INDEX TO EXHIBITS FILED WITH
THE CURRENT REPORT ON FORM 8-K DATED APRIL 21, 1999
Exhibit Description
2.1 Stock Purchase Agreement, dated April 21, 1999, between
the Registrant and the Seller.
99 Press Release dated April 21, 1999.
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated as of April 21, 1999 by and
between Lattice Semiconductor Corporation, a Delaware corporation ("Buyer"), and
Advanced Micro Devices, Inc., a Delaware corporation ("Seller"). Certain
capitalized terms used in this Agreement are defined in Section 13.2 hereof.
W I T N E S S E T H
WHEREAS, Seller owns and will own as of the Closing Date all of the
issued and outstanding capital stock (the "Stock") of Vantis Corporation, a
Delaware corporation ("Company"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Stock on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound, Buyer and Seller do hereby
agree as follows:
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ARTICLE I
PURCHASE AND SALE/COMPANY OPTIONS/CLOSING
1.1 TRANSFER OF THE STOCK BY SELLER. (a) Subject to the terms and
conditions of this Agreement, Seller agrees to sell, assign and transfer good
and valid title and interest in and to the Stock free and clear of all
Encumbrances and deliver the certificate(s) representing the Stock, to Buyer at
the Closing. The certificate(s) shall be properly endorsed for transfer to, or
accompanied by a duly executed stock power in favor of, Buyer.
(b) PURCHASE OF THE STOCK BY BUYER; PURCHASE PRICE; AMOUNT
PAYABLE AT CLOSING. Subject to the terms and conditions of this Agreement,
Buyer agrees to purchase all of the right, title and interest in and to the
Stock from Seller and to pay to Seller the Purchase Price. The "Purchase
Price" shall be $500,000,000 (Five Hundred Million Dollars) (the "Base
Price") adjusted by the Closing Equity Adjustment Amount (which may be a
negative number). At the Closing, Buyer shall pay the Estimated Purchase
Price (determined in accordance with Section 1.4) to Seller by wire transfer
of funds immediately available in the City of San Francisco.
1.2 COMPANY OPTIONS. On the Closing Date, the Company Stock Option
Plans and each outstanding option to purchase shares of Company common stock
under the Company Stock Option Plans (the "Company Options") as of the Closing
Date will be assumed by Buyer and each Company Option shall become an option to
purchase shares of Buyer common stock, as determined below. In addition, Buyer
will honor the provisions of the Company Options respecting vesting and
exercisability and shall treat the consummation of the
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transactions contemplated hereby as a "Change in Control" for purposes
thereof, all upon the same terms and conditions as set forth therein. All of
the terms and conditions of each Company Option in effect immediately prior
to the assumption shall continue in full force and effect under the assumed
option, except that, (i) as appropriate, references to Company under such
option shall be deemed to be references to Buyer, (ii) each Company Option
shall be exercisable (or shall become exercisable in accordance with its
terms) for that number of whole shares of Buyer common stock equal to the
product of (a) the number of shares of Company common stock that were
issuable upon exercise of the Company Option immediately prior to the Closing
Date and (b) the Exchange Ratio (as defined below), rounded up to the nearest
whole number of shares of Buyer common stock, and (c) the per share exercise
price for the shares of Buyer common stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient determined by dividing
(A) the exercise price per share of the Company Option immediately prior to
the Closing Date by (B) the Exchange Ratio, rounded up to the nearest whole
cent. The Exchange Ratio shall mean the quotient determined by dividing the
Company Per Share Value by the Buyer Per Share Value. The Company Per Share
Value shall equal the quotient determined by dividing the Purchase Price by
the fully diluted number of shares of Company common stock outstanding
immediately prior to the close of this transaction (reflecting all shares
subject to the Company Options, without applying the treasury method). The
Buyer Per Share Value shall equal the average of the closing sales prices as
reported on the Nasdaq National Market for a share of Buyer common stock for
the five most recent trading days that the Buyer common stock is traded
ending three days prior to the date on which the execution of this Agreement
is publicly announced. Company and Seller shall take all actions necessary
to provide that upon the Closing Date, all outstanding Company Options can be
automatically
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assumed by Buyer. SCHEDULE 1.2 sets forth a list as of the date hereof of
all holders of Company Options, including, with respect to each Company
Option, the number of shares of Company common stock subject to each such
Company Option, the exercise price per share, the termination date, and the
vesting schedule. As soon as reasonably practicable, but in no event more
than the later of 90 days after the Closing Date and 14 days after final
determination of the Closing Equity Adjustment Amount pursuant to Section
1.5, Buyer will issue to each person who immediately prior to the Closing
Date was a holder of Company Options a document evidencing the foregoing
assumption of such option by Buyer.
1.3 THE CLOSING. The Closing shall take place at the offices of
O'Melveny & Myers LLP, Embarcadero Center West, 275 Battery Street, San
Francisco, California 94111-3305, as soon as practicable after all conditions
specified in Articles VI, VII and VIII have been satisfied or waived in
accordance with this Agreement, but not later than the fifth business day
following the date that all conditions specified in Articles VI, VII and VIII
have been satisfied or waived in accordance with this Agreement, or at such
other place or on such other date as Seller and Buyer may mutually agree.
1.4 DETERMINATION OF ESTIMATED CLOSING EQUITY ADJUSTMENT AMOUNT.
The "Estimated Purchase Price" shall be the Base Price as adjusted by the
Estimated Closing Equity Adjustment Amount (as defined below) (which shall
not exceed a positive $5,000,000 and which may be a negative number). Not
later than five business days prior to the Closing Date, Seller shall deliver
to Buyer a written notice setting forth Seller's good faith estimate
(applying the Agreed Accounting Principles) as of the Closing Date of the
Closing Equity Adjustment Amount (the "Estimated Closing Equity Adjustment
Amount") and, based thereon, Seller's calculation of
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the Estimated Purchase Price, which shall be binding on Buyer and Seller as
the Estimated Purchase Price hereunder absent manifest error. Such notice
shall be accompanied by the estimated balance sheet used to prepare the
Estimated Closing Equity Adjustment Amount, including (in reasonable detail)
an explanation of the methods used (including estimates of cash flows and
income) to "roll forward" the estimated line items set forth therein from the
immediately preceding month's end balance sheet and related statements of
results of operations and cash flows, copies of which shall also accompany
the notice. Seller shall make, upon Buyer's request, its appropriate
personnel and records available to Buyer's internal and external accountants
for purposes of explaining the assumptions and estimates used in the
preparation of the Estimated Closing Equity Adjustment Amount.
1.5 DETERMINATION OF CLOSING EQUITY ADJUSTMENT AMOUNT.
(a) Following the Closing, the parties shall observe the
procedures set forth in this Section 1.5 to determine the Closing Equity
Adjustment Amount. Promptly, but in any event not later than five business
days after the final determination thereof in accordance herewith, (i) in the
event that the difference between the Closing Equity Adjustment Amount and
the Estimated Closing Equity Adjustment Amount (i.e., the Closing Equity
Adjustment Amount minus the Estimated Closing Equity Adjustment Amount) is
positive, Buyer shall pay to Seller by wire transfer of immediately available
funds to an account specified by Seller an amount equal to such difference
plus interest thereon from the Closing Date to the date of payment thereof at
the Agreed Rate, or (ii) in the event that the difference between the Closing
Equity Adjustment Amount and the Estimated Closing Equity Adjustment Amount
(i.e., the Closing Equity Adjustment Amount minus the Estimated Closing
Equity Adjustment Amount) is
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negative, Seller shall pay to Buyer by wire transfer of immediately available
funds to an account specified by Buyer an amount equal to such difference
plus interest thereon from the Closing Date to the date of payment thereof at
the Agreed Rate.
(b) Within sixty days after the Closing Date, Buyer shall
prepare and deliver to Seller a notice setting forth its determination of the
Closing Equity Adjustment Amount (the "Initial Closing Equity Statement") and
setting forth in reasonable detail the basis for such determination. Such
notice shall be accompanied by the consolidated balance sheet of the Company
used to prepare the Initial Closing Equity Statement (the "Initial Balance
Sheet"), together with the related estimated statement of results of operation
and cash flows for the period from December 28, 1998 to the Closing Date used to
prepare the Initial Balance Sheet. During the sixty days next following
Seller's receipt of the Initial Closing Equity Statement, Seller and its
representatives will be permitted to review Buyer's working papers relating to
the Initial Closing Equity Statement as well as all of the books and records
relating to the operations and finances of the Business with respect to the
period up to and including the Closing Date, and Buyer shall make reasonably
available in Buyer's offices the individuals responsible for the preparation of
the Initial Closing Equity Statement in order to respond to the reasonable
inquiries of Seller relating thereto.
(c) If Seller disagrees with Buyer's calculation of the Closing
Equity Adjustment Amount, then not later than sixty days following Seller's
receipt of the Initial Closing Equity Statement, Seller shall so notify Buyer in
writing (the "Notice of Disagreement"), setting forth in reasonable detail the
basis for such disagreement, the dollar amounts involved and Seller's good faith
calculation of the Closing Equity Adjustment Amount. Such notice shall
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be accompanied by the consolidated balance sheet of the Company used to
prepare the Notice of Disagreement (the "Protest Balance Sheet"), together
with the related statement of results of operations and cash flows used to
prepare the Protest Balance Sheet. If no Notice of Disagreement is received
by Buyer within such sixty day period, then the Initial Closing Equity
Statement, and its related balance sheet, shall be deemed to have been
accepted by Seller, shall become final and binding upon the parties, the
Closing Equity Adjustment Amount as indicated therein shall be the final
Closing Equity Adjustment Amount hereunder and its related balance sheet
shall be the final Closing Balance Sheet.
(d) During the twenty business days immediately following the
delivery of a Notice of Disagreement (if any), Seller and Buyer shall seek in
good faith to resolve any differences which they may have with respect to any
matter specified in the Notice of Disagreement. If at the end of such twenty
business day period Seller and Buyer have been unable to agree upon the Closing
Equity Adjustment Amount and a supporting balance sheet therefor, Seller and
Buyer shall submit to the Independent Accounting Firm for review and resolution
any and all matters which remain in dispute with respect to the Notice of
Disagreement. If required to do so by such Independent Accounting Firm, in
connection with its engagement, Buyer and Seller shall (i) negotiate in good
faith to agree to a specific materiality level for the conduct of the engagement
(which shall not exceed $30,000 nor be less than $10,000 per individual item)
and (ii) submit the Initial Balance Sheet (with such changes as may then have
been agreed by Seller and Buyer) to such Independent Accounting Firm for audit.
Buyer and Seller shall use commercially practicable efforts to cause the
Independent Accounting Firm to make a final determination as promptly as
practicable, but in no event later than sixty
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days from submission of the Initial Balance Sheet to the Independent
Accounting Firm, binding on the parties hereto, of the Closing Equity
Adjustment Amount and a supporting balance sheet therefor, and such final
determination shall be the final Closing Equity Adjustment Amount. The
supporting balance sheet as agreed by the parties or as determined by the
Independent Accounting Firm pursuant to this Section 1.5(d) shall then be the
final Closing Balance Sheet. The cost of the Independent Accounting Firm's
review and determination shall be paid by the party which has determined an
amount of the Closing Equity Adjustment Amount that is the greatest amount
different from the amount of the same determined by the Independent
Accounting Firm. During the review by the Independent Accounting Firm, Buyer
and Seller will each make available to the Independent Accounting Firm
interviews with such individuals and such information, books and records as
may be reasonably required by the Independent Accounting Firm to make its
final determination.
(e) Seller and Buyer agree that, in the case of Seller, prior to
the Closing and, in the cause of Buyer, following the Closing through the date
that payment, if any, is made pursuant to Section 1.5(a), it will not take any
actions with respect to any accounting books, records, policy or procedure that
would affect the determination of the Closing Equity Adjustment Amount that are
inconsistent with past practices of Company or that would make it impossible or
impracticable to calculate the Closing Equity Adjustment Amount in the manner
and utilizing the methods required hereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.1 ORGANIZATION AND RELATED MATTERS. Seller and Company are each
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation. Seller has all
necessary corporate power and authority to execute, deliver and perform its
obligations under this Agreement. SCHEDULE 2.1(a) sets forth, as of the date
hereof, the equity capitalization of each Subsidiary and Company's direct or
indirect ownership interest therein and the jurisdiction in which each
Subsidiary was organized. Except as set forth on SCHEDULE 2.1(a), neither
Company nor any Subsidiary holds any Equity Securities of any person.
SCHEDULE 2.1(b) sets forth the current directors and executive officers of
Company and of each Subsidiary. Each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Company and the Subsidiaries have all
necessary corporate power and authority to own or lease their respective
properties and assets, as applicable, and to carry on their respective
businesses as now conducted and are duly qualified or licensed to do business
as foreign corporations in good standing in all jurisdictions, except where
the failure to be so qualified or licensed is not material to the Business.
Neither Company nor any of the Subsidiaries is a registered or reporting
company under the Exchange Act. True, correct and complete copies of the
respective charter documents, including all amendments, of Company and the
Subsidiaries have been delivered to Buyer.
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2.2 STOCK. Seller beneficially and of record owns all of the
shares of capital stock of Company outstanding. Company beneficially and of
record owns all of the outstanding Equity Securities of each of the
Subsidiaries, directly or indirectly through a wholly owned Subsidiary. All
of such Equity Securities of Company and the Subsidiaries are owned free and
clear of any Encumbrances. At the Closing, Buyer will acquire good and
marketable title to and complete ownership of all of the capital stock of
Company outstanding on the Closing Date, free and clear of any Encumbrances.
The authorized capital stock of Company consists of 150,000,000 shares of
common stock, $0.01 par value, of which 100,000,000 shares are issued and
outstanding on the date hereof. Except for the Company Options listed in
SCHEDULE 1.2, there are no outstanding Contracts or other rights to subscribe
for or purchase, or Contracts or other obligations to issue or grant any
rights to acquire, any Equity Securities of Company or any Subsidiary, or to
restructure or recapitalize Company or any Subsidiary. Except as set forth
on SCHEDULE 2.2, there are no outstanding Contracts of Seller, Company or any
Subsidiary to repurchase, redeem or otherwise acquire any Equity Securities
of Company or any Subsidiary. All outstanding Equity Securities of Company
and the Subsidiaries are duly authorized, validly issued and outstanding and
are fully paid and nonassessable, and were issued in conformity with
applicable Laws. There are no preemptive rights in respect of any Equity
Securities of Company or any Subsidiary.
2.3 FINANCIAL STATEMENTS; NO OTHER LIABILITIES.
(a) Seller has delivered to Buyer true, correct and complete
copies of Company's audited consolidated balance sheets at fiscal year-end
1996, 1997 and 1998 and the related audited consolidated statement of
operations and statement of cash flows for the periods
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ending December 1996, 1997 and 1998 (the "Financial Statements"). Such
Financial Statements have been prepared in conformity with GAAP except as
disclosed therein or in the footnotes thereto. Such Financial Statements
reflect the conduct of Company as a division of Seller, until September 1997.
The statements of operations and cash flow present fairly, in accordance
with GAAP, the results of operations and cash flows of Company and the
Subsidiaries for the respective periods covered, and the balance sheets
present fairly, in accordance with GAAP, the financial condition of Company
and the Subsidiaries as of their respective dates. Since December 27, 1998,
there has been no change in any of the significant accounting policies,
methods, practices or procedures of Company and the Subsidiaries. Under cover
of a letter dated of even date herewith, Seller has delivered to Buyer a
true, correct and complete copy of Company's unaudited consolidated balance
sheet at March 28, 1999 and the related unaudited consolidated statement of
operations and statement of cash flows for the three months then ended. Such
financial statements have been prepared in conformity with GAAP (except for
the absence of notes, normal year-end audit adjustments and accruals for
profit-sharing). Such statement of operations and statement of cash flows
present fairly in accordance with GAAP, the results of operations and cash
flows of Company for the period covered and such balance sheet presents
fairly, in accordance with GAAP, the financial condition of Company as of its
date.
(b) Except as set forth on SCHEDULE 2.3(b), since December
27, 1998, whether or not in the ordinary course of business, there has not
been, occurred or arisen any change in or event affecting Company or any of
the Subsidiaries that has or would have a material adverse effect on the
Business (other than matters of general applicability to Company's industry
and matters arising in connection with this Agreement).
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(c) Neither Company nor any Subsidiary has any liabilities of
any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, probable of assertion or not, except liabilities that
(i) are reflected or disclosed in the March 28, 1999 balance sheet described
in clause (a) above, (ii) are reflected in the notes to the balance sheet
included in the most recent of the Financial Statements, (iii) are
obligations set forth in any Contracts listed in the Schedules to this
Agreement or in Contracts not required to be listed in such Schedules, (iv)
are disclosed in any of the Schedules to this Agreement, (v) were incurred in
the ordinary course of business, or (vi) except as set forth in SCHEDULE
2.3(c)(vi), do not exceed $200,000 individually or $2,000,000 in the
aggregate.
2.4 TAXES. All federal Tax Returns and all material state, local
and foreign Tax Returns that are required to be filed by or with respect to
Company and each Subsidiary on or before the Closing Date have been or prior
to the Closing will be duly filed, and all Taxes shown as due on such Tax
Returns have been paid or will be paid in full. No issues relating to
Company or any Subsidiary, that have been raised by the IRS or any other
taxing authority in connection with the examination of any of such Tax
Returns, are currently pending.
2.5 MATERIAL CONTRACTS. SCHEDULE 2.5 lists each Contract which is
a Material Contract. Each Material Contract is valid and subsisting, Company
or the applicable Subsidiary has duly performed all its obligations under
each Material Contract to which Company or any Subsidiary is a party to the
extent that such obligations to perform have accrued, and no breach or
default (or, to Seller's knowledge, alleged breach or default) or event which
would (with the passage of time, notice or both) constitute a breach or
default or loss of rights or benefits by Company or the Subsidiary
thereunder, as the case may be, or, to Seller's knowledge, any other
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party or obligor with respect thereto, has occurred or, assuming that the
requisite Approvals and Permits set forth on SCHEDULE 2.9 are sought and
obtained, as a result of the execution, delivery and performance of this
Agreement will occur, except for such, as individually or in the aggregate,
as would not have a material adverse effect on the Business. True, correct
and complete copies of the agreements identified in SCHEDULE 2.5, including
all amendments and supplements, have been delivered to Buyer (subject to
compliance with applicable confidentiality restrictions for the contracts
that are so indicated on SCHEDULE 2.5).
2.6 CHANGES. Since December 27, 1998, there has not been:
(a) excluding any changes which may occur after the date of
this Agreement as a result of the transactions contemplated by this
Agreement, any change (other than changes affecting Company's industry
generally) that has or would have a material adverse effect on the Business,
except (i) changes reflected in the unaudited balance sheet of Company at
March 28, 1999, (ii) changes in the ordinary course of business, which have
not been, individually or in the aggregate, materially adverse to the
Business, and (iii) repayment by Seller to Company of an intercompany loan in
an approximate amount of $12,000,000 on March 29, 1999.
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, cash flows or operating results of Company and
Subsidiaries, taken as a whole;
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(c) any waiver by Company or any Subsidiary of a valuable
right or of a debt owed to it, except for such as have not been, individually
or in the aggregate materially adverse to the Business;
(d) any satisfaction or discharge of any lien, claim of
encumbrance or payment of any obligation by Company or any Subsidiary, except
in the ordinary course of business and that is not material to the assets,
properties, financial condition, operating results or Business (as such
Business is presently conducted);
(e) except as set forth on SCHEDULE 2.6(e), any change or
amendment to a Material Contract;
(f) except for the Company Options and issuances thereunder,
any change in the outstanding capital stock of Company;
(g) except for intercompany loans to Seller which have been
paid in full, any loan, guaranty or other extension of credit to any Person;
(h) except as described on SCHEDULE 2.6(h), any material
change in any compensation arrangement or agreement with any key employee; or
(i) other than dispositions of surplus equipment, furniture
and fixtures and dispositions of inventory in the ordinary course of
business, any sale, disposition, transfer or encumbrance of any material
property owned by Company or any Subsidiary, or any termination, modification
or amendment of any material lease of property to which Company or any
Subsidiary was a party on December 27, 1998.
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2.7 PROPERTIES.
(a) Except for dispositions of surplus equipment, furniture,
fixtures, dispositions in the ordinary course of business and dispositions
reflected on the March 28, 1999 unaudited consolidated balance sheet
described in Section 2.3(a), Company and the Subsidiaries have good title to
or, in the case of leased assets and properties, valid leasehold interests
in, all tangible real and personal assets and properties that they
respectively own or lease and that are used in and material to conduct of the
Business, including, but not limited to, all such assets that they
respectively own or lease as reflected in the December 1998 balance sheet
referred to in Section 2.3(a). Such assets are sufficient for the conduct of
the Business as currently conducted. None of such assets or properties is
subject to any Encumbrances other than Permitted Encumbrances. Except as set
forth on SCHEDULE 2.7(a), the assets, properties and rights of Company and
the Subsidiaries (including contract rights and intangible assets, properties
and rights) include all of the assets, properties and rights of Seller, its
subsidiaries and any of their controlled Affiliates primarily used in the
Business.
(b) Company and the Subsidiaries do not own any real
property. SCHEDULE 2.7(b) sets forth a list of all real property currently
leased or subleased by Company (other than foreign office space provided by
Seller and its Affiliates) or any Subsidiary (each a "Lease"). With respect
to each property listed on SCHEDULE 2.7(b):
(i) the Lease is valid and subsisting, and there is not,
under such Lease, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute
a default) by Company or any Subsidiary
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or, if Seller or any subsidiary is a party to such Lease, by Seller or
such subsidiary of Seller, or to Seller's knowledge, any other party
thereto; and
(ii) to Seller's knowledge, no third party to a material
Lease has repudiated any provisions thereof.
(c) All material items of equipment owned or leased by Company
or any Subsidiary used in the Business are in adequate operating condition,
regularly and properly maintained, subject to normal wear and tear, except, in
each case, for such failures in condition and maintenance as do not have a
material adverse effect on the Business.
2.8 INTELLECTUAL PROPERTY.
(a) Company and Subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use, all Intellectual
Property and trade secrets that are used in the Business as currently
conducted, except to the extent that the failure to have such rights is not
material to the Business.
(b) SCHEDULES 2.8(b)(i) AND 2.8(b)(ii) AND (iii) list (i) (A)
all United States patents, including applications therefor, (B) all United
States and international registered trademarks, applications to register
trademarks, including intent-to-use applications, and (C) United States mask
work registrations and applications to register mask works, which are owned
by Company or licensed by Company and which are material to its Business
(clauses (A) through (C) constituting "Registered Property"), including the
jurisdictions in which each such Intellectual Property right has been issued
or registered or in which any application for such
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issuance and registration has been filed, (ii) all licenses, sublicenses and
other agreements which are material to the Business and as to which Seller,
Seller's controlled Affiliate, Company or a Subsidiary is a party, and
pursuant to which any other third party is authorized or licensed to use any
such Intellectual Property or trade secret, and (iii) all licenses,
sublicenses and other agreements which are material to the Business and as to
which Seller, Seller's controlled Affiliate, Company or a Subsidiary is a
party, and pursuant to which Seller, Seller's controlled Affiliate, Company
or a Subsidiary is authorized to use any third party patents, trademarks,
trade secrets, copyrights, maskworks or software which are incorporated in,
are or form a part of, any product that is sold by the Business.
(c) To Company's knowledge, except as to claims listed in
SCHEDULE 2.8(c), there is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of Company or any
Subsidiary, any trade secret material to Company or any Subsidiary, or any
Intellectual Property right of any third party to the extent licensed by or
through Company or any Subsidiary, by any third party, including any employee
or former employee of Company or any Subsidiary. Neither Company nor any
Subsidiary has entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property or
misappropriation of any trade secrets, other than indemnification provisions
contained in license agreements for such Intellectual Property or such trade
secrets licensed by Company or in purchase orders or customer agreements
arising in the ordinary course of business.
After the Closing, all Registered Property owned by Company will be
fully transferable, alienable or licensable by Company without payment of any
kind to any third party.
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Buyer's entering into this Agreement, either alone or in
conjunction with the Continuing Intercompany Agreements, will not, by virtue
of any agreement to which Company is a party, (i) to Seller's knowledge,
cause Buyer to be obligated to grant to any third party any new material
right to use any Intellectual Property owned by, or licensed to, Buyer; (ii)
cause Company to be bound by or subject to any new non-competition
obligation, or (iii) cause Company to be obligated to pay any royalty rate or
other amount to any given third party in excess of the royalty rate or amount
payable by Company to such given third party prior to Closing.
(d) Except as set forth on SCHEDULE 2.8(d), Company (i) is
not a party to any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, copyrights or violation of any trade
secret or other Intellectual Property 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 Company's knowledge, the manufacture,
marketing, licensing or sale of Company's products has not and does not
infringe any Intellectual Property right or misappropriate any trade secret
of any third party, except where such infringement or misappropriation is not
material to the Business.
2.9 AUTHORIZATION; NO CONFLICTS. The execution, delivery and
performance of this Agreement by Seller has been duly and validly authorized
by the board of directors of Seller and by all other necessary corporate
action on the part of Seller. This Agreement constitutes the legally valid
and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors'
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rights generally. The execution, delivery and performance of this Agreement
by Seller will not directly or indirectly (a) contravene, conflict with,
violate, or constitute a breach or default (whether upon lapse of time and/or
the occurrence of any act or event or otherwise) under any provision of the
charter documents or by-laws of Seller, Company or any Subsidiary or any
resolution adopted by the board of directors or stockholders of Seller,
Company or any Subsidiary, (b) result in the imposition of any Encumbrance
against any material asset or property owned, licensed or leased by Company
or any Subsidiary, or (c) contravene, conflict with or result in a violation
of any Law or Order to which Company, any Subsidiary or any of the assets
owned licensed or leased by any of them are subject, except, in each of
clauses (b) through (c), for such contraventions, conflicts, impositions and
violations, which, individually or in the aggregate, do not have a material
adverse effect on the Business. SCHEDULE 2.9 lists, as of the date hereof,
all Approvals and Permits required to be obtained by Seller, Company or any
Subsidiary to consummate the transactions contemplated by this Agreement and
to permit Company as a wholly-owned subsidiary of Buyer to operate the
Business without loss of material rights, other than those which have been
previously obtained. Except for the Approvals and Permits identified on
SCHEDULE 2.9 as requiring that certain actions be taken by or with respect to
a third party or Governmental Entity, the execution, delivery and performance
of this Agreement by Seller will not require any material filing or
registration with, or the issuance of any material Approval or Permit by, any
third party or Governmental Entity.
2.10 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS. Except as set
forth in SCHEDULE 2.10, there is no Order or Action pending, or, to Seller's
knowledge, threatened, against Company or any Subsidiary or any of their
respective properties or assets that individually
19
or when aggregated with one or more other such Orders or Actions has, or, if
determined adversely to the interests of Seller, Company or Buyer can be
reasonably expected to have, a material adverse effect on the Business or
Seller's ability to perform its obligations under this Agreement. There is
no organized labor strike, dispute, slowdown or stoppage, or collective
bargaining or unfair labor practice claim pending or, to Seller's knowledge,
threatened, against or affecting Company or any Subsidiary. SCHEDULE 2.10
lists, each pending Order and each Action that involves a claim or potential
claim of aggregate liability in excess of $250,000 against, or that enjoins
or seeks to enjoin any activity of Company or any Subsidiary.
2.11 INSURANCE. SCHEDULE 2.11 lists, as of the date hereof, all
insurance policies owned by Seller under which Company and the Subsidiaries
are insured. Under the terms thereof, Company and the Subsidiaries are, and
at all times during the past year have been, insured with reputable insurers
against the types of risks normally insured against by companies in similar
lines of business. All of such insurance policies to the extent Company and
the Subsidiaries are insured thereby or participate therein, are in full
force and effect and neither Seller nor Company or any Subsidiary is in
material default thereunder. Company and SUBSIDIARIES HAVE TIMELY FILED
CLAIMS WITH THEIR RESPECTIVE INSURERS WITH RESPECT TO ALL MATERIAL LOSSES FOR
WHICH THEY BELIEVE THEY HAVE COVERAGE.
2.12 PERMITS. Company and the Subsidiaries hold all Permits that
are required by any Governmental Entity to permit each of them to conduct
their respective businesses as now conducted, and all such Permits are valid
and in full force and effect, except, in each case, for those which would not
have a material adverse effect on the Business.
20
2.13 COMPLIANCE WITH LAW. Company and the Subsidiaries have
conducted the Business in all material respects in accordance with applicable
Law (including the receipt of all Permits material to the conduct of the
Business). No suspension, cancellation or termination of any material Permits
is pending or, to Seller's knowledge, threatened.
2.14 ENVIRONMENTAL COMPLIANCE. Company's and the Subsidiaries'
properties are, in all material respects, in compliance with all applicable
Environmental Laws, and Company has no knowledge and has received no notice
of any material unresolved violation or alleged violation of any
Environmental Laws in its conduct of the Business.
2.15 DIVIDENDS AND OTHER DISTRIBUTIONS. There has been no dividend
or other distribution of assets or securities by Company or any Subsidiary,
whether consisting of money, property or any other thing of value, declared,
issued or paid subsequent to the date of the latest financial statements
referred to in Section 2.3(a).
2.16 EMPLOYEE BENEFITS. SCHEDULE 2.16 sets forth, as of the date
hereof, a complete list of all Employee Pension Benefit Plans (as defined in
Section 3(2) of ERISA), Employee Welfare Benefit Plans (as defined in Section
3(1) of ERISA) and any other significant employee benefit arrangements
maintained by Company and the Subsidiaries or to which Company and the
Subsidiaries contribute or to which Company or any Subsidiaries would have
any liability or obligation (collectively, the "Company Plans"). No Company
Plan is subject to Title IV of ERISA, nor is any such plan a multiemployer
plan (within the meaning of Section 3(37) of ERISA). With respect to each
Company Plan:
21
(a) such Company Plan has been administered in all material
respects in accordance with its terms and, to the extent it is subject to any
requirements under ERISA or the Code, complies in all material respects
therewith;
(b) all contributions payable by Seller, Company, or any of
their respective Affiliates which are due, if any, to such Company Plan have
been paid in full;
(c) Seller has delivered to Buyer complete copies of the
current plan documents with respect to the Company Plans, together with
copies of any and all amendments thereof adopted through the date hereof;
(d) there is no pending or threatened legal action,
proceeding or investigation against such Company Plan or the assets of any of
the trusts under such Company Plan that is reasonably likely to have a
material adverse effect on the Business; and
(e) there have been no non-exempt "prohibited transactions"
within the meaning of Section 406 of ERISA and Section 4975 of the Code or
breaches of fiduciary duty with respect to such Company Plan that are
reasonably likely to have a material adverse effect on the Business.
2.17 BANK ACCOUNTS, POWERS, ETC. SCHEDULE 2.17 lists, each bank,
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which Company or any Subsidiary has an account or
safe deposit box and the names and identification of all Persons authorized
to draw thereon or to have access thereto.
22
2.18 NO BROKERS OR FINDERS. No agent, broker, finder, or
investment or commercial banker, or other Person or firm engaged by or acting
on behalf of Seller, Company or any Subsidiary or any of their respective
Affiliates in connection with the negotiation, execution or performance of
this Agreement or the transactions contemplated by this Agreement, is or will
be entitled to any brokerage or finder's or similar fee or other commission
as a result of this Agreement or such transactions, except for Morgan Stanley
Dean Witter and Donaldson, Lufkin & Jenrette (in each case for their services
on behalf of Seller), as to which Seller shall have full responsibility and
none of Buyer, Company or any Subsidiary shall have any liability.
2.19 CERTAIN INTERESTS. No controlled Affiliate of Seller,
Company or any Subsidiary, nor any officer, director or Affiliate thereof,
has any material interest in any property used in or pertaining to the
Business or, to Seller's knowledge, any customer or supplier doing business
with Company or any of the Subsidiaries.
2.20 RECEIVABLES. All receivables of Company and the
Subsidiaries, whether reflected on the balance sheet or otherwise, represent
sales actually made in the ordinary course of business. Reserves shown on
Company's audited consolidated balance sheet at December 27, 1998 referred to
in Section 2.3(a) are adequate as of such date and were calculated on a basis
consistent with GAAP and past practices. Seller has delivered to Buyer a
complete and accurate aging list of all receivables of Company and the
Subsidiaries as of March 28, 1999.
2.21 CUSTOMERS AND SUPPLIERS. SCHEDULE 2.21 lists the names
of the five largest customers of the Business for the fiscal year ended
December 27, 1998.
23
2.22 AMENDED SCHEDULES. Seller may, within 3 days prior to
the Closing Date, deliver to Buyer an amendment to SCHEDULES 2.5, 2.8(c),
2.8(d) and 2.10, which amendment shall reflect any additions to such
Schedules for events occurring from the date hereof to the Closing Date.
2.23 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Seller
acknowledges and agrees that the purchase and sale of the Stock hereunder
shall be without representation or warranty by Buyer, express or implied,
except as specifically set forth in Article III.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 ORGANIZATION AND RELATED MATTERS. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Buyer has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to carry on its business as now being conducted.
3.2 AUTHORIZATION; NO CONFLICTS. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly authorized by
the board of directors of Buyer and by all other necessary corporate action on
the part of Buyer and its Affiliates. This Agreement constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating
24
to or limiting creditors' rights generally. The execution, delivery and
performance of this Agreement by Buyer will not directly or indirectly (a)
contravene, conflict with, violate, or constitute a breach or default
(whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under, the charter documents or by-laws of Buyer, (b) result in
the imposition of any Encumbrance against any material asset or property
owned, licensed or leased by Buyer, or (c) contravene, conflict with or
result in a violation of Law or Order to which Buyer or any of the assets
owned, licensed or leased by Buyer are subject, except, in each of clauses
(b) through (c), for such contraventions, conflicts, impositions and
violations which , individually or in the aggregate, do not have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement. SCHEDULE 3.2 lists, as of the date hereof, all material Approvals
and Permits required to be obtained by Buyer to consummate the transactions
contemplated by this Agreement, other than those which have already been
obtained. Except for the Approvals and Permits identified on SCHEDULE 3.2 as
requiring that certain actions be taken by or with respect to a third party
or Governmental Entity, the execution, delivery and performance of this
Agreement by Buyer will not require any material filing or registration with,
or the issuance of any material Approval or Permit by, any third party or
Governmental Entity.
3.3 NO BROKERS OR FINDERS. No agent, broker, finder or investment
or commercial banker, or other Person or firms engaged by or acting on behalf
of Buyer or its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fees
or other commissions as a result of this Agreement or such transactions,
except for
25
Morgan Stanley Dean Witter (for their services provided on behalf of Buyer),
as to which Buyer shall have full responsibility and Seller shall not have
any liability.
3.4 LEGAL PROCEEDINGS. There is no Order or Action pending, or to
the knowledge of Buyer, threatened, against or affecting Buyer or any of its
properties or assets that individually or when aggregated with one or more
other Actions has or, if determined adversely to the interest of Buyer, might
reasonably be expected to have, a material adverse effect on Buyer's ability
to perform its obligations under this Agreement.
3.5 WARN ACT. Buyer is not planning or contemplating, and has not
made or taken, any decisions or actions concerning Company or any Subsidiary
after the Closing that would require the service of notice under the Worker
Adjustment and Retraining Act of 1988 (the "WARN Act").
3.6 INVESTMENT REPRESENTATION. Buyer is acquiring the Stock from
Seller for Buyer's own account, for investment purposes only and not with a
view to, or for sale in connection with, any distribution thereof.
3.7 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Buyer
acknowledges and agrees that the purchase and sale of the Stock hereunder
shall be without representation or warranty by Seller, express or implied,
except as specifically set forth in Article II.
3.8 FINANCING COMMITMENT. Buyer has received a commitment letter,
a copy of which has been delivered to Seller (the "Commitment Letter"), with
respect to financing for the transactions contemplated by this Agreement in
the form of senior unsecured debt (the
26
"Financing"). Buyer has no basis to believe that the financing contemplated
thereby will not be available to Buyer in a time sufficient to support a
Closing by June 25, 1999, assuming satisfaction of all other conditions to
Closing by such date.
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF COMPANY
AND THE SUBSIDIARIES PRIOR TO CLOSING
4.1 ACCESS. Seller shall and shall cause Company and the
Subsidiaries to authorize and permit Buyer, its prospective lenders and their
respective representatives, including their respective independent
accountants, financial advisers, agents and counsel (such entities being,
with respect to either Buyer or Seller, collectively, "Representatives") to
have reasonable access during normal business hours, upon reasonable notice
and in such manner as will not unreasonably interfere with the conduct of
their respective businesses, to all of their respective properties, books,
records, operating instructions and procedures and all other information with
respect to the Business as Buyer may from time to time request, and to make
copies of such books, records and other documents and to discuss the Business
with the respective directors and officers and, after consultation with
Seller, and accompanied by or in coordination with Seller, employees,
accountants, counsel, suppliers, customers and creditors of, Company and
Subsidiaries, in each case, as is reasonably necessary or appropriate for the
purposes of familiarizing themselves with the Business and in connection with
obtaining financing for and any necessary Approvals of or Permits for the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that under no
circumstances shall Seller be required to provide to Buyer, its prospective
financing sources and their respective representatives access to (i) Tax
Returns filed
27
by Seller or any of its Affiliates other than Tax Returns filed by Company or
any Subsidiary, (ii) any information or materials required to be kept
confidential pursuant to agreements with third parties or by Law, or (iii)
subject to entering into appropriate agreements that preserve the privilege,
any privileged attorney-client communications or attorney work-product of
Company.
4.2 CONDUCT OF BUSINESS. During the period beginning on the date
hereof and ending on the Closing Date, Seller shall not and shall cause
Company and each Subsidiary not to, without the prior written consent of
Buyer (which consent shall not be unreasonably withheld):
(a) conduct the Business in any manner except in the ordinary
course;
(b) terminate, or fail to renew or preserve, any material
Permits;
(c) make any loan, guaranty or other extension of credit, or
enter into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee, stockholder
or any of their respective Affiliates, except pursuant to the Company Plans;
(d) amend any Company Plan or grant any general or uniform
increase in the rates of pay or benefits to officers, directors or employees
(or a class thereof), or any increase in salary or benefits of any officer,
director or employee or pay any bonus to any person, except for (i) any
increase or bonus mandated by any of the Company Plans, (ii) any normal
increase or bonus in connection with a promotion not to exceed 10% of each
such Person's annual base pay, and (iii) annual merit salary increases in the
ordinary course of business not to exceed 5.5% of the applicable base annual
salaries on an aggregate basis;
28
(e) sell, transfer, mortgage, encumber or otherwise dispose
of any assets or properties except dispositions of inventory in the ordinary
course of business consistent with past practices and other dispositions of
assets not to exceed $100,000 in the aggregate in the ordinary course of
business consistent with past practices;
(f) except pursuant to Company Options, issue, grant, sell,
redeem or acquire for value, or agree to issue, sell, redeem or acquire for
value or, except as provided in Section 1.2, amend or modify, any Equity
Securities of Company or any of the Subsidiaries;
(g) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other thing of value, to its stockholders, or split,
combine, dividend, distribute or reclassify any shares of its Equity
Securities, except in accordance with Section 5.12;
(h) change or amend its certificate of incorporation or bylaws;
(i) amend the Intercompany Agreements;
(j) terminate, amend or fail to use its commercially
reasonable efforts to renew any existing insurance coverage;
(k) other than (i) in the ordinary course of business
consistent with past practice, (ii) capital expenditures permitted under
paragraph (q) of this Section 4.2 and (iii) sales returns by, or price
allowances to, distributors or stocking representatives, voluntarily incur or
agree to incur any obligation or liability (absolute or contingent) that
individually calls for
29
payment by Company or any Subsidiary of more than $75,000 in any specific
case or $350,000 in the aggregate;
(l) issue, sell, redeem or acquire for value, or agree to do
so, any debt obligations (other than advances to or from Seller) or Equity
Securities of Company or any Subsidiary;
(m) compromise or otherwise settle or waive any claims in
respect of Intellectual Property or for non-monetary consideration or for
payment of monetary consideration in excess of $50,000 individually or
$250,000 in the aggregate;
(n) make any material investment, by purchase, contributions
to capital, property transfers, or otherwise, in any other Person;
(o) other than as expressly provided herein, make any Tax
election or make any change in any method or period of accounting or in any
accounting policy, practice or procedure;
(p) dispose of or fail to preserve any material Intellectual
Property, trade secrets or any rights to the use thereof;
(q) make any capital expenditures or commitments with respect
thereto (i) in excess of $3,000,000 in the aggregate in accordance with the
aggregate annual budget for 1999 as of the date hereof (subject to variances
of up to 10% for any discrete budgeted item, without increasing the
$3,000,000 aggregate limit); or (ii) in excess of $250,000 with respect to
individual items of equipment or individual systems; or
30
(r) agree to or make any commitment to take any actions
prohibited by this Section 4.2.
4.3 PERMITS AND APPROVALS. Seller shall use its best efforts to
obtain, and will promptly prepare all registrations, filings and
applications, requests and notices in order to obtain, all Approvals and
Permits required on its part to consummate the transaction contemplated by
this Agreement and to permit Buyer to operate the Business without loss of
any material rights. Buyer shall use its best efforts to obtain, and will
promptly prepare all registrations, filings and applications, requests and
notices in order to obtain, all Approvals and Permits required on its part to
consummate the transactions contemplated by this Agreement. Each party
shall pay their respective costs or expenses incurred in order to obtain such
Approvals. Fees paid or expenses incurred in connection with any and all
filings or proceedings required under the Hart-Scott-Rodino Act and any other
Law requiring filings with any Governmental Entity shall be addressed under
Section 4.4.
4.4 GOVERNMENT FILINGS. Buyer and Seller shall promptly make any
and all filings required under the Hart-Scott-Rodino Act and any other Law
requiring filings with any Governmental Entity with respect to the
transactions contemplated hereby. Buyer and Seller agree to use their best
efforts to obtain all approvals required under the Hart-Scott-Rodino Act to
consummate the transactions contemplated by this Agreement. Subject to such
confidentiality restrictions as may be reasonably requested, Seller and Buyer
shall furnish each other such necessary information and reasonable assistance
as the other may reasonably request in connection with its preparation of
necessary filings or submissions under the provisions of such Laws. Seller
and Buyer will immediately supply to each other copies of all correspondence,
31
filings or communications, by such party or its Affiliates with any
Governmental Entity or members of its staff, with respect to the transactions
contemplated by this Agreement and any related or contemplated or
inconsistent transactions, except for documents filed pursuant to Item 4(c)
of the Hart-Scott Rodino Notification and Report Form or communications
regarding the same. Buyer and Seller shall each pay their respective costs
and expenses incurred under this Section 4.4, except for the $45,000 initial
filing fee under the Hart-Scott-Rodino Act with respect to the transactions
contemplated by this Agreement, which shall be borne entirely by Buyer.
4.5 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE. During
the period beginning on the date hereof and ending on the Closing Date, (a)
Seller will and will cause Company to use its commercially reasonable efforts
to preserve the Business and to preserve the goodwill of customers, suppliers
and others having business relations with Company or the Subsidiaries, and
(b) Seller and Buyer will consult with each other concerning, and Seller will
use commercially reasonable efforts and will cooperate with Buyer in
connection with Buyer's efforts to keep, the services of the officers and
employees of Company and the Subsidiaries that Buyer may wish to have Company
and the Subsidiaries retain. Nothing in this Section 4.5 shall obligate
Buyer, Company or any Subsidiary after the Closing to retain or offer
employment to any officer or employee of Company or any Subsidiary.
4.6 EXCLUSIVITY. Prior to the Closing, Seller will not, and
will cause its controlled Affiliates and Company and any of the directors,
officers, employees, representatives or agents of Seller, Company or any of
their controlled Affiliates (collectively, the "Seller's Representatives")
not to, directly or indirectly, (a) discuss, negotiate, undertake, authorize,
recommend, propose or enter into, either as the proposed surviving, merged,
acquiring or
32
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets or
capital stock or other equity interest in Company or any of the Subsidiaries
other than the transactions contemplated by this Agreement (an "Acquisition
Transaction"), (b) facilitate, encourage, solicit or initiate discussions,
negotiations or submissions of proposals or offers in respect of an
Acquisition Transaction, (c) furnish or cause to be furnished, to any Person,
any information concerning the business operations, properties or assets of
Company or any of the Subsidiaries in connection with an Acquisition
Transaction, or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing. Seller will inform Buyer in
writing immediately following the receipt by Seller, Company or any of
Seller's Representatives of any proposal or inquiry in respect of any
Acquisition Transaction.
4.7 INTERNATIONAL PATENTS. Seller shall deliver to Buyer
within three days prior to the Closing Date an amendment to SCHEDULE 2.8(b)(i)
listing all international patents, including applications therefor,
which are related to the United States patents, including applications
therefor, as set forth on SCHEDULE 2.8(b)(i) as of the date of this Agreement.
4.8 COMPANY STOCK OPTION PLANS. Prior to the Closing, the
appropriate committee of the Board of Directors of the Company (the "Board"), in
accordance with Section 6.2.1 of the Company Stock Option Plans, shall (i) adopt
resolutions (A) approving the Exchange Ratio as described in Section 1.2 of this
Agreement, and (B) providing that all outstanding Company Options shall be
automatically assumed by Buyer at Closing in accordance with the terms in
Section 1.2 of this Agreement and (ii) take all other actions necessary to
implement the
33
terms of Section 1.2 of this Agreement. In addition, Seller and the Company
shall not make any amendments or other changes to the Company Stock Option
Plans or to the Company Options except as required by Law or this Section and
Section 1.2 of this Agreement.
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 SELLER'S POST-CLOSING ACCESS.
(a) Subject to Section 11.5(d) hereof (relating to the
preservation of Tax records), Seller and Buyer agree that each of them shall
preserve and keep the records held by it, their subsidiaries or their controlled
Affiliates relating to the business of Company and the Subsidiaries for a period
of three years from the Closing Date and shall make such records and personnel
available to the other as may be reasonably required by such party, including
without limitation in connection with, among other things, any insurance claims
by, legal proceedings against or governmental investigations of Seller or Buyer
or any of their Affiliates or in order to enable Seller or Buyer to comply with
their respective obligations under this Agreement and each other agreement,
document or instrument contemplated hereby subject to restrictions on disclosure
of such information under applicable Laws, agreements with third parties, and,
subject to entering into appropriate agreements that preserve attorney-client
privilege, attorney-client privilege. In the event Seller or Buyer wishes to
destroy such records after that time, such party shall first give ninety days'
prior written notice to the other party and such other party shall have the
right at its option and expense, upon prior written notice given to such party
within that ninety day period, to take possession of the records within one
hundred and eighty days after the
34
date of such notice. Any information obtained pursuant to this Section 5.1
or pursuant to any other section hereof (including Section 11.5(d)) providing
for the sharing of information or the review of any Tax Return or other
schedule relating to Taxes shall be subject to Section 12.2.
5.2 NO RIGHTS TO SELLER INTELLECTUAL PROPERTY. Except as provided
herein or in the Continuing Intercompany Agreements, Buyer acknowledges and
agrees that Company and the Subsidiaries shall not have, and Buyer shall not
acquire pursuant to this Agreement, any rights of ownership or use whatsoever
with respect to any Mark of any kind that is owned by Seller or any Affiliate
of Seller other than Company or any Subsidiary, including, but not limited
to, the names and Marks "Advanced Micro Devices, Inc.," "AMD," "an AMD
Company," and any derivatives thereof. Buyer agrees that, effective as of
the Closing, it shall cause Company and the Subsidiaries to promptly cease
and desist from any use of any such names or Marks in connection with any
advertising, marketing, or solicitation efforts, and not later than 120 days
after the Closing Date, to cease and desist from any other use of any such
name or Mark.
5.3 INSURANCE; INDEMNITY OBLIGATIONS.
(a) Seller shall maintain in effect, with respect to Company
and the Subsidiaries, until 12:00 a.m. on the date following the Closing Date
all casualty and liability insurance policies listed on SCHEDULE 2.11 (or
comparable replacement policies). Effective at 12:01 a.m. on the date
following the Closing Date, all insurance coverage maintained by Seller under
which Company and the Subsidiaries are insured, including any and all bonds
or other indemnity obligations (excluding any of the same set forth on
SCHEDULE 5.5), shall be cancelled and terminated (except to the extent that
they may not, by their terms, be so cancelled or
35
terminated). Company and the Subsidiaries shall be responsible for any
deductibles or retentions in connection with any such insurance. All premium
refunds paid to Seller relating to insurance covering Company and the
Subsidiaries shall be the property of Seller, regardless of whether such
refunds are paid on, before or after the Closing Date.
(b) Company and the Subsidiaries shall continue to be
entitled to such claims or rights to receive any insurance proceeds under
pre-Closing insurance covering Company and the Subsidiaries as Seller may
have, whether such coverage is or was maintained on an "occurrence" basis or
a "claims-made" basis. From and after the Closing Date, Seller and Buyer
shall cooperate in connection with the adjustment and administration of
claims under all such insurance coverage. Buyer, Company and the
Subsidiaries shall be responsible for any deductible, retention or other
charge provided for by the terms of any such coverage.
(c) Buyer and Seller shall use all reasonable efforts to
ensure that no certificates of insurance indicating coverage under Seller (or
by reason of being a subsidiary or Affiliate of Seller) shall be issued after
the Closing Date and that all such insurance certificates which are
outstanding as of the Closing Date are promptly returned to Seller. In the
event that Seller is unable to notify the holder of a certificate of
insurance indicating such coverage of the termination of coverage as of the
Closing Date, or Seller is unable to cancel or terminate any such coverage as
of the Closing Date, and Seller or its insurer thereafter receives a claim or
purported claim under any such coverage, Buyer shall have no right to recover
any amounts in respect thereof from Seller or its insurers and be responsible
for all Losses incurred by Seller or its insurers in respect of the same.
36
5.4 WARN ACT. Buyer agrees that it will not take any action which
causes the notice provisions of the WARN Act to be applicable to Seller or,
prior to the Closing, Company or any Subsidiary in connection with the
transactions contemplated by this Agreement.
5.5 INTERCOMPANY AGREEMENTS. Buyer agrees to perform or cause
Company to perform the obligations of Company under the Continuing Intercompany
Agreements. Except with respect to the Continuing Intercompany Agreements,
Buyer and Seller acknowledge and agree that all Intercompany Agreements shall be
terminated as of the Closing Date.
5.6 EXPENSES OF SALE. To the extent and only to the extent paid
prior to the Closing or accrued on the Closing Balance Sheet, Company shall
be responsible for the following extraordinary out-of-pocket expenses
actually incurred by Company and the Subsidiaries in connection with the sale
of the Stock hereunder: (a) pre-Closing fees, expenses and disbursements of
legal counsel, accountants, consultants and other advisors, (b) pre-Closing
expenses relating to arrangements for due diligence investigations of
Company, the Subsidiaries and the Business by prospective buyers, including,
but not limited to, expenses to secure premises, equipment, personnel and
other services, and (c) the other sale expenses set forth on SCHEDULE 5.6.
Upon request, Seller shall reimburse Buyer for any such expenses not paid
prior to the Closing or accrued on the Closing Balance Sheet.
5.7 INTERCOMPANY BALANCES. Except for any amounts due and owing
under the terms of any Company Plan (a) immediately prior to the Closing,
Company and the Subsidiaries shall pay any amounts accrued and payable to
Seller or any Affiliate of Seller (other than amounts incurred in
contravention of Section 4.2), including, but not limited to, any declared
but
37
unpaid dividends or other distributions permitted by Section 5.12 and amounts
accrued under the Intercompany Agreements, and (b) Seller or any Affiliate of
Seller shall pay any amounts accrued and payable to Company or any
Subsidiary, including, but not limited to, amounts accrued under the
Intercompany Agreements.
5.8 FACILITIES. Seller shall take all reasonable efforts to
effect the assignment to Buyer of the real property leases set forth on
SCHEDULE 5.8 and, subject to such assignment, Buyer shall assume all
obligations of Seller under such leases as of the Closing Date.
5.9 NONDISCLOSURE OF PROPRIETARY DATA. Subject to applicable law,
neither Seller nor its controlled Affiliates shall, at any time, make use of,
divulge or otherwise disclose, directly or indirectly, any trade secret or
other similar proprietary data (including, but not limited to, any customer
list, record or financial information) concerning the Business or policies of
Company and the Subsidiaries. Seller shall further protect such information
by applying the same standards and procedures of confidentiality which it
applies generally to its own trade secret or other similar proprietary data.
5.10 NONSOLICITATION. During the period beginning on the date of
this Agreement and ending three years after the Closing Date, neither Seller,
on the one hand, nor Buyer, on the other hand (nor any of their respective
controlled Affiliates), will, without the other's prior consent (which
consent may be withheld in the other's sole discretion), directly or
indirectly, solicit for employment, in the case of Seller, any employee of
Buyer, Company or any of their subsidiaries, and in the case of Buyer, any
employee of Seller or any of its subsidiaries. For purposes of this Section
5.10, the term "solicit" shall be deemed not to include
38
advertisements or other generalized employment searches, including
advertisements in any media (including trade media) or any job postings
system not specifically directed to a particular employee. Seller and Buyer
recognize and agree that a breach of their respective covenants set forth in
this Section 5.10 could cause irreparable harm to the other, that remedies at
law in the event of such breach would be inadequate, and that accordingly, in
the event of such breach, a restraining order or injunction or both may be
issued against it, in addition to any other rights and remedies which are
available. If this Section 5.10 is more restrictive than permitted by the
Laws of any jurisdiction in which enforcement is sought, this Section 5.10
shall be limited to the extent required to permit enforcement under such Laws.
5.11 NONCOMPETITION.
(a) Seller agrees that, for the period from the Closing to
the date which is the fifth anniversary of the Closing Date, neither Seller
nor any of Seller's controlled Affiliates will, directly or indirectly, for
its own benefit or as agent of another, carry on or own, manage or operate,
participate in, or control the management or operation of, or allow its name
to be used in, the Device Business (i) in the County of Santa Clara, (ii) in
the State of California, (iii) in the State of Oregon and (iv) in the United
States of America. For purposes of this Section 5.11, the "Device Business"
shall mean the design, marketing or sale of (or the investment in or
acquisition of any manufacturer of) any "stand alone" integrated circuit
comprising (i) a general purpose array of logic gates (whether AND arrays or
OR arrays) which can be interconnected by programming a matrix of
interconnect lines between the logic gates, including any accompanying
circuitry to provide I/O buffer control and protection, programming control
and data path, embedded memory and other embedded subsidiary circuitry,
timing control and
39
distribution clocking, voltage control and regulation, and chip protection
functions (a "Programmable Logic Device") or (ii) a general purpose array of
logic blocks built from basic logic gates or LUTs (Look Up Tables) which can
be interconnected by programming a matrix of interconnect lines between the
logic blocks, including any accompanying circuitry to provide I/O buffer
control and protection, programming control and data path, embedded memory
and other embedded subsidiary circuitry, timing control and distribution
clocking, voltage control and regulation, and chip protection functions (a
"Field Programmable Gate Array").
The Device Business shall not include the manufacture, design,
marketing or sale of any Programmable Logic Device or Field Programmable Gate
Array that is combined on an integrated circuit with other devices (including
without limitation flash memory, microprocessors, microprocessors with or for
embedded applications, or other functions of integrated circuitry) or is
otherwise not a single purpose, "stand alone" integrated circuit that
constitutes or is otherwise not marketed as a Programmable Logic Device or
Field Programmable Gate Array.
(b) Nothing contained herein shall (i) limit Seller (A) from
acquiring (including through a merger) or investing in any business,
development arrangement or joint venture whose primary business activities do
not constitute a Device Business, or (B) from, directly or indirectly,
holding or making investments in securities of any business listed on a
national securities exchange, admitted to trading in an automated quotations
market, or traded generally on the over-the-counter market, so long as
Seller's direct or indirect holdings do not exceed 5% of the outstanding
Equity Securities thereof, or (ii) apply to any Person who acquires, directly
or indirectly, the Equity Securities of, or control of, Seller or to the
activities of any
40
Person merging with or into Seller as conducted prior to such merger by any
Person merging with or into Seller.
(c) Seller recognizes and agrees that compliance with the
covenant contained in this Section 5.11 is necessary to protect Buyer,
Company and the Subsidiaries and that a breach by Seller of any of the
covenants set forth in this Section 5.11 could cause irreparable harm to
Buyer, that Buyer's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach, a restraining
order or injunction or both may be issued against Seller, in addition to any
other rights and remedies which are available to Buyer. If this Section 5.11
is more restrictive than permitted by the Laws of any jurisdiction in which
Buyer seeks enforcement hereof, this Section 5.11 shall be limited to the
extent required to permit enforcement under such Laws. In particular, the
parties intend that the covenants contained in the preceding portions of this
Section 5.11 shall be construed as a series of separate covenants, one for
each location specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms. If, in any judicial proceeding,
a court shall refuse to enforce any of the separate covenants deemed included
in this Section 5.11, then such unenforceable covenant shall be deemed
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
If any court of competent jurisdiction shall determine the foregoing covenant
to be unenforceable with respect to the term or the scope of the subject
matter or geography covered thereby, then such covenant shall nevertheless be
enforceable by such court against the other party upon such shorter term or
within such lesser scope as may be determined by such court to be reasonable
and enforceable.
41
5.12 DIVIDENDS. At any time prior to the Closing, Company may
pay cash dividends to its stockholders of record. In no event, however, will
such dividends paid from the date hereof to the Closing exceed, in the
aggregate, $60 million.
5.13 ACCESS FOR ENVIRONMENTAL REVIEW. Prior to the Closing,
Buyer and its consultants and other representatives shall have access to all
of Seller's and Company's records of environmental inspections and tests and
soil and groundwater samples, in each instance relating to the Historic
Company Business Facilities.
5.14 CONTRACT RIGHTS. If any necessary Approval of a third
party with respect to a contract that is used in the conduct of the Business
is not obtained prior to the Closing, or as a result of the failure to have
obtained any such Approval Buyer would not, at the Closing, receive
substantially all rights under any such Contract, (a) Seller shall continue
to use its best efforts to obtain such Approval from and after the Closing,
and (b) Seller and Company shall cooperate in a mutually agreeable
arrangement under which Company or the Subsidiaries obtain or retain the
benefits and assume the obligations under such Contract, including
subcontracting, sub-licensing or sub-leasing to Company or the Subsidiaries,
or under which Seller would enforce for the benefit of Company and the
Subsidiaries any and all rights of Seller against a third party thereto,
PROVIDED that Seller shall not be required to incur any out-of-pocket
expenses in connection with the same, unless and to the extent advanced by
Buyer.
5.15 PATENTS. As provided in Section 2.8(b), SCHEDULE 2.8(b)
sets forth a list of all patents and patent applications that are owned by
Company or will be owned by Company as of the Closing. To the extent any
patents or patent applications on such Schedule have not been
42
assigned to Company as of the date hereof, Seller shall assign such patents
or patent applications (together with any associated past unrecovered damages
claims and future damages claims), as the case may be, to Company prior to
the Closing. Seller agrees that, during the six (6) month period following
the date hereof, Seller will discuss with Buyer in good faith whether any
patent or patent application not on SCHEDULE 2.8(b) should reasonably be
added thereto and, if Seller and Buyer agree that a patent or patent
application should reasonably be added thereto, Seller shall promptly assign
such patent or patent application (together with any associated past
unrecovered damages claims and future damages claims) to Company.
5.16 TRANSFER OF CERTAIN BUSINESS-RELATED ASSETS.
(a) This Section 5.16 does not apply to Intellectual Property
or trade secrets.
(b) Seller shall use commercially reasonable efforts to
assign and transfer or cause to be assigned and transferred to Company prior
to Closing (i) all of the assets, properties and rights contemplated to be
transferred to Company by the resolutions adopted by Seller's board of
directors at its December 1997 meeting, (ii) the assets, properties and
rights of Seller and its controlled Affiliates (including contract rights and
intangible assets, properties and rights) predominantly related to the
Business, and (iii) the assets, properties and rights of Seller and its
controlled Affiliates currently treated by the Company as a part of the
Business (collectively, the "Other Business Assets").
43
(c) To the extent any Other Business Assets have not been
assigned and transferred prior to Closing, Seller shall take such additional
commercially reasonable actions after the Closing to effect such assignments
and transfers as are reasonably requested by Buyer.
(d) The assignments and transfers pursuant to this Section
5.16 shall be at no cost to Buyer, Company or their respective subsidiaries
and Affiliates.
ARTICLE VI
GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by each of the
parties hereto:
6.1 NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity, nor shall any Action have been instituted and remain pending by any
Governmental Entity at what would otherwise be the Closing Date, which
prohibits or restricts or would (if successful) prohibit or restrict the sale
and purchase of Stock contemplated by this Agreement.
6.2 APPROVALS. To the extent required by applicable Law, all
material Permits and Approvals required to be obtained from any Governmental
Entity in connection with consummation of the transactions contemplated by
this Agreement shall have been received or obtained on or prior to the
Closing Date, without the imposition of any burdensome conditions materially
adverse to the party entitled to the benefit thereof, and any applicable
waiting period under the Hart-Scott-Rodino Act shall have expired or been
terminated and any applicable
44
merger notification requirements under statutes of foreign Governmental
Entities shall have been complied with, except to the extent that
noncompliance with any such foreign merger notification statute is not
reasonably likely to have a material adverse impact on the transactions
contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Buyer:
7.1 REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SELLER. The
representations and warranties of Seller herein contained shall be true in
all material respects (PROVIDED, HOWEVER, that where a representation or
warranty is already qualified as to materiality, such representation or
warranty shall be true in all respects) at the Closing Date with the same
effect as though made at such time, Seller shall have performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed, or complied with by it (except in immaterial
respects), on or prior to the Closing Date, and Seller shall have delivered
to Buyer a certificate of Seller ("Seller's Closing Certificate") dated as of
the Closing Date and signed by its president to such effect. The
representations and warranties made by Seller in Seller's Closing Certificate
shall constitute, upon execution and delivery thereof, representations and
warranties of Seller for all purposes of this Agreement including Article II
hereof.
45
7.2 RESIGNATION OF DIRECTORS. The directors of Company and
the Subsidiaries shall have submitted their respective resignations in
writing to Company and the Subsidiaries, as applicable. Such resignations
shall be effective as of the Closing.
7.3 CONTINUING INTERCOMPANY AGREEMENTS. The Continuing
Intercompany Agreements shall be in the amended forms executed on the date
hereof and as attached to the letter agreement dated as of the date of this
Agreement by and between Seller and Buyer and shall be in full force and
effect.
7.4 AMENDED SCHEDULES. The additions to the Schedules, as
reflected in the amendment delivered to Buyer pursuant to Section 2.22 shall
not have indicated any change in, or the occurrence of an event affecting,
Company or any of the Subsidiaries that, individually or in the aggregate,
has or would have a material adverse effect on the Business (other than
matters of general applicability to Company's industry.
7.5 FINANCING. (x) There shall not have occurred a material
adverse change or disruption in the loan syndication or capital markets after
the date of this Agreement which results in (i) termination of the Commitment
Letter (including any extension thereof), (ii) Buyer being unable to extend
the Commitment Letter beyond its scheduled expiration on terms not
significantly worse than those contemplated by the Commitment Letter or (iii)
Buyer otherwise being unable to consummate the Financing and (y) Buyer,
despite commercially reasonable efforts, is unable to obtain alternate
financing (on terms not significantly worse than those set forth in the
Commitment Letter) sufficient, with Buyer's available cash, to pay the
Purchase Price.
46
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
8.1 REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER. The
representations and warranties of Buyer herein contained shall be true in all
material respects (PROVIDED, HOWEVER, that where a representation or warranty
is already qualified as to materiality, such representation or warranty shall
be true in all respects) at the Closing Date with the same effect as though
made at such time, Buyer shall have performed all obligations and complied
with all covenants and conditions required by this Agreement to be performed,
or complied with by it (except in immaterial respects), on or prior to the
Closing Date, and Buyer shall have delivered to Seller a certificate of Buyer
("Buyer's Closing Certificate") dated as of the Closing Date and signed by
its president to such effect. The representations and warranties made by
Buyer in Buyer's Closing Certificate shall constitute, upon execution and
delivery thereof, representations and warranties of Buyer for all purposes of
this Agreement including Article III hereof.
ARTICLE IX
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall automatically terminate, without any notice, demand or action
by either party, if the Closing does
47
not occur on or before the close of business on August 31, 1999 unless
extended by mutual, written consent of Buyer and Seller and otherwise may be
terminated at any time before the Closing as follows and in no other manner:
(a) MUTUAL CONSENT. By mutual written consent of Buyer and
Seller.
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer by
written notice to Seller if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the
obligations of Buyer to consummate the transactions contemplated by this
Agreement as set forth in Articles VI or VII.
(c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. By Seller by
written notice to Buyer if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the
obligation of Seller to consummate the transactions contemplated by this
Agreement as set forth in Articles VI or VIII.
(d) MATERIAL BREACH. By Buyer or Seller if there has been a
material misrepresentation or other material breach by the other party in its
representations, warranties and covenants set forth herein; PROVIDED,
HOWEVER, that the breaching party shall have 20 business days after receipt
of notice from the other party of its intention to terminate this Agreement
if such breach continues, in which to cure such breach.
9.2 EFFECT OF TERMINATION. In the event that this Agreement shall
be terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement shall terminate; PROVIDED that the obligations of the
parties contained in Sections 12.2, 14.12,
48
14.13 and 14.16 shall survive any such termination, and that a termination
under Section 9.1 shall not relieve either party of any liability for a
breach of, or for any misrepresentation under, this Agreement, or be deemed
to constitute a waiver of any available remedy (including specific
performance if available) for any such breach or misrepresentation.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Article II and Article III of
this Agreement (including the representations and warranties made in Seller's
Closing Certificate and Buyer's Closing Certificate) shall expire 18 months
after the Closing Date, except that (i) the representations and warranties
contained in Section 2.4 shall continue through the expiration of the
applicable statute of limitations as the same may be extended; and (ii) if a
claim or notice is given under Article X with respect to any representation
or warranty prior to the applicable expiration date, such claim shall
continue indefinitely until it is finally resolved.
9.4 NOTICE OF KNOWN UNSATISFIED CONDITIONS OR BREACHED
REPRESENTATIONS, WARRANTIES OR COVENANTS. Prior to the Closing, each of
Buyer and Seller agrees to promptly inform the other party of any failure to
be satisfied of any condition in its favor or the breach of any
representation, warranty or covenant by the other of which such party becomes
aware.
ARTICLE X
INDEMNIFICATION
10.1 OBLIGATIONS OF SELLER. Subject to the provisions of Section
10.4, from and after the Closing, Seller agrees to indemnify Buyer, Company
and each Subsidiary, and their respective directors, officers, employees,
Affiliates, agents and assigns for, and save and hold
49
harmless each from and against, any and all Losses, directly or indirectly,
as a result of, arising from, incurred in connection with, or incident to:
(a) any inaccuracy in or breach of any of the representations
and warranties made by Seller in or pursuant to this Agreement (other than
any set forth in Section 2.4);
(b) any breach or nonperformance of any covenants or
agreements made by Seller in or pursuant to this Agreement;
(c) any breach of Law under ERISA or the Code in connection
with, any employee benefit plan or arrangement maintained, sponsored,
contributed to or administered by Seller or its ERISA Affiliates other than
under, as a result of, or based upon or arising from, the Company Plans;
(d) Seller's Retained Environmental Liabilities;
(e) claims asserted against Company in connection with
matters listed on SCHEDULE 2.3(b) ITEM 2; in respect of invoices in an
approximate aggregate amount of $750,000; and
(f) any claim that additional royalties are payable under
Buyer's license described in the letter of even date herewith, as a result of
Buyer's acquisition of the Business PROVIDED that such Losses exceed $75,000.
Notwithstanding the foregoing, in the case of any Losses described
in (a), (b) or (c) above, liabilities specifically identified and accrued or
reserved in the Closing Balance Sheet
50
shall not be indemnified under this Section 10.1 to the extent so accrued or
reserved. Except as provided in this Section 10.1, Buyer releases Seller
from any liability to Buyer arising out of any Environmental Claim in
connection with the conduct of the Business or the use of the Historic
Company Business Facilities by Seller, Company or any of their respective
Subsidiaries.
10.2 OBLIGATIONS OF BUYER. Subject to the provisions of Section
10.4, from and after the Closing, Buyer agrees to indemnify, Seller and its
directors, officers, employees, Affiliates, agents and assigns for, and save
and hold harmless each, from and against any Losses, directly or indirectly,
as a result of or arising from, incurred in connection with, or incident to:
(a) any inaccuracy in or breach of any of the representations
and warranties made by Buyer in or pursuant to this Agreement;
(b) any breach or nonperformance of any covenants or
agreements made by Buyer in or pursuant to this Agreement;
(c) Buyer's Environmental Liabilities; and
(d) if such lease is assigned to Company, any claims against
Seller under the Sunnyvale Technology Park Lease between Stewart Drive LLC
and Seller dated September 17, 1997 (other than any consent fee or other one
time payment incurred directly as a result of the assignment of such lease to
the Company or the transactions contemplated by this Agreement) (until such
time as Seller shall have been forever released from all liability by the
lessor thereunder with respect to events occurring after the Closing Date).
51
Except as provided in this Section 10.2, Seller releases Buyer from
any liability to Seller arising out of any Environmental Claim in connection
with the conduct of the Business or the use of the Historic Company Business
Facilities by Buyer, Company or any of their respective Subsidiaries.
10.3 PROCEDURE.
(a) NOTICE. Any party seeking indemnification of any Loss or
potential Loss arising from a claim asserted by a third party shall give
written notice (a "Claim Notice") to the party from whom indemnification is
sought. Written notice to the Indemnifying Party of the existence of such
third-party claim shall be given by the Indemnified Party within the later of
(i) 30 days after its receipt of a written assertion of liability from the
third party or (ii) upon Indemnified Party's determination to seek
indemnification for such claim from the Indemnifying Party (but in any event
within 30 days of Indemnified Party's receipt of notice of the intended
commencement of an Action or investigation in respect of such claim).
Neither the failure of the Indemnified Party to provide notice of any such
third party claim to the Indemnifying Party within the 30 days contemplated
by clause (i) of the preceding sentence nor the failure of the Indemnified
Party to provide notice of any such claim in accordance with clause (ii) of
the preceding sentence shall affect the Indemnified Party's rights to
indemnification hereunder, except to the extent that the Indemnifying Party
incurs an out-of-pocket expense or otherwise has been prejudiced as a result
of such delay.
(b) DEFENSE. The Indemnifying Party shall be entitled to
assume the defense, control and settlement (at its cost) of any Indemnifiable
Claim (including Environmental
52
Claims) asserted by a third party. Without prejudice to the foregoing, in
the event the Indemnifying Party assumes defense, control and settlement of
any Indemnifiable Claim which is an Environmental Claim (an "Indemnifiable
Environmental Claim"), the Indemnifying Party shall undertake, and shall be
entitled to control, the remediation of the release and shall be entitled to
control the defense of any third party claims arising therefrom, PROVIDED
that the Indemnifying Party shall take all reasonable steps to minimize any
adverse impact of such remediation on the Indemnified Party. If the
Indemnifying Party assumes the defense of any such Indemnifiable Claim, it
shall retain experienced counsel reasonably satisfactory to the Indemnified
Party. With respect to Indemnifiable Environmental Claims, the Indemnifying
Party shall be entitled to (i) retain environmental engineers and other
experts and advisors as it may determine to be advisable and (ii) to
remediate the Release as it may determine to be advisable. If the
Indemnifying Party does not assume such defense, the Indemnified Party may
compromise or settle any claim for the payment of money on behalf of and for
the account and risk of the Indemnifying Party, who shall be bound by the
result.
(c) SETTLEMENT LIMITATIONS. Notwithstanding anything in this
Section 10.3 to the contrary, the Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent may not be
unreasonably withheld), settle or compromise any third party Indemnifiable
Claim or permit a default or consent to entry of any judgment therein.
Notwithstanding the foregoing, if a settlement offer solely for money damages
(and which otherwise (i) has no material adverse impact on the Indemnified
Party, (ii) does not limit, restrict or otherwise affect Indemnified Party's
ability to conduct the Business, (iii) does not require any admission of
wrongdoing on the part of Indemnified Party and (iv) does not require payment
of
53
any amount by Indemnified Party) is made by the applicable third party
claimant, which settlement includes an unqualified release from all liability
in respect of such claim, and the Indemnifying Party notifies the Indemnified
Party in writing of the Indemnifying Party's willingness to accept the
settlement offer and pay the amount called for by such offer, and the
Indemnified Party fails to accept such offer in writing within a reasonable
period, the Indemnified Party may continue to contest such claim, free of any
participation by the Indemnifying Party, and the amount of any ultimate
liability with respect to such Indemnifiable Claim that the Indemnifying
Party has an obligation to pay hereunder shall be limited to the lesser of
(i) the amount of the settlement offer that the Indemnified Party failed to
accept, or (ii) the aggregate Losses of the Indemnified Party with respect to
such claim. If the Indemnifying Party makes any payment on any claim, the
Indemnifying Party shall be subrogated, to the extent of such payment, to all
rights and remedies of the Indemnified Party to any claims of the Indemnified
Party against third parties (other than the Indemnified Party's insurers)
with respect to such claim.
10.4 LIMITATIONS ON INDEMNIFICATION.
(a) The Indemnified Party shall provide reasonable evidence
and documentation of the nature and extent of any Loss payable by the
Indemnifying Party upon request by the Indemnifying Party.
(b) Any Indemnifiable Claim governed by this Article X shall
be limited to the amount of Losses sustained by the Indemnified Party, net of
the dollar amount of any insurance proceeds received by the Indemnified Party
with respect to such Losses, (net of any
54
Tax liabilities in respect thereof and any incremental cumulative additional
insurance costs as a result thereof as reasonably determined by Indemnified
Party). The Indemnified Party shall proceed in good faith using commercially
reasonable efforts to make claims for any insurance proceeds receivable with
respect to Losses. Seller shall not be required to pay any amounts under
Section 10.1(a) unless (i) the aggregate of all amounts which would otherwise
be payable by Seller thereunder exceeds $2,750,000 or (ii) the amount of any
individual Indemnifiable Claim which would otherwise be payable by Seller
thereunder exceeds $75,000, and, if an Indemnifiable Claim or Indemnifiable
Claims, as the case may be, is in excess of such individual or aggregate
limits, Seller shall be responsible for the total amount of such
Indemnifiable Claim or Indemnifiable Claims. Buyer shall not be required to
pay any amounts under Section 10.2(a) unless (i) the aggregate of all amounts
for which indemnity would otherwise be payable by Buyer exceeds $2,750,000,
or (ii) the amount of any individual Indemnifiable Claim which would
otherwise be payable by Buyer thereunder exceeds $75,000, and if an
Indemnifiable Claim or Indemnifiable Claims, as the case may be, is in excess
of such individual or aggregate limits, Buyer shall be responsible for the
total amount of such Indemnifiable Claim or Indemnifiable Claims. For
purposes of indemnification in respect of Losses, any representation or
warranty shall be deemed to exclude any limitation or qualification as to
materiality set forth in such representation or warranty, but in no event
shall an individual breach or inaccuracy of any such representation or
warranty be considered until the Losses relating thereto exceed $75,000.
Seller's indemnity obligations under Section 10.1(a) shall be limited, in the
aggregate, to $75,000,000.
55
10.5 REMEDIES EXCLUSIVE. The remedies provided for in this Article
X shall constitute the sole and exclusive remedy for any post-Closing claims
made for breach of this Agreement, except for claims arising out of any
breach of Sections 5.9 or 12.2, or arising under Article XI. Nothing in this
Section 10.5, however, shall constitute a waiver or limitation by any party
of its rights or remedies based on fraud or intentional misrepresentation.
Each party hereby waives any provision of law to the extent that it would
limit or restrict the agreement contained in this Section 10.5.
Notwithstanding anything to the contrary elsewhere in this Agreement, nothing
herein shall preclude a party from exercising its rights under this Agreement
and applicable law to equitable remedies, including, without limitation,
specific performance and injunction, and no party or its Affiliates shall
seek or be liable for any punitive or consequential damages, including, but
not limited to, loss of revenue or income, or loss of business reputation or
opportunity relating to any breach or alleged breach of this Agreement
(unless, and to the extent, such party is determined to have acted in bad
faith in respect to such breach).
ARTICLE XI
TAX MATTERS
11.1 ALLOCATION OF TAX LIABILITIES; INDEMNIFICATION.
(a) Subject to the provisions of Section 11.2 and 11.7,
Seller shall be liable for and shall hold Buyer harmless against any
liability for Taxes of (i) Company or any Subsidiary for any taxable year or
other taxable period that ends on or before the Closing Date (including Taxes
attributable to the Section 338 Elections specified in Section 11.7 below)
and, in the case of any taxable year or other taxable period that includes
the Closing Date, that part of
56
the taxable year or other taxable period that ends at the close of business
on the Closing Date, and (ii) Company or any Subsidiary that are attributable
to any other corporation and that are imposed on Company or any Subsidiary as
a result of membership of Company or such Subsidiary in a consolidated,
combined or unitary group of Seller on or prior to the Closing Date.
(b) Buyer shall be liable for and shall hold Seller harmless
against any liability for Taxes of Company and each Subsidiary for any
taxable year or other taxable period that begins after the close of the
Closing Date and, in the case of any taxable year or other taxable period
that includes the Closing Date, that part of the taxable year or other
taxable period that begins after the close of the Closing Date.
(c) Whenever it is necessary for purposes of this Section
11.1 to determine the liability for Taxes of Company or any Subsidiary for a
taxable year or period that begins on or before and ends after the Closing
Date, the determination shall be made by assuming that Company had a taxable
year which ended at the close of business on the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis
(such as the deduction for depreciation) shall be apportioned on a time basis.
(d) Buyer shall promptly (and in any event within 15 business
days) notify Seller in writing upon receipt by Buyer, any of its Affiliates,
Company or any Subsidiary of notice of any pending or threatened audits or
assessments relating to Taxes for which Seller would be required to indemnify
Buyer pursuant to Section 11.1(a). Seller shall have the sole right to
represent Company's or any Subsidiary's interest in any audit or
administrative or court proceeding relating to any Tax that Seller is
required to indemnify pursuant to Section 11.1(a),
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and to employ counsel of its choice at its expense. Notwithstanding the
foregoing, Seller shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim for Taxes which would
materially adversely affect the liability for Taxes of Buyer, Company or any
Subsidiary for any period after the Closing Date without the prior written
consent of Buyer. Such consent shall not be unreasonably withheld, and shall
not be necessary to the extent that (i) the settlement is consistent with the
positions previously taken by Company or the Subsidiary, or (ii) Seller has
agreed to indemnify Buyer against the effects of any such settlement. If
Seller elects not to assume the defense of any claim for Taxes which may be
the subject of indemnification by Seller pursuant to Section 11.1(a), Seller
shall be entitled to participate at its expense in such defense. Neither
Buyer nor Company nor any Subsidiary may agree to settle any claim for Taxes
which may be the subject of indemnification by Seller under Section 11.1(a)
without the prior written consent of Seller, which consent shall not be
unreasonably withheld.
(e) Seller shall have no liability under Section 11.1(a) for
the payment of any Tax attributable to or resulting from any action described
in Section 11.2.
(f) Seller shall not be liable for any settlements effected
without the consent of Seller, as required by Section 11.1(d), or resulting
from any claim, suit, action, litigation or proceeding in which Seller was
not permitted an opportunity to assume the defense as required under
Section 11.1(d).
11.2 TAX COVENANTS. Buyer covenants that it will not cause or
permit Company, any Subsidiary or any Affiliate of Buyer (a) to take any
action on or after the Closing
58
Date other than in the ordinary course of business, including but not limited
to the distribution of any dividend or the effectuation of any redemption
that could give rise to any Tax liability of Seller or any of its Affiliates,
or (b) to make or change any Tax election, amend any Tax Return or take any
Tax position on any Tax Return, take any action, omit to take any action or
enter into any transaction that results in any increased Tax liability or
reduction of any Tax asset of Seller, Company or any Subsidiary in respect to
any Tax period including the Closing Date or ending on or before the close of
business on the Closing Date.
11.3 REFUNDS. Any refunds (including interest thereon) of Taxes
paid or indemnified by Seller pursuant to Section 11.1(a) shall be for the
account of Seller. Any refunds (including interest thereon) of Taxes paid or
indemnified by Buyer pursuant to Section 11.1(b) shall be for the account of
Buyer. Buyer agrees to assign and promptly remit (and to cause Company and
each Subsidiary to assign and promptly remit) to Seller all refunds
(including interest thereon) of Taxes which Seller is entitled to hereunder
and which are received by Buyer, Company, any Subsidiary or any other
Affiliate of Buyer. Seller agrees to assign and promptly remit to Buyer all
refunds (including interest thereon) of Taxes which Buyer is entitled to
hereunder and which are received by Seller or any of its Affiliates. Buyer
agrees that, upon the reasonable request and at the sole expense of Seller,
Buyer shall file, or cause Company or any Subsidiary to file, a claim for
refund of any Tax which Seller is entitled to hereunder.
11.4 TAX BENEFITS.
(a) If any adjustment shall be made to any Tax Return
relating to Seller, Company or any Subsidiary for any taxable period of
Company or any Subsidiary ending prior to
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or on or including the Closing Date which results in any Tax detriment
(including any indemnity payment pursuant to Section 11.1(a)) to Seller or
any Affiliate of Seller (including, prior to the close of business on the
Closing Date, Company and the Subsidiaries) and results in any deduction,
exclusion from income or other allowance (a "Tax Benefit") to Company, any
Subsidiary, Buyer, or any Affiliate of Buyer, Buyer shall pay to Seller the
amount of the Tax reduction attributable to such Tax Benefit at such time or
times as, and to the extent that, Company, any Subsidiary, Buyer, or any
Affiliate of Buyer realizes such Tax reduction.
(b) If any adjustment shall be made to any Tax Return
relating to Buyer, Company or any Subsidiary for any taxable period of
Company or any Subsidiary ending after the Closing Date which results in any
Tax detriment to Buyer or any Affiliate of Buyer (including, after the close
of business on the Closing Date, Company and the Subsidiaries) and results in
any Tax Benefit to Seller or any Affiliate of Seller for any taxable period
of Company ending on or prior to the Closing Date, or including the Closing
Date (to the extent of the portion of such period treated as ending on the
Closing Date pursuant to Section 11.1(c)), Seller shall pay to Buyer the
amount of the Tax reduction attributable to such Tax Benefit at such time or
times as and to the extent that Seller or any Affiliate of Seller realizes
such Tax reduction.
11.5 RETURNS AND REPORTS.
(a) Seller shall file or cause to be filed when due all Tax
Returns with respect to Taxes that are required to be filed by or with
respect to Company and each Subsidiary for taxable years or periods ending on
or before the Closing Date and shall pay any Taxes shown as due on such Tax
returns. Unless otherwise required, Tax Returns with respect to Taxes for
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taxable years ending on the Closing Date shall be prepared on a basis
consistent with Treasury Regulations Section 1.1502-76(b)(1); PROVIDED,
HOWEVER, that if the Closing Date falls in the middle of a month, Seller and
Buyer may agree to allocate the tax items ratable to such month consistent
with Treasury Regulations Section 1.1502-76(b)(2)(iii). Buyer shall file or
cause to be filed when due all Tax Returns that are required to be filed by
or with respect to Company and each Subsidiary for taxable years or periods
ending after the Closing Date and shall pay any Taxes shown as due on such
Tax Returns subject to any reimbursement to which Buyer may be entitled
pursuant to Section 11.1. Buyer shall cause Company and each Subsidiary to
consent to join, for all taxable periods of Company or Subsidiary ending on
or before the Closing Date for which Company or Subsidiary is eligible to do
so, in any consolidated, combined or unitary Tax Returns relating to Tax
which Seller shall request it to join.
(b) With respect to any Tax Return with respect to Taxes that
covers a period beginning before and ending after the Closing Date, a copy of
such Tax Return shall be provided to Seller within 45 days prior to the due
date (including extensions) for the filing thereof, and Seller shall have the
right to approve (which approval shall not be unreasonably withheld) such Tax
Return to the extent it relates to the portion of the period ending on the
Closing Date. Seller shall promptly pay to Buyer the amount of Taxes
attributable to such period less any Taxes previously paid relating to such
period (as determined pursuant to Section 11.1(c) above) at the time such Tax
Return is filed. If Seller has overpaid the amount of Taxes attributable to
such period Buyer shall refund such amount.
(c) With respect to any taxable year of Company and each
Subsidiary ending after December 27, 1998 and on or prior to the Closing
Date, Buyer shall promptly cause
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Company and each Subsidiary to prepare and provide to Seller a package of tax
information materials (the "Tax Package"), which shall be completed in
accordance with past practice including past practice as to providing the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measure of income of Company and
each Subsidiary.
(d) COOPERATION WITH RESPECT TO TAX RETURNS. Buyer and
Seller agree to furnish or cause to be furnished to each other, and each at
their own expense, as promptly as practicable, such information (including
access to books and records) and assistance, including making employees
available on a mutually convenient basis to provide additional information
and explanations of any materials provided, relating to Company and the
Subsidiaries as is reasonably necessary for the filing of any Tax Return, for
the preparation for any audit, and for the prosecution or defense of any
claim, suit or proceeding relating to any adjustment or proposed adjustment
with respect to Taxes. Buyer or Company shall retain in its possession, and
shall provide Seller reasonable access to (including the right to make copies
of), such supporting books and records and any other materials that Seller
may specify with respect to Tax matters relating to any taxable period ending
on or before to the Closing Date until 180 days after the relevant statute of
limitations has expired. After such time, Buyer may dispose of such material.
11.6 DISPUTES. If Buyer and Seller cannot agree on any calculation
required to be made under Sections 11.1(c), 11.3, 11.4 or 11.5(b), Buyer and
Seller shall jointly select a national accounting firm acceptable to both
Buyer and Seller (or, if they cannot agree on such selection, they shall
select a national (big-five) accounting firm by lot after eliminating the
Auditors and Buyer's independent public accountants) and shall direct the
firm so selected to
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make such calculation as promptly as practicable, but in any event not later
than 30 days after such direction, and to deliver a written notice to each of
Buyer and Seller setting forth the results of such calculation. The results
of such calculation as made by such firm shall be final and binding, and the
fees and expenses of such firm shall be paid 50% by Buyer and 50% by Seller.
11.7 SECTION 338 ELECTION.
(a) Buyer and Seller shall join in an election to have the
provisions of Section 338(h)(10) of the Code and similar provisions of state
law ("Section 338 Elections") apply to the acquisition of the Stock. Buyer
shall be responsible for the preparation and filing of such election. The
allocation of purchase price among the assets of Company shall be made in
accordance with Code Sections 338 and 1060 and any comparable provisions of
state, local or foreign law, as appropriate. The parties agree that for tax
purposes no part of the Purchase Price is attributable to any noncompetition,
nonsolicitation or other covenants of the parties, unless otherwise required
by a taxing authority. Buyer shall initially prepare a complete set of
Section 338 Forms, as defined below. Buyer shall deliver said forms to
Seller for review no later than ninety business days prior to the date the
Section 338 Forms are required to be filed. In the event Seller objects to
the manner in which the Section 338 Forms have been prepared, Seller shall
notify Buyer within fifteen business days of receipt of the Section 338 Forms
of such objection, and the parties shall endeavor within the next fifteen
business days in good faith to resolve such dispute. If the parties are
unable to resolve such dispute within a fifteen business-day period, Buyer
and Seller shall submit such dispute to an independent arbiter in accordance
with the methodology specified in Section 11.6 hereof (the "Allocation
Arbiter"). Promptly, but not later than fifteen business days after its
acceptance of appointment hereunder, the Allocation Arbiter
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will determine (based solely on presentations of Buyer and Seller and not by
independent review) only those matters in dispute and will render a written
report as to the disputed matters, and the resulting preparation of the
Section 338 Forms shall be conclusive and binding upon the parties. "Section
338 Forms" shall mean all returns, documents, statements, and other forms
that are required to be submitted to any federal, state, county or other
local taxing authority in connection with a 338 Election, including, without
limitation, any "statement of Section 338 Election" and IRS Form 8023
(together with any schedules or attachments thereto) that are required
pursuant to Treasury Regulations.
(b) Seller shall be responsible for and shall pay any income,
franchise, or similar Taxes arising as a result of any Section 338 Election
(excluding any Section 338(g) election).
(c) Buyer shall be responsible for and shall pay Seller for
any sales or use or similar Taxes arising as a result of any Section 338
Elections.
11.8 TERMINATION OF TAX SHARING AGREEMENTS. Seller agrees and
covenants that the existing Tax Sharing Agreement between Seller and Company
effective as of July 2, 1997 shall terminate one day prior to the Closing
Date and that there will be no outstanding obligations of or to Company
pursuant to the Tax Sharing Agreement or any similar arrangement in effect on
the Closing Date.
11.9 PRICE ADJUSTMENT. Buyer and Seller agree that any payment
made under this Article XI will be treated by the parties on their Tax
Returns as an adjustment to the Purchase Price.
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11.10 SURVIVAL. Notwithstanding anything in this Agreement to the
contrary, the provisions of this Article XI shall survive through the
expiration of the applicable statute of limitations as the same may be
extended.
ARTICLE XII
PUBLICITY/CONFIDENTIALITY
12.1 PUBLICITY AND REPORTS. Seller and Buyer shall coordinate all
publicity relating to the transactions contemplated by this Agreement, and
neither party shall issue any press release, publicity statement or other
public notice relating to this Agreement or the transactions contemplated by
this Agreement without first obtaining the prior written consent of the other
party, except that neither party shall be precluded from making such filings
or giving such notices as may be required by Law or the rules of any stock
exchange. Seller and Buyer shall cooperate and shall use their reasonable
efforts to agree on the form of any press releases to be issued following the
execution and delivery of this Agreement and the Closing announcing,
respectively, the signing or the consummation of the transactions
contemplated by this Agreement.
12.2 CONFIDENTIALITY. All non-public information disclosed by any
party or its Representatives, whether before or after the date hereof, in
connection with the transactions contemplated by, or the discussions and
negotiations preceding, this Agreement (including, without limitation, any
environmental records provided pursuant to Section 5.13) to any other party
or its prospective lenders or their respective Representatives shall be kept
confidential by such other party its prospective lenders and their respective
Representatives and shall not be used
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by any such Persons other than as contemplated by this Agreement, except to
the extent that such information (i) was known by the recipient when
received, (ii) is or hereafter becomes lawfully obtainable from other
sources, (iii) is necessary or appropriate to disclose to a Governmental
Entity having jurisdiction over the parties, (iv) as may otherwise be
required by law, or (v) to the extent such duty as to confidentiality is
waived in writing by the other party; PROVIDED, HOWEVER, that following the
Closing the foregoing restrictions will not apply to Buyer's use of documents
and information of Company and its Subsidiaries furnished by Seller hereunder
in the conduct of the Business (other than Buyer's use of any environmental
records provided pursuant to Section 5.13, which shall be so restricted, but
shall be subject to the exceptions set forth in (i) -- (v) of this sentence).
If this Agreement is terminated in accordance with its terms, each party
shall return all documents and reproductions thereof received by it or its
representatives from the other party and, in the case of reproductions, all
such reproductions made by the receiving party that include information not
within the exceptions contained in the first sentence of this Section 12.2,
unless the recipients provide assurances satisfactory to the requesting party
that such documents have been destroyed. This Section 12.2 supersedes and
replaces that certain Confidentiality Agreement dated February 25, 1999 (the
"Confidentiality Agreement") between Buyer and Seller (which hereby is
terminated in its entirety other than Section 7 thereof, which shall survive
such termination and continue in accordance with its terms).
ARTICLE XIII
DEFINITIONS
13.1 GENERAL PROVISIONS. For all purposes of this Agreement,
except as otherwise expressly provided:
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(a) the terms defined in this Article XIII have the meanings
assigned to them in this Article XIII and include the plural as well as the
singular;
(b) all accounting terms used herein have the meanings
assigned to them under generally accepted accounting principles, except to
the extent otherwise provided herein;
(c) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions and to "Exhibits" and
"Schedules" are to the designated Articles, Sections and other subdivisions
of the body of this Agreement and to the Exhibits and Schedules to this
Agreement;
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms; and
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
13.2 SPECIFIC PROVISIONS. As used in this Agreement the following
definitions shall apply:
"Acquisition Transaction" is defined in Section 4.6.
"Action" means any action, complaint, petition, suit or other
proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
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"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"Agreed Accounting Principles" means except as otherwise
specifically stated in this definition, the GAAP accounting principles,
policies, practices and methods applied in the preparation of the most recent
of the Financial Statements (specifically December 1998), without regard to
whether with respect to any matter there is more than one generally accepted
accounting principle, or generally accepted accounting principles would
permit or allow for more than one treatment or approach. In particular, the
Agreed Accounting Principles shall reflect the GAAP reserving practices,
procedures and methods used to establish reserves for accounts receivable,
inventory, fixed assets, income taxes, accrued liabilities and deferred
income used in such Financial Statement. The Agreed Accounting Principles
will also cause to be reflected all payments made and terminations effected
pursuant to Sections 5.5 and 5.7. No adjustments shall be made to reflect
the purchase of Stock contemplated by this Agreement (such as adjustments to
reflect purchase price in excess of net assets). Assets contributed to
Company or any Subsidiary by Seller or any of its controlled Affiliates after
the date hereof will be valued at zero. No identified adjustments to the
Closing Balance Sheet shall be excluded therefrom solely because such
adjustments fell below the materiality threshold, and all such adjustments
shall be made.
"Agreed Rate" means 7% per annum.
"Agreement" means this Agreement by and between Buyer and Seller as
amended or supplemented together with all Exhibits and Schedules hereto.
"Allocation Arbiter" is defined in Section 11.7.
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"Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from, or any notice, statement or other communication
required to be filed with or delivered to, any Governmental Entity or any
other Person.
"Auditors" means Ernst & Young LLP, independent public accountants
to Company.
"Base Price" is defined in Section 1.1(b).
"Books and Records" means all books, ledgers, files, reports,
documents, plans and operating records of or maintained by Seller, Company or
any Subsidiary relating to or otherwise reasonably required for the operation
of the Business.
"Business" means the business of Company and the Subsidiaries taken
as a whole, and shall be deemed to include the following incidents of such
business: income, cash flow, operations, condition (financial or other),
assets, properties, revenues and liabilities. For the avoidance of doubt,
"Business" shall include rights and obligations of Company and its
Subsidiaries under contracts with Seller or third parties for wafer
fabrication, assembly, production, testing or other production-related
operations conducted by Seller or third parties on behalf of Company or the
Subsidiaries, but shall not include any such wafer fabrication, assembly,
production, testing or other production-related operations (other than wafer
sort test and development engineering testing).
"Buyer's Closing Certificate" is defined in Section 8.1.
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"Buyer's Environmental Liabilities" means any Losses with respect
to: (i) any Release of Hazardous Materials at the Historic Company Business
Facilities (which does not constitute Pre-Existing Contamination, as defined
below) and any migration resulting from such Release, in each case occurring
after the Closing Date; provided that Company or a Subsidiary is owning,
operating, leasing or occupying such Historic Company Business Facility at
the time of such Release and such Release is not caused by Seller or any
controlled Affiliate thereof; (ii) any Hazardous Materials Activities
conducted by Buyer, Company or any of its Subsidiaries in connection with or
to benefit the Business from and after the Closing Date; (iii) the violation
of any Environmental Laws by Buyer, Company or any Subsidiary or their
agents, employees, predecessors in interest, contractors, invitees or
licensees in the conduct of the Business from and after the Closing Date or
in connection with any Hazardous Materials Activities from and after the
Closing Date.
"Buyer Per Share Value" is defined in Section 1.2.
"Closing" means the consummation of the purchase and sale of the
Stock pursuant to this Agreement.
"Closing Balance Sheet" means the balance sheet showing, as of the
Closing Date, consolidated total assets and consolidated total liabilities of
Company and shareholders' equity of Company as finally determined pursuant to
Section 1.5.
"Closing Date" means the date of the Closing.
"Closing Equity" means the consolidated total assets of Company as
of the
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Closing Date less the consolidated total liabilities of Company as of
the Closing Date, in each instance computed in accordance with the Agreed
Accounting Principles, and in any case unaffected by the election made
pursuant to Section 338 of the Code.
"Closing Equity Adjustment Amount" means:
(a) if Closing Equity is greater than $59.8 million, the
positive amount by which Closing Equity is greater than $59.8 million;
(b) if Closing Equity is less than $59.8 million, the
negative amount by which Closing Equity is less than $59.8 million; or
(c) if Closing Equity is equal to $59.8 million, then nil.
"Code" means the Internal Revenue Code of 1986, as amended or as
hereafter amended.
"Company" means Vantis Corporation, a Delaware corporation.
"Company Per Share Value" is defined in Section 1.2.
"Company Plan" is defined in Section 2.16.
"Company Stock Option Plans" means Company's 1999 Performance Award
Plan and Company's 1999 Leadership Award Plan.
"Continuing Intercompany Agreements" means the agreements listed on
SCHEDULE 5.5 and identified as such thereon.
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"Contract" means any enforceable agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease, license or
understanding, whether or not in writing.
"Employee Pension Benefit Plan" is defined in Section 2.16.
"Employee Welfare Benefit Plan" is defined in Section 2.16.
"Encumbrance" means any charge, encumbrance, security interest, lien,
pledge, or similar restriction, whether imposed by agreement, understanding,
law, equity or otherwise, PROVIDED, HOWEVER, that "Encumbrance" shall not mean
any restrictions on transfer generally arising under any applicable federal or
state securities laws.
"Environmental Claim" means any claim arising under Environmental Laws
or in respect of Hazardous Materials Activities.
"Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to the protection of the environment (including ambient
air, surface water, ground water, land surface or subsurface strata) including
laws and regulations relating to the release of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of, or exposure of any person to,
Hazardous Materials.
"Equity Securities" means any capital stock or other equity interest
or any securities convertible into or exchangeable for capital stock or other
equity interest or stock
72
appreciation rights or any other rights, warrants or options to acquire any
of the foregoing securities.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the related regulations and published interpretations.
"ERISA Affiliate" means any Person other than Company or any
Subsidiary who is a member of a group which is under common control with
Seller who together with Seller is treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
"Estimated Closing Equity Adjustment Amount" is defined in
Section 1.4.
"Estimated Purchase Price" is defined in Section 1.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" is defined in Section 1.2.
"Financial Statements" is defined in Section 2.3.
"GAAP" means generally accepted accounting principles in the United
States as in effect as of the respective dates of the financial statements
referred to in Section 2.3(a).
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
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"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related regulations and
published interpretations.
"Hazardous Materials" means pollutants, contaminants, wastes, toxic
substances, radioactive materials, asbestos-containing materials (ACM),
hazardous substances, petroleum and petroleum products or any fraction
thereof.
"Hazardous Materials Activities" means the transportation,
transfer, recycling, storage, use, handling, treatment, manufacture, removal,
investigation, remediation, release, emission, sale, disposal or distribution
of any Hazardous Materials, or any waste containing Hazardous Materials.
"Historic Company Business Facilities" means any property,
including the land and improvements, groundwater and surface water thereof,
that Seller, Company or any Subsidiary has at any time prior to the Closing
Date owned, operated, occupied or leased for the conduct of the Business.
"Indemnifiable Claim" means any Loss for or against which any party
is entitled to indemnity under this Agreement.
"Indemnified Party" means a party entitled to indemnity under this
Agreement.
"Indemnifying Party" means a party obligated to provide indemnity
under this Agreement.
"Independent Accounting Firm" means an independent certified public
accounting firm in the United States of national recognition mutually
acceptable to Seller and Buyer, or if
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Seller and Buyer are unable to agree upon such a firm, then each of them
shall select one such firm and those two firms shall select a third firm, in
which event "Independent Accounting Firm" shall mean such third firm.
"Initial Closing Equity Statement" is defined in Section 1.5(b).
"Intellectual Property" means all patents, patent applications,
trademarks, maskworks, service marks, logos, trade names, copyrights,
proprietary software or similar proprietary intellectual property.
"Intercompany Agreements" means the agreements listed on SCHEDULE 5.5.
"IRS" means the Internal Revenue Service or any successor entity.
"Knowledge", "to Company's knowledge" or "to Seller's knowledge" or
any phrase of similar import or other limitation shall mean and be limited to
the knowledge of the persons identified in SCHEDULE 13.2.
"Law" means any applicable constitutional provision, statute,
ordinance or other law, rule, regulation, or interpretation of any Governmental
Entity and any Order applicable to the operation of Company's and the
Subsidiaries respective business and the ownership of each of their properties
and assets.
"Loss" means any cost, claim, damage, diminution in value,
disbursement, expense, loss, liability, penalty or settlement of any kind or
nature, whether foreseeable or unforeseeable, including, but not limited to,
interest or other carrying costs, penalties, legal, accounting and other
professional fees and expenses reasonably incurred in the investigation,
75
collection, prosecution and defense of claims and amounts paid in settlement,
that may be imposed on or otherwise incurred or suffered by the specified
person. The term "Loss" as used in this Agreement is not limited to matters
asserted by third parties against any specified person ("Third Party
Claims"), and includes Losses incurred or sustained by such person in the
absence of any Third Party Claim.
"Mark" means any brand name, copyright, patent, service mark,
trademark, tradename, and all registrations or applications for registration
of any of the foregoing.
"Material Contract" means each Contract (including all amendments,
supplements or modifications thereto) to which Company or any Subsidiary is a
party, or which otherwise constitutes an Other Business Asset that (a) is a
material facilities lease, (b) by its terms obligates Company or the
Subsidiary to pay an amount in excess of $500,000 per year and which cannot
be terminated or cancelled by Company or the Subsidiary without liability or
penalty upon 60 days' or less prior notice, (c) limits or restricts the
ability of Company or any Subsidiary to compete or otherwise to conduct its
business in any manner or place, (d) is a credit agreement, note, bond,
mortgage, deed of trust or indenture evidencing any indebtedness of Company
or any Subsidiary for borrowed money or is a guaranty by Company or any
Subsidiary, (e) contains a right or obligation, other than pursuant to any
Company Plan, of any Affiliate (other than Company or any Subsidiary),
officer or director, of Seller, Company or any Subsidiary, from or to Company
or any Subsidiary, (f) represents a contract upon which the Business is
substantially dependent or which is otherwise material to the Business, (g)
grants a power of attorney, agency or similar authority to another person or
entity, (h) grants to a third party a right of first refusal with respect to
a material property of Company or a Subsidiary, (i) is between Seller or any
76
controlled Affiliate of Seller on the one hand and Company or a Subsidiary on
the other hand or (j) is a license, sublicense or other agreement listed on a
Schedule under Section 2.8; PROVIDED, HOWEVER, that "Material Contract" shall
not mean any of the Company Plans.
"Notice of Disagreement" is defined in Section 1.5(c).
"Other Business Assets" is defined in Section 5.16.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Permitted Encumbrance" means any Encumbrance that:
(i) is reflected in the financial statements referred to in
Section 2.3(a);
(ii) is a lien of a landlord, carrier, warehouseman, mechanic,
materialman, or any other lien arising in the ordinary course of
business by operation of law with respect to liability that is not
yet due or delinquent;
(iii) is a lien for Taxes not yet due or being contested in
good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP;
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(iv) with respect to the right of a Person to use any property
leased from Company or any Subsidiary, arises by the terms of the
applicable lease;
(v) is a purchase money security interest arising in the
ordinary course of business; or
(vi) does not materially detract from the value of the encumbered
property or materially detract from or interfere with the use of the
encumbered property in the ordinary conduct of the Business and is not
otherwise material to the Business or to Company and the Subsidiaries,
taken as a whole.
"Person" means an association, a corporation, a limited liability
company, an individual, a partnership, a trust or any other entity or
organization, including a Governmental Entity.
"Purchase Price" is defined in Section 1.1(b).
"Registered Property" is defined in Section 2.8(b).
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the indoor or outdoor environment, including, without limitation, the
movement of Hazardous Materials through ambient air, soil, surface water,
groundwater, wetlands, land or subsurface strata initiated by Seller or
Buyer, as applicable, or any of their respective subsidiaries.
"Representatives" is defined in Section 4.1.
78
"Section 338 Elections" is defined in Section 11.7.
"Section 338 Forms" is defined in Section 11.7.
"Seller's Closing Certificate" is defined in Section 7.1.
"Seller's Retained Environmental Liabilities" means any Losses with
respect to: (i) the presence on or before the Closing Date of any Hazardous
Materials in the soil, groundwater, surface water, air or building materials
of the Historic Company Business Facilities ("Pre-Existing Contamination");
(ii) the migration at any time prior to or after the Closing Date of
Pre-Existing Contamination to any other real property; (iii) any Hazardous
Materials Activities conducted by Seller or its controlled Affiliates on the
Historic Company Business Facilities prior to the Closing Date or otherwise
occurring prior to the Closing Date in connection with the Business
("Pre-Closing Hazardous Materials Activities"); (iv) the violation of any
Environmental Laws by the Seller, the Company or any Subsidiary or their
agents, employees, predecessors in interest, contractors, invitees or
licensees in connection with the Business prior to the Closing Date or in
connection with any Pre-Closing Hazardous Materials Activities.
"Seller's Representatives" is defined in Section 4.6.
"Stock" is defined in the preamble to this Agreement.
"Subsidiary" means those Persons listed on SCHEDULE 2.1(A).
"Tax" means any foreign, federal, state, county or local income,
sales and use, excise, franchise, real and personal property, transfer, gross
receipt, ad valorem, stamp, premium, profits, customs, duties, windfall
profits, capital stock, production, business and occupation,
79
disability, employment, payroll, severance or withholding tax, fee,
assessment or charge imposed by any Governmental Entity, any interest and
penalties (civil or criminal) related thereto or to the nonpayment thereof,
and any Loss in connection with the determination, settlement or litigation
of any Tax liability.
"Tax Benefit" is defined in Section 11.4(a).
"Tax Package" is defined in Section 11.5(c).
"Tax Return" means a declaration statement, report, return or other
information required to be supplied to a Governmental Entity with respect to
Taxes including, where permitted or required, combined or consolidated
returns for any group of entities that includes Company or any Subsidiary.
"Treasury Regulation" means those regulations, as amended,
promulgated by the United States Department of Treasury.
"WARN Act" is defined in Section 3.5.
ARTICLE XIV
GENERAL
14.1 AMENDMENTS; WAIVERS. This Agreement and any Exhibit or
Schedule attached hereto may be amended only by an agreement in writing
executed on behalf of both Buyer and Seller. No waiver of any provision nor
consent to any exception to the terms of this Agreement shall be effective
unless in writing and signed by the party to be bound and then only to the
specific purpose, extent and instance so provided.
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14.2 EXHIBITS AND SCHEDULES; INTEGRATION. Each Exhibit and
Schedule delivered pursuant to the terms of this Agreement shall be in
writing and shall constitute a part of this Agreement, although such Exhibits
and Schedules need not be attached to each copy of this Agreement. This
Agreement, together with such Exhibits and Schedules and the letters between
the parties of even date herewith, constitutes the entire agreement between
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith,
including the Confidentiality Agreement dated February 25, 1999, by and
between Seller and Buyer (other than Section 7 thereof, which shall survive
such termination and continue in accordance with its terms).
14.3 REASONABLE EFFORTS. Each party will use its commercially
reasonable efforts to cause all conditions to its and the other party's
obligations hereunder to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially
in accordance with its terms as soon as reasonably practicable.
14.4 FURTHER ASSURANCES.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its commercially reasonable efforts to
take or cause to be taken, all action, and to do or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement.
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(b) Notwithstanding the foregoing, or anything to the
contrary contained in this Agreement, neither Buyer nor any of its Affiliates
shall be required to divest themselves of any significant assets or
properties or agree to limit the ownership or operation of Buyer or any of
its Affiliates, of any significant assets or properties, including without
limitation the assets to be acquired under this Agreement, in order to
perform its obligations under this Agreement.
14.5 GOVERNING LAW. This Agreement, the legal relations between
the parties and any Action, whether contractual or non-contractual,
instituted by any party with respect to matters arising under or growing out
of or in connection with or in respect of this Agreement shall be governed by
and construed in accordance with the laws of the State of California
applicable to contracts made and performed in such State and without regard
to conflicts of law doctrines.
14.6 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under it are assignable, except that Buyer may assign its rights,
but not its obligations, hereunder to any wholly owned subsidiary of Buyer.
Subject to the foregoing sentence, this Agreement is binding upon and inures
to the benefit of and is enforceable by the parties hereto and their
respective successors and permitted assigns.
14.7 HEADINGS. The descriptive headings of the Articles, Sections
and subsections of this Agreement are for convenience only and do not
constitute a part of this Agreement.
14.8 COUNTERPARTS. This Agreement and any amendment hereto or any
other agreement or document delivered pursuant hereto may be executed in one
or more counterparts
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and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement or other document and shall
become effective unless otherwise provided therein when one or more
counterparts have been signed by each party and delivered to the other party.
14.9 PARTIES IN INTEREST. Except as set forth in Article 10 with
respect to Indemnified Parties, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
14.10 PERFORMANCE BY SUBSIDIARIES. Each party agrees to cause
its subsidiaries to comply with any obligations hereunder relating to such
subsidiaries and to cause its subsidiaries to take any other action which may
be necessary or reasonably requested by the other party in order to
consummate the transactions contemplated by this Agreement.
14.11 NOTICES. Any notice or other communication hereunder
must be given in writing and (a) delivered in person, (b) transmitted by
confirmed telex, telefax or telecommunications mechanism provided that any
notice so given is also mailed or sent as provided in clause (c), or (c)
mailed by certified or registered mail, postage prepaid, receipt requested or
sent by reputable overnight courier as follows:
If to Buyer, addressed to:
Lattice Semiconductor Corporation
5555 N.E. Moore Court
Hillsboro, Oregon 94124
Telecopy: 503-268-8077
Attn: General Counsel
83
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Telecopy: 650-493-6811
Attn: Larry W. Sonsini, Esq.
If to Seller, addressed to:
Advanced Micro Devices, Inc.
One AMD Place
P. O. Box 3453
Sunnyvale, California 94088-3453
Telecopy: 408-774-7399
Attn: General Counsel
With copies to:
O'Melveny & Myers LLP
400 South Hope Street, 15th Floor
Los Angeles, California 90071
Telecopy: 213-430-6407
Attn: C. James Levin, Esq.
or to such other address or to such other person as either party shall have
last designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number specified in (or pursuant to) this
Section 14.11 and an appropriate answerback is received, (ii) if given by
mail or courier or any other means, when actually delivered.
14.12 EXPENSES. Except as otherwise provided in Sections 4.3,
5.1, 11.6, 14.13 and 14.16, Seller, Company and Buyer shall each pay their
own expenses incident to the negotiation, preparation and performance of this
Agreement and the transactions contemplated hereby, including, but not
limited to, the fees, expenses and disbursements of their advisers.
84
14.13 ATTORNEYS' FEES. In the event of any Action by any party
arising under or out of, in connection with or in respect of this Agreement,
including any participation in bankruptcy proceedings to enforce against a
party a right or claim in such proceedings, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and expenses incurred in such
Action. Attorneys' fees incurred in enforcing any judgement in respect of
this Agreement are recoverable as a separate item. The parties intend that
the preceding sentence be severable from the other provisions of this
Agreement, survive any judgment and, to the maximum extent permitted by law,
not be deemed merged into such judgment.
14.14 REPRESENTATION BY COUNSEL; INTERPRETATION. Seller and
Buyer each acknowledge that each party to this Agreement has been represented
by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of Law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of Buyer and Seller.
14.15 SEVERABILITY. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental
Entity, the remaining provisions of this Agreement shall remain in full force
and effect provided that the essential terms and conditions of this Agreement
for both parties remain valid, binding and enforceable. To the extent
permitted by Law, the parties hereby to the same extent waive any provision
of Law that renders any provision hereof prohibited or unenforceable in any
respect.
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14.16 DISPUTE RESOLUTION; AGREEMENT TO ARBITRATE. Except to
the extent that any specific Dispute resolution mechanism has been otherwise
provided for in Section 1.5, 11.6 and 11.7 (or such mechanism has been
pursued to its conclusion and either the Dispute (as defined below) in
question remains unresolved or the resolution reached by such process has not
been honored), and subject to Section 14.16(d), in the event that any Dispute
arises between Buyer and Seller with respect to this Agreement or the
transactions contemplated hereby, the following procedures shall apply.
(a) The parties will attempt in good faith to resolve any
dispute, controversy or claim under, arising out of, relating to or in
connection with this Agreement, including, but not limited to, the
negotiation, execution, interpretation, construction, performance,
non-performance, breach, termination, validity, scope, coverage or
enforceability of this Agreement or any alleged fraud in connection therewith
(a "Dispute"), promptly by negotiations between appropriate senior officers
of the parties. If any such Dispute should arise, appropriate senior
officers of Buyer and Seller will meet at least once within 20 days after
notice of such Dispute is given by a party and will attempt to resolve the
matter. Nothing herein, however, shall prohibit a party from initiating
arbitration proceedings pursuant to Section 14.16(d) if such party reasonably
believes it would be substantially prejudiced by a 50-day delay in commencing
arbitration proceedings; PROVIDED, HOWEVER, that the initiation of
arbitration proceedings shall not relieve the parties of their obligations to
mediate Disputes pursuant to Section 14.16(c). Either representative may
request the other to meet again within 14 days thereafter, at a mutually
agreed time and place.
86
(b) If the matter has not been resolved within 30 days after
the first meeting of the representatives (which period may be extended by
mutual agreement), the parties will attempt in good faith to resolve the
controversy or claim in accordance with the Center for Public Resources Model
Procedure for Mediation of Business Disputes as in effect at such time. The
costs of mediation shall be shared equally by the parties. Any settlement
reached by mediation shall be resolved in writing, signed by the parties and
binding on the parties. The place of any such mediation shall be San Jose,
California.
(c) If the matter has not been resolved pursuant to the
foregoing procedures within 60 days after the first meeting (which period may
be extended by mutual agreement), the matter shall be resolved, at the
request of either party, by arbitration conducted in accordance with the
provisions of the Federal Arbitration Act (9 U.S.C. Sections 1-16) and in
accordance with the Center for Public Resources Rules for Non-Administered
Arbitration of Business Disputes as then in effect, by three neutral
arbitrators selected by the parties as follows. Each party shall select a
neutral arbitrator, subject to objection of the other party, and the two
neutral arbitrators chosen by the parties shall select a third neutral
arbitrator. If the two neutral arbitrators selected by the parties are
unable to agree on the selection of the third arbitrator, they shall select
an arbitrator according to the procedures established by the Center for
Public Resources Rules for Non-Administered Arbitration of Business Disputes
as then in effect. The arbitration of such issues, including the
determination of any amount of damages suffered by any party hereto by reason
of the acts or omissions of any party, shall be final and binding upon the
parties, except that the arbitrator shall not be authorized to award punitive
damages with respect to any such claim, dispute or controversy. The
arbitrators shall have the power to decide all
87
questions of arbitrability and of such arbitrators' jurisdiction. No party
shall seek any punitive damages relating to any matters under, arising out
of, in connection with or relating to this Agreement. Equitable remedies
shall be available in any such arbitration. The parties intend that this
agreement to arbitrate be valid, binding, enforceable and irrevocable. The
substantive and procedural law of the State of California shall apply to any
such arbitration proceedings. The place of any such arbitration shall be San
Jose, California. Judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof.
(d) Notwithstanding the provisions of this Section 14.16, either
party may seek injunctive or other equitable relief to maintain the status quo
before any court of competent jurisdiction in connection with any claim, dispute
or controversy arising out of this Agreement, without breach of this Section
14.16 or abridgement of the powers of the arbitrators.
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be executed by its duly authorized representative as of the date first above
written.
BUYER:
LATTICE SEMICONDUCTOR CORPORATION,
a Delaware corporation
By: Cyrus Y. Tsui
Title: President and Chief Executive Officer
SELLER:
ADVANCED MICRO DEVICES, INC., a
Delaware corporation
By: Richard Previte
Title: President and Co-Chief Operating Officer
89
STOCK PURCHASE AGREEMENT
dated as of
April 21, 1999
by and between
LATTICE SEMICONDUCTOR CORPORATION
and
ADVANCED MICRO DEVICES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE/COMPANY OPTIONS/CLOSING
1.1 Transfer of the Stock by Seller................................ 2
1.2 Company Options................................................ 2
1.3 The Closing.................................................... 4
1.4 Determination of Estimated Closing Equity Adjustment Amount.... 4
1.5 Determination of Closing Equity Adjustment Amount.............. 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Related Matters................................ 9
2.2 Stock........................................................... 10
2.3 Financial Statements; No Other Liabilities...................... 10
2.4 Taxes........................................................... 12
2.5 Material Contracts.............................................. 12
2.6 Changes......................................................... 13
2.7 Properties...................................................... 15
2.8 Intellectual Property........................................... 16
2.9 Authorization;No Conflicts...................................... 18
2.10 Legal Proceedings and Certain Labor Matters..................... 19
2.11 Insurance....................................................... 20
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
2.12 Permits......................................................... 20
2.13 Compliance with Law............................................. 21
2.14 Environmental Compliance........................................ 21
2.15 Dividends and Other Distributions............................... 21
2.16 Employee Benefits............................................... 21
2.17 Bank Accounts, Powers, etc...................................... 22
2.18 No Brokers or Finders........................................... 23
2.19 Certain Interests............................................... 23
2.20 Receivables..................................................... 23
2.21 Customers and Suppliers......................................... 23
2.22 Amended Schedules............................................... 24
2.23 Disclaimer of Representations and Warranties.................... 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization and Related Matters................................ 24
3.2 Authorization; No Conflicts..................................... 24
3.3 No Brokers or Finders........................................... 25
3.4 Legal Proceedings............................................... 26
3.5 WARN Act........................................................ 26
3.6 Investment Representation....................................... 26
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.7 Disclaimer of Representations and Warranties.................... 26
3.8 Financing Commitment............................................ 26
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF COMPANY AND THE
SUBSIDIARIES PRIOR TO CLOSING
4.1 Access.......................................................... 27
4.2 Conduct of Business............................................. 28
4.3 Permits and Approvals........................................... 31
4.4 Government Filings.............................................. 31
4.5 Preservation of Business Prior to Closing Date.................. 32
4.6 Exclusivity..................................................... 32
4.7 International Patents........................................... 33
4.8 Company Stock Option Plans...................................... 33
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 Seller's Post-Closing Access.................................... 34
5.2 No Rights to Seller Intellectual Property....................... 35
5.3 Insurance; Indemnity Obligations................................ 35
5.4 WARN Act........................................................ 37
5.5 Intercompany Agreements......................................... 37
5.6 Expenses of Sale................................................ 37
5.7 Intercompany Balances........................................... 37
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.8 Facilities...................................................... 38
5.9 Nondisclosure of Proprietary Data............................... 38
5.10 Nonsolicitation................................................. 38
5.11 Noncompetition.................................................. 39
5.12 Dividends....................................................... 42
5.13 Access for Environmental Review................................. 42
5.14 Contract Rights................................................. 42
5.15 Patents......................................................... 42
5.16 Transfer of Certain Business-Related Assets..................... 43
GENERAL CONDITIONS OF PURCHASE
6.1 No Orders; Legal Proceedings.................................... 44
6.2 Approvals....................................................... 44
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
7.1 Representations and Warranties and Covenants of Seller.......... 45
7.2 Resignation of Directors........................................ 46
7.3 Continuing Intercompany Agreements.............................. 46
7.4 Amended Schedules............................................... 46
7.5 Financing....................................................... 46
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
8.1 Representations and Warranties and Covenants of Buyer............. 47
ARTICLE IX
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 Termination of Agreement.......................................... 47
9.2 Effect of Termination............................................. 48
9.3 Survival of Representations and Warranties........................ 49
9.4 Notice of Known Unsatisfied Conditions or Breached
Representations, Warranties or Covenants.......................... 49
ARTICLE X
INDEMNIFICATION
10.1 Obligations of Seller............................................. 49
10.2 Obligations of Buyer.............................................. 51
10.3 Procedure......................................................... 52
10.4 Limitations on Indemnification.................................... 54
10.5 Remedies Exclusive................................................ 56
ARTICLE XI
TAX MATTERS
11.1 Allocation of Tax Liabilities; Indemnification.................... 56
TABLE OF CONTENTS
(CONTINUED)
PAGE
11.2 Tax Covenants..................................................... 58
11.3 Refunds........................................................... 59
11.4 Tax Benefits...................................................... 59
11.5 Returns and Reports............................................... 60
11.6 Disputes.......................................................... 62
11.7 Section 338 Election.............................................. 63
11.8 Termination of Tax Sharing Agreements............................. 64
11.9 Price Adjustment.................................................. 64
11.10 Survival.......................................................... 65
ARTICLE XII
PUBLICITY/CONFIDENTIALITY
12.1 Publicity and Reports............................................. 65
12.2 Confidentiality................................................... 65
ARTICLE XIII
DEFINITIONS
13.1 General Provisions................................................ 66
13.2 Specific Provisions............................................... 67
ARTICLE XIV
GENERAL
TABLE OF CONTENTS
(CONTINUED)
PAGE
14.1 Amendments; Waivers............................................... 80
14.2 Exhibits and Schedules; Integration............................... 81
14.3 Reasonable Efforts................................................ 81
14.4 Further Assurances................................................ 81
14.5 Governing Law..................................................... 82
14.6 No Assignment..................................................... 82
14.7 Headings.......................................................... 82
14.8 Counterparts...................................................... 82
14.9 Parties in Interest............................................... 83
14.10 Performance by Subsidiaries....................................... 83
14.11 Notices........................................................... 83
14.12 Expenses.......................................................... 84
14.13 Attorneys' Fees................................................... 85
14.14 Representation By Counsel; Interpretation......................... 85
14.15 Severability...................................................... 85
14.16 Dispute Resolution; Agreement to Arbitrate........................ 86
TABLE OF CONTENTS
SCHEDULES
Disclosure Schedule
1.2 Outstanding Stock Options
2.1(a) Subsidiaries; Capitalization; Ownership
2.1(b) Directors and Executive Officers
2.2 Contracts to Acquire Equity Securities
2.3(b) Material Changes
2.3(c)(vi) Material Liabilities
2.5 Material Contracts
2.6(e) Material Contract Changes
2.6(h) Compensation Arrangements
2.7(a) Assets, Properties and Rights
2.7(b) Real Property
2.8(b)(i) Intellectual Property
2.8(b)(ii) and
(iii) Intellectual Property Licenses and Agreements
2.8(c) Intellectual Property Claims
2.8(d) Infringement Claims
2.9 Seller Approvals and Permits
2.10 Legal Proceedings
2.11 Insurance
2.16 Company Plans
2.17 Bank Accounts
2.21 Customers
3.2 Buyer Approvals and Permits
5.5 Intercompany Agreements
5.6 Other Sale Expenses
5.8 Real Property Leases
8.2 Real Property Leases to be Assigned
13.2 Knowledge
CONFIDENTIAL