\nARTICLE VIII TERMINATION, AMENDMENT AND WAIVER…………………………………….. 59<\/p>\n 8.1 Termination………………………………………………………….. 59
\n ———–
\n 8.2 Effect of Termination…………………………………………………. 60
\n ———————
\n 8.3 Amendment……………………………………………………………. 60
\n ———
\n 8.4 Extension; Waiver…………………………………………………….. 60
\n —————–<\/p>\n
ARTICLE IX DEFINITIONS………………………………………………………….. 61<\/p>\n
9.1 Defined Terms………………………………………………………… 61
\n ————-<\/p>\n
ARTICLE X GENERAL PROVISIONS…………………………………………………….. 67<\/p>\n
10.1 Notices……………………………………………………………… 67
\n ——-
\n 10.2 Interpretation……………………………………………………….. 68
\n ————–
\n 10.3 Counterparts…………………………………………………………. 69
\n ————
\n 10.4 Entire Agreement; Assignment…………………………………………… 69
\n —————————-
\n 10.5 Severability…………………………………………………………. 69
\n ————
\n 10.6 Other Remedies……………………………………………………….. 69
\n ————–
\n 10.7 Governing Law………………………………………………………… 69
\n ————-
\n 10.8 Rules of Construction…………………………………………………. 69
\n ———————
\n 10.9 No Third Party Beneficiary…………………………………………….. 70
\n ————————–
\n<\/c><\/s><\/caption>\n<\/table>\n
-iv-<\/p>\n
Exhibit 2.1<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made and
\n ———
\nentered into as of July 21, 2000 by and among Integrated Software & Devices
\nCorporation, a California corporation (the “Company”), LynuxWorks, Inc., a
\n ——-
\nCalifornia corporation (“Parent”), LWorks, Inc., a California corporation and a
\n ——
\nwholly-owned subsidiary of Parent (“Merger Sub”), and, with respect to the
\n ———-
\nmatters set forth in Articles VII and X hereof only, Reza Soliman-Noori as the
\nShareholder Representative and Firstar Bank, N.A. as Escrow Agent. Capitalized
\nterms used herein and not otherwise defined herein shall have the meanings given
\nto such terms in Article IX hereof.<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of each of the Company, Parent and Merger Sub
\nbelieve it is in the best interests of each company and their respective
\nshareholders that Parent acquire the Company through the statutory merger of
\nMerger Sub with and into the Company (the “Merger”) and, in furtherance thereof,
\n ——
\nhave approved the Merger.<\/p>\n
B. Pursuant to the Merger, among other things, (i) all of the issued and
\noutstanding shares of capital stock of the Company (other than Dissenting
\nShares) shall be converted into the right to receive consideration from Parent,
\n(ii) all of the issued and outstanding options to acquire any shares of Company
\nCommon shall be assumed by Parent at the Effective Time, and (iii) all of the
\nissued and outstanding warrants and other rights to acquire any shares of
\ncapital stock of the Company shall be assumed by Parent at the Effective Time.<\/p>\n
C. Concurrent with the execution of this Agreement, as a material
\ninducement to Parent and Merger Sub to enter into this Agreement, certain
\nemployees of the Company are entering into employment and non-competition
\nagreements with Parent (the “Employment and Non-Competition Agreements”) in the
\n —————————————–
\nform of Exhibit B attached hereto.
\n ——— <\/p>\n
D. The Company, Parent and Merger Sub desire to make certain
\nrepresentations and warranties and other agreements in connection with the
\nMerger.<\/p>\n
NOW, THEREFORE, in consideration of the covenants, promises and
\nrepresentations set forth herein, and for other good and valuable consideration,
\nthe parties agree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER<\/p>\n
1.1 The Merger. Subject to and upon the terms and conditions of this
\n ———-
\nAgreement and the applicable provisions of the California General Corporation
\nLaw (“California Law”), Merger Sub shall be merged with and into the Company,
\n ————–
\nthe separate corporate existence of Merger Sub shall cease and the Company shall
\ncontinue as the surviving corporation and as a wholly-owned<\/p>\n
subsidiary of Parent. The surviving corporation after the Merger is sometimes
\nreferred to hereinafter as the “Surviving Corporation.”
\n ——————— <\/p>\n
1.2 Effective Time. Unless this Agreement is earlier terminated
\n ————–
\npursuant to Section 8.1, the closing of the Merger (the “Closing”) will take
\n ——-
\nplace as promptly as practicable, but no later than five (5) business days,
\nfollowing satisfaction or waiver of the conditions set forth in Article VI, at
\nthe offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo
\nAlto, California, unless another place or time is agreed to in writing by Parent
\nand the Company. The date upon which the Closing actually occurs is herein
\nreferred to as the “Closing Date.” On the Closing Date, the parties hereto shall
\n ————
\ncause the Merger to be consummated by filing an Agreement of Merger (or like
\ninstrument) and the accompanying officers’ certificates, each in the form agreed
\nto by the parties, with the Secretary of State of the State of California (the
\n“Agreement of Merger”), in accordance with the relevant provisions of California
\n ——————
\nLaw (the time of acceptance by the Secretary of State of the State of California
\nof such filing being referred to herein as the “Effective Time”).
\n ————– <\/p>\n
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
\n ——————–
\nshall be as provided in the applicable provisions of California Law. Without
\nlimiting the generality of the foregoing, and subject thereto, at the Effective
\nTime, all the property, rights, privileges, powers and franchises of the Company
\nand Merger Sub shall vest in the Surviving Corporation, and all debts,
\nliabilities and duties of the Company and Merger Sub shall become the debts,
\nliabilities and duties of the Surviving Corporation.<\/p>\n
1.4 Articles of Incorporation; Bylaw
\n ———————————<\/p>\n
(a) The articles of incorporation of Merger Sub, as in effect
\nimmediately prior to the Effective Time, shall be the articles of incorporation
\nof the Surviving Corporation at the Effective Time until thereafter amended in
\naccordance with California Law and as provided in such articles of
\nincorporation; provided, however, that Article I of the articles of
\nincorporation of the Surviving Corporation shall be amended to read as follows:
\n“The name of the corporation is Integrated Software & Devices Corporation.”<\/p>\n
(b) The bylaws of Merger Sub, as in effect immediately prior to the
\nEffective Time, shall be the bylaws of the Surviving Corporation at the
\nEffective Time until thereafter amended in accordance with California Law and as
\nprovided in such bylaws.<\/p>\n
1.5 Directors and Officers.
\n ———————-<\/p>\n
(a) The director(s) of Merger Sub immediately prior to the Effective
\nTime shall be the initial director(s) of the Surviving Corporation immediately
\nafter the Effective Time, each to hold the office of a director of the surviving
\ncorporation in accordance with the provisions of California Law and the articles
\nof incorporation and bylaws of the Surviving Corporation until his or her
\nsuccessor is duly qualified and elected. The officers of Merger Sub immediately
\nprior to the Effective Time shall be the initial officers of the Surviving
\nCorporation immediately after the Effective Time, (except that Reza Soliman-
\nNoori, shall, at the Effective Time, become the President <\/p>\n
-2-<\/p>\n
of the Surviving Corporation) each to hold office in accordance with the by laws
\nof the Surviving Corporation.<\/p>\n
(b) As of the Effective Time, Reza Soliman-Noori shall be elected a
\ndirector of Parent.<\/p>\n
1.6 Effect of Merger on Capital Stock of the Constituent Corporations
\n —————————————————————– <\/p>\n
(a) Company Capital Stock. At the Effective Time, by virtue of the
\n ———————
\nMerger and without any action on the part of Parent, Merger Sub, the Company or
\nthe Shareholders, each share of Company Capital Stock issued and outstanding
\nimmediately prior to the Effective Time (other than Dissenting Shares) will be
\ncancelled and extinguished and be converted automatically into the right to
\nreceive, upon surrender of the certificate representing such share of Company
\nCapital Stock and upon the terms and subject to the conditions set forth below
\nand throughout this Agreement, including without limitation, this Section 1.6,
\nSection 1.8 hereof and the provisions of Article VII hereof, the number of
\nshares of Parent Common Stock equal to the Exchange Ratio.<\/p>\n
(b) Company Options. At the Effective Time, each issued and
\n —————
\noutstanding Company Option not yet exercised, whether vested or unvested, will
\nbe assumed by Parent in connection with the Merger. Each Company Option so
\nassumed by Parent under this Agreement shall continue to have, and be subject
\nto, the same terms and conditions set forth in the Option Plans and\/or as
\nprovided in the respective option agreements immediately prior to the Effective
\nTime (including, without limitation, any vesting schedule or repurchase rights),
\nexcept that (i) each Company Option will be exercisable for that number of whole
\nshares of Parent Common Stock equal to the product of the number of shares of
\nCompany Common Stock that were issuable upon exercise of such Company Option
\nimmediately prior to the Effective Time multiplied by the Exchange Ratio,
\nrounded down to the nearest whole number of shares of Parent Common Stock, and
\n(ii) the per share exercise price for the shares of Parent Common Stock issuable
\nupon exercise of such assumed Company Option will be equal to the quotient
\ndetermined by dividing the exercise price per share of Company Capital Stock at
\nwhich such Company Option was exercisable immediately prior to the Effective
\nTime by the Exchange Ratio, rounded up to the nearest whole cent. No cash will
\nbe paid in lieu of fractional shares which are rounded down pursuant to this
\nSection 1.6(b). It is the intention of the parties hereto that the Company
\nOptions assumed by Parent pursuant to this Section 1.6(b) will, to the extent
\npermitted by applicable law, qualify as incentive stock options as defined in
\nSection 422 of the Code, to the extent any such Company Options qualified as
\nincentive stock options immediately prior to the Effective Time.<\/p>\n
(c) Assumption Agreement. As soon as administratively practicable
\n ——————–
\nfollowing the Closing, Parent shall issue to each holder of a Company Option to
\nbe assumed by Parent a document evidencing the assumption of such Company Option
\nby Parent, and each former holder of a Company Option so assumed by Parent shall
\nacknowledge the receipt of the same in exchange for the assumption of such
\nholder’s Company Option.<\/p>\n
(d) Company Warrants. Parent shall assume any Company Warrants in
\n —————-
\nconnection with the Merger at the Effective Time.<\/p>\n
-3-<\/p>\n
(e) Capital Stock of Merger Sub. At the Effective Time, by virtue
\n —————————
\nof the Merger and without any action on the part of Parent, Merger Sub or the
\nCompany, each share of common stock of Merger Sub issued and outstanding
\nimmediately prior to the Effective Time shall be converted into and exchanged
\nfor one validly issued, fully paid and nonassessable share of common stock of
\nthe Surviving Corporation, then comprising all of the issued and outstanding
\ncapital stock of the Surviving Corporation.<\/p>\n
(f) Shareholder Loans. In the event that any Shareholder has
\n —————–
\noutstanding loans from the Company as of the Effective Time, the number of
\nshares of Parent Common Stock issuable pursuant to Section 1.6(a) hereof shall
\nbe reduced by an amount equal to the outstanding principal plus accrued interest
\nof such Shareholder loans as of the Effective Time; provided, however, that
\nloans made to Shareholders in connection with the exercise of Company stock
\noptions, as disclosed on the Company Schedule, shall be assumed by the Surviving
\nCorporation and not cause a reduction in the number of shares of Parent Common
\nStock issuable pursuant to Section 1.6(a).<\/p>\n
(g) Fractional Shares. No fraction of a share of Parent Common
\n —————–
\nStock will be issued in the Merger. In lieu thereof, any fractional share
\nresulting from the conversion pursuant to Section 1.6(a) hereof shall be rounded
\nto the nearest whole share of Parent Common Stock (with a fraction greater than
\n.5 being rounded up).<\/p>\n
(h) Adjustments to Parent Common Stock. The number of shares of
\n ———————————-
\nParent Common Stock issuable pursuant to Section 1.6(a) hereof shall be adjusted
\nto reflect fully the effect of any stock split, reverse stock split, stock
\ndividend (including any dividend or distribution of securities convertible into
\nParent Common Stock or Company Capital Stock), reorganization, recapitalization
\nor the other like change with respect to Parent Common Stock or Company Capital
\nStock after the date hereof.<\/p>\n
1.7 Dissenting Shares.
\n —————–<\/p>\n
(a) Notwithstanding any provision of this Agreement to the contrary,
\nany shares of Company Capital Stock held by a holder who has exercised and
\nperfected dissenters’ rights for such shares in accordance with California Law
\nand who, as of the Effective Time, has not effectively withdrawn or lost such
\ndissenters’ rights (“Dissenting Shares”), shall not be converted into or
\n —————–
\nrepresent a right to receive the consideration for Company Capital Stock set
\nforth in Section 1.6(a) hereof, but the holder thereof shall only be entitled to
\nsuch rights as are provided by California Law.<\/p>\n
(b) Notwithstanding the provisions of Section 1.7(a) hereof, if any
\nholder of Dissenting Shares shall effectively withdraw or lose (through failure
\nto perfect or otherwise) such holder’s dissenters’ rights under California Law,
\nthen, as of the later of the Effective Time and the occurrence of such event,
\nsuch holder’s shares shall automatically be converted into and represent only
\nthe right to receive the consideration for Company Capital Stock set forth in
\nSection 1.6(a) hereof, without interest thereon, upon surrender of the
\ncertificate representing such shares.<\/p>\n
(c) The Company shall give Parent (i) prompt notice of any written
\ndemand for appraisal received by the Company pursuant to the applicable
\nprovisions of California Law and<\/p>\n
-4-<\/p>\n
(ii) the opportunity to participate in all negotiations and proceedings with
\nrespect to such demands. The Company shall not, except with the prior written
\nconsent of Parent, voluntarily make any payment with respect to any such demands
\nor offer to settle or settle any such demands. To the extent that Parent or the
\nCompany makes any payment or payments in respect of any Dissenting Shares,
\nParent shall be entitled to recover under the terms of Article VII hereof the
\naggregate amount by which such payment or payments exceed the aggregate
\nconsideration that otherwise would have been payable in respect of such shares
\npursuant to Section 1.6(a) hereof.<\/p>\n
1.8 Surrender of Certificates
\n ————————-<\/p>\n
(a) Exchange Agent. A designee of Parent shall serve as the exchange
\n ————–
\nagent (“Exchange Agent”) for the Merger.
\n ————– <\/p>\n
(b) Parent to Provide Common Stock; Escrow Amount. At the Effective
\n ———————————————
\nTime, Parent shall deposit with the Exchange Agent for exchange in accordance
\nwith this Article I, the Merger Consideration issuable pursuant to Section
\n1.6(a) hereof in exchange for all of the outstanding shares of Company Capital
\nStock, less 600,459 shares of Parent Common Stock (the “Escrow Amount”), which
\n ————-
\nshall be deducted from the Merger Consideration and shall be available to Parent
\nto set off any Losses in accordance with Article VII.<\/p>\n
(c) Exchange Procedures. Promptly after the Effective Time, the
\n ——————-
\nExchange Agent shall cause to be mailed to each holder of record of a
\ncertificate or certificates (each a “Certificate” and collectively, the
\n ———–
\n“Certificates”) representing shares of Company Capital Stock that were
\n ————
\noutstanding immediately prior to the Effective Time, (i) a letter of transmittal
\nin such form and having such other provisions as Parent may reasonably request
\nand (ii) instructions for use in effecting the surrender of the Certificates in
\nexchange for the Merger Consideration. Upon surrender of a Certificate for
\ncancellation to the Exchange Agent, together with such letter of transmittal,
\nduly completed and validly executed in accordance with the instructions thereto,
\nthe holder of such Certificate shall be entitled to receive in exchange therefor
\nthat portion of the Merger Consideration pursuant to Section 1.6(a) hereof
\nrepresented by such Certificate and the Certificate so surrendered shall be
\ncanceled. Until so surrendered, each outstanding Certificate that, prior to the
\nEffective Time, represented shares of Company Capital Stock, will be deemed from
\nand after the Effective Time to evidence only the right to receive the Merger
\nConsideration in respect of each such share.<\/p>\n
(d) Transfers of Ownership. If any Parent Common Stock is to be
\n ———————-
\nissued to a person other than the holder in whose name the Certificate
\nsurrendered in exchange therefor is registered, it will be a condition of the
\nissuance thereof that the Certificate so surrendered will be properly endorsed
\nand accompanied by all documents required to evidence and effect such transfer
\nand to evidence that any applicable stock transfer taxes have been paid.<\/p>\n
1.9 No Further Ownership Rights in Company Capital Stock. The right to
\n —————————————————-
\nreceive the Merger Consideration upon the surrender for exchange of shares of
\nCompany Capital Stock in accordance with the terms hereof shall be deemed to be
\nfull satisfaction of all rights pertaining to such shares of Company Capital
\nStock, and there shall be no further registration of transfers on the records of
\nthe Surviving Corporation of shares of Company Capital Stock which were
\noutstanding<\/p>\n
-5-<\/p>\n
immediately prior to the Effective Time. If, after the Effective Time,
\ncertificates evidencing shares of Company Capital Stock are presented to the
\nSurviving Corporation for any reason, they shall be cancelled and the right of
\nthe holder or holders of such certificates shall be limited to the right to
\nreceive that portion of the Merger Consideration represented by such
\ncertificate, which portion shall be delivered to the person entitled thereto.<\/p>\n
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
\n ————————————–<\/p>\n
evidencing shares of Company Capital Stock shall have been lost, stolen or
\ndestroyed, Parent shall, in exchange for such lost, stolen or destroyed
\ncertificates, upon the making of an affidavit of that fact by the holder
\nthereof, issue such Parent Common Stock as may be required pursuant to Section
\n1.6(a) hereof; provided, however, that Parent may, in its sole discretion and as
\na condition precedent to the issuance thereof, require the owner of such lost,
\nstolen or destroyed certificates to deliver an agreement (in form and substance
\nsatisfactory to it) to indemnify Parent against any claim that may be made
\nagainst Parent with respect to the certificates alleged to have been lost,
\nstolen or destroyed.<\/p>\n
1.11 Tax and Accounting Treatment. The Merger is intended to constitute a
\n —————————-
\ntax-free reorganization within the meaning of Section 368(a)(2)(E) of the Code,
\n and will be treated as a purchase for financial accounting purposes.<\/p>\n
1.12 Taking of Necessary Action; Further Action. If, at any time after the
\n ——————————————
\nEffective Time, any further action is necessary or desirable to carry out the
\npurposes of this Agreement and to vest the Surviving Corporation with full
\nright, title and possession to all assets, property, rights, privileges, powers
\nand franchises of the Company and Merger Sub, Parent and the Surviving
\nCorporation are fully authorized in the name of their respective corporations or
\notherwise to take, and will take, all such lawful and necessary and\/or desirable
\naction.<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF THE COMPANY<\/p>\n
The Company represents and warrants to Parent and Merger Sub, subject to
\nsuch exceptions as are specifically disclosed in the disclosure letter
\n(referencing the appropriate section and paragraph numbers and any other section
\nand\/or paragraph number to which it is reasonably apparent on the face of such
\ndisclosure that such disclosure relates) supplied by the Company to Parent (the
\n“Company Schedule”) and dated as of the date hereof, that on the date hereof
\n —————-
\n(provided, that the representations and warranties made as of a specified date
\nwill be true and correct as of such date):<\/p>\n
2.1 Organization and Authority of the Company. The Company is a
\n —————————————–
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the State of California and has all necessary corporate power and authority
\nto own, operate or lease the properties and assets now owned, operated or leased
\nby it and to carry on its business as it has been and is currently being
\nconducted. The Company is duly licensed or qualified to do business and is in
\ngood standing in each jurisdiction in which the failure to be so qualified or
\nlicensed would have a Company Material Adverse Effect. The term “Material
\n ——–
\nAdverse Effect” when used in connection with an entity means
\n————–<\/p>\n
-6-<\/p>\n
any change, event, violation, inaccuracy, circumstance or effect that is, or
\ncould reasonably be expected to be, materially adverse to (a) the business,
\nassets (including intangible assets), financial condition or results of
\noperations of such entity, and (b) the ability of such person to perform its
\nobligations under this Agreement and to consummate the transactions provided for
\nhereunder, or (c) the ability of such entity to conduct its business as
\npresently conducted; provided, however, that none of the following shall be
\ndeemed by itself or by themselves, either alone or in combination, to constitute
\na Material Adverse Effect on such person: (a) with respect to the Company, any
\nadverse effect on the bookings, revenues, gross margins or earnings of the
\nCompany, or any delay in or reduction or cancellation of orders of the Company’s
\nproducts or services, following execution of this Agreement which is primarily
\nattributable to the announcement of the execution of this Agreement and the
\ntransactions contemplated hereby; (b) any change arising out of conditions
\naffecting the economy or industry of such person in general which does not
\naffect such person in a materially disproportionate manner relative to other
\nparticipants in the economy or industry, respectively; or (c) with respect to
\nthe Company, employee attrition which is primarily attributable to (X) the
\nannouncement of the execution of this Agreement and the transactions
\ncontemplated hereby or (Y) any action directly required of the Company by Parent
\nunder Section 4.1 or any omission of the Company directly resulting from
\nParent’s failure to consent to actions requested to be taken by the Company
\nunder Section 4.1. “Company Material Adverse Effect” means a Material Adverse
\n ——————————-
\nEffect with respect to the Company, and “Parent Material Adverse Effect” means a
\n ——————————
\nMaterial Adverse Effect with respect to Parent. All jurisdictions in which the
\nCompany conducts its business are set forth on the Company Schedule. The Company
\nhas not taken any action that in any respect conflicts with, constitutes a
\ndefault under or results in a violation of any provision of its Organizational
\nDocuments. The Company Schedule sets forth (i) true and correct copies of the
\nOrganizational Documents of the Company, each as in effect on the date hereof,
\nand (ii) the directors and officers of the Company. The operations now being
\nconducted by the Company are not now and have never been conducted by the
\nCompany under any other name.<\/p>\n
2.2 Company Capital Structure
\n ————————-<\/p>\n
(a) The authorized capital stock of the Company consists of:
\n35,000,000 shares of Common Stock, 21,860,000 shares of which are issued and
\noutstanding as of the date hereof. The Company has no other capital stock
\nauthorized, issued or outstanding. The Company Capital Stock is held by the
\npersons with the domicile addresses and in the amounts set forth on the Company
\nSchedule. The Company Schedule sets forth, as of the date hereof, the total
\nnumber of shares of Company Common Stock outstanding assuming the conversion,
\nexercise or exchange of all securities convertible into, or exercisable or
\nexchangeable for, shares of Company Common Stock, and the exercise of all
\nCompany Options and Company Warrants. All outstanding shares of Company Capital
\nStock are duly authorized, validly issued, fully paid and non-assessable and not
\nsubject to preemptive rights created by statute, the Organizational Documents of
\nthe Company, or any agreement to which the Company is a party or by which it is
\nbound, and have been issued in compliance with the registration or qualification
\nrequirements of applicable securities laws. Except as set forth on the Company
\nSchedule, there are no declared or accrued but unpaid dividends with respect to
\nany shares of Company Capital Stock.<\/p>\n
-7-<\/p>\n
(b) Except for the Option Plans, the Company has never adopted or
\nmaintained any stock option plan or other plan providing for equity compensation
\nof any person. The Company has reserved 4,071,428 shares of Company Common
\nStock for issuance to employees, directors and consultants of the Company upon
\nthe exercise of options granted under the 2000 Plan, under which options to
\npurchase 2,636,700 shares are outstanding and under which no shares have been
\nissued upon the exercise of options. The Company has reserved 4,500,000 shares
\nof Company Common Stock for issuance to employees, directors and consultants of
\nthe Company upon the exercise of options granted under the 2000 Executive Plan,
\nunder which options to purchase 1,875,000 shares are outstanding and under which
\n1,860,000 shares have been issued upon the exercise of options. The Company
\nSchedule sets forth for each outstanding Company Option and Company Warrant, the
\nname of the holder of such security, the domicile address of such holder, the
\nnumber of shares of Company Capital Stock issuable upon the exercise of such
\noption, the exercise price of such option, the vesting schedule for such option,
\nincluding the extent vested to date and whether the vesting of such option will
\nbe accelerated by the transactions contemplated by this Agreement and whether
\nsuch option is intended to qualify as an incentive stock option as defined in
\nSection 422 of the Code. Except for the Company Options and the Company
\nWarrants, there are no options, warrants, calls, rights, commitments or
\nagreements of any character, written or oral, to which the Company is a party or
\nby which it is bound obligating the Company to issue, deliver, sell, repurchase
\nor redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
\nshares of the capital stock of the Company or obligating the Company to grant,
\nextend, accelerate the vesting of, change the price of, otherwise amend or enter
\ninto any such option, warrant, call, right, commitment or agreement. There are
\nno outstanding or authorized stock appreciation, phantom stock, profit
\nparticipation, or other similar rights with respect to the Company. Except as
\ncontemplated hereby, there are no voting trusts, proxies, or other agreements or
\nunderstandings with respect to the voting stock of the Company. As a result of
\nthe Merger, and assuming Parent owns all outstanding shares of Merger Sub and
\nall rights to acquire any shares of Merger Sub, Parent will be the sole record
\nand beneficial holder of all issued and outstanding Company Capital Stock and
\nall rights to acquire or receive any shares of Company Capital Stock, whether or
\nnot such shares of Company Capital Stock are outstanding.<\/p>\n
2.3 Subsidiaries. Except as set forth on the Company Schedule, the Company
\n ————
\ndoes not have, and has never had, any subsidiaries or affiliated companies and
\ndoes not otherwise own, and has not otherwise owned, any shares of capital stock
\nor any interest in, or control, directly or indirectly, any other corporation,
\npartnership, association, joint venture or other business entity.<\/p>\n
2.4 Authority. The Company has all requisite power and authority to enter
\n ———
\ninto this Agreement and any Related Agreements (as hereinafter defined in this
\nSection 2.4) to which it is a party and to consummate the transactions
\ncontemplated hereby and thereby. The execution and delivery of this Agreement
\nand any Related Agreements to which the Company is a party and the consummation
\nof the transactions contemplated hereby and thereby have been duly authorized by
\nall necessary corporate action on the part of the Company, and no further action
\nis required on the part of the Company to authorize the Agreement and any
\nRelated Agreements to which it is a party and the transactions contemplated
\nhereby and thereby, subject only to the approval of this Agreement by the
\nShareholders. This Agreement and the Merger have been unanimously approved by
\nthe Board of Directors of the Company. This Agreement and each of the Related
\nAgreements to which the<\/p>\n
-8-<\/p>\n
Company is a party has been duly executed and delivered
\nby the Company, and assuming the due authorization, execution and delivery by
\nthe other parties hereto and thereto, constitute valid and binding obligations
\nof the Company, enforceable against the Company in accordance with their
\nrespective terms, except as such enforceability may be subject to the laws of
\ngeneral application relating to bankruptcy, insolvency and the relief of debtors
\nand rules of law governing specific performance, injunctive relief or other
\nequitable remedies. For all purposes of this Agreement, the term “Related
\n ——-
\nAgreements” shall mean the Agreement of Merger.
\n———- <\/p>\n
2.5 No Conflict. The execution and delivery by the Company of this
\n ———–
\nAgreement and any Related Agreement to which the Company is a party, and the
\nconsummation of the transactions contemplated hereby and thereby, will not
\nconflict with or result in any violation of or default under (with or without
\nnotice or lapse of time, or both) or give rise to a right of termination,
\ncancellation, modification or acceleration of any obligation or loss of any
\nbenefit under (any such event, a “Conflict”) (i) any provision of the
\n ——–
\nOrganizational Documents of the Company,-(ii) any Contract, or (iii) any
\njudgment, order, decree, statute, law, ordinance, rule or regulation applicable
\nto the Company or any of its properties (tangible and intangible) or assets. The
\nCompany is in material compliance with and has not materially breached, violated
\nor defaulted under, or received notice that it has breached, violated or
\ndefaulted under, any of the terms or conditions of any Contract, nor is the
\nCompany aware of any event that would constitute such a material breach,
\nviolation or default with the lapse of time, giving of notice or both. Each
\nContract is in full force and effect and the Company is not in default
\nthereunder, and to the Company’s knowledge, no other party obligated to the
\nCompany pursuant to any such Contract in material default thereunder. The
\nCompany has obtained, or will obtain prior to the Effective Time, all necessary
\nconsents, waivers and approvals of parties to any Contract as are required (i)
\nthereunder in connection with the Merger, (ii) and for any such Contract to
\nremain in full force and effect without limitation, modification or alteration
\nafter the Effective Time. After the Effective Time, Parent, and\/or the Surviving
\nCorporation, will be permitted to exercise all of the rights under the Contracts
\nthat were vested in the Company prior to the Effective Time without the payment
\nof any additional amounts or consideration other than ongoing fees, royalties or
\npayments which the Company would otherwise be required to pay pursuant to the
\nterms of such Contracts had the transactions contemplated by this Agreement not
\noccurred.<\/p>\n
2.6 Consents. No consent, waiver, approval, order or authorization of, or
\n ——–
\nregistration, declaration or filing with any Governmental Entity, is required by
\nor with respect to the Company in connection with the execution and delivery of
\nthis Agreement and any Related Agreement to which the Company is a party or the
\nconsummation of the transactions contemplated hereby and thereby, except for (i)
\nsuch consents, waivers, approvals, orders, authorizations, registrations,
\ndeclarations and filings as may be required under applicable securities laws;
\n(ii) the filing of the Agreement of Merger with the Secretary of State of the
\nState of California; and (iii) such other consents, waivers, approvals, orders,
\nauthorizations, registrations, declarations and filings that are not material.<\/p>\n
2.7 Company Financial Statements. The Company Schedule sets forth the
\n —————————-
\nCompany’s (i) compiled balance sheets as of December 31, 1999 and as of December
\n31, 1998, and the related compiled statements of income, cash flow and
\nstockholders’ equity for the twelve (12) month periods ended December 31, 1999
\nand December 31, 1998, respectively (collectively, the “Year-End
\n ——–<\/p>\n
-9-<\/p>\n
Financials”), and (ii) unaudited balance sheet as of March 31, 2000, and the
\n———-
\nrelated unaudited statements of income, cash flow and stockholders’ equity for
\nthe three-month period then ended (the “Interim Financials”). The Year-End
\n ——————
\nFinancials have been prepared in accordance with GAAP consistently applied on a
\nbasis consistent throughout the periods indicated and consistent with each
\nother. The Year-End Financials and Interim Financials present fairly the
\nfinancial condition, operating results and cash flows of the Company as of the
\ndates and during the periods indicated therein, subject in the case of the
\nInterim Financials to normal year-end adjustments, which are not material in
\namount in any individual case or in the aggregate. The Company’s unaudited
\nbalance sheet as of March 31, 2000 is referred to hereinafter as the “Current
\nBalance Sheet.” ——-
\n————-<\/p>\n
2.8 Accounts Receivable. The Company Schedule sets forth a list of all
\n ——————-
\naccounts receivable of the Company (collectively the “Accounts Receivable”) as
\n ——————-
\nof May 31, 2000 along with a range of days elapsed since invoice. Except as set
\nforth on the Company Schedule, the Accounts Receivable (net of allowances for
\ndoubtful accounts as reflected on the Current Balance Sheet and as determined in
\naccordance with GAAP consistently applied or, for Accounts Receivable arising
\nsubsequent to May 31, 2000, as reflected on the books and records of the
\nCompany, which are prepared in accordance with GAAP) are or shall be valid
\nAccounts Receivable arising in the ordinary course of business, and, to the
\nCompany’s knowledge, are or shall be collectible within one hundred fifty (150)
\ndays after the day on which each Account Receivable first becomes due and
\npayable, subject to no counterclaims or set-offs. If Accounts Receivable are
\ncollected more than 150 days after the day on which they became due and payable
\nbut during the Escrow Period, any Loss to Parent shall be limited to an amount
\nequal to the amount of interest on the amount of the Account Receivable not so
\ncollected, calculated at a rate of ten (10)% per annum from such 150-day date
\nuntil the date such amount is collected. No third party has any Lien on the
\nAccounts Receivable or any part thereof, and no agreement for deduction, free
\ngoods, discount or other deferred price or quantity adjustment has been made
\nwith respect to any of the Accounts Receivable .<\/p>\n
2.9 Inventory. Except as set forth on the Company Schedule and subject to
\n ———
\nany reserve as reflected on the Current Balance Sheet, all inventory (including
\nraw materials, work-in-process, and finished goods) of the Company consists of a
\nquality and quantity usable and salable in the ordinary course of business, and
\nis not excess, obsolete or damaged. The presentation of inventory on the Current
\nBalance Sheet conforms to GAAP and such inventory is stated at the lower of cost
\n(determined using the first-in, first-out method) or net realizable value.<\/p>\n
2.10 No Undisclosed Liabilities. The Company does not have any material
\n ————————–
\nliability, indebtedness, obligation, expense, claim, deficiency, guaranty or
\nendorsement of any type, whether accrued, absolute, contingent, matured,
\nunmatured or other (whether or not required to be reflected in financial
\nstatements in accordance with GAAP), which has not been reflected on the Current
\nBalance Sheet. The Company Schedule sets forth a schedule of all Company
\nindebtedness (including the amounts of Company indebtedness, names of creditors,
\nand a summary of the pertinent terms of such Company indebtedness) as of the
\ndate of this Agreement. The parties shall mutually agree upon any changes made
\nto the Company Schedule after the date of this Agreement.<\/p>\n
2.11 No Changes. Except as set forth on the Company Schedule, since March
\n ———-
\n31, 2000, there has not been, occurred or arisen any:<\/p>\n
-10-<\/p>\n
(a) transaction by the Company except in the ordinary course of
\nbusiness as conducted on that date and consistent with past practices;<\/p>\n
(b) capital expenditure or commitment by the Company in excess of USD
\n$50,000 individually or USD $100,000 in the aggregate;<\/p>\n
(c) destruction of, damage to or loss of any material assets, business
\nor customer of the Company (whether or not covered by insurance);<\/p>\n
(d) claim of wrongful discharge or other unlawful labor practice or
\naction;<\/p>\n
(e) change in accounting methods or practices (including any change in
\ndepreciation or amortization policies or rates) by the Company, except as may be
\nrequired by GAAP;<\/p>\n
(f) amendments or changes to the Organizational Documents of the
\nCompany;<\/p>\n
(g) revaluation by the Company of any of its assets;<\/p>\n
(h) declaration, setting aside or payment of a dividend or other
\ndistribution with respect to the capital stock of the Company, or any direct or
\nindirect redemption, purchase or other acquisition by the Company of any of its
\nCompany Capital Stock;<\/p>\n
(i) acquisition, sale, license or other disposition or transfer of any
\nof the assets or properties of the Company or any creation of any security
\ninterest in such assets or properties, except for sales of inventory in the
\nordinary course of business as conducted on that date and consistent with past
\npractices;<\/p>\n
(j) amendment or termination of any material contract, agreement or
\nlicense to which the Company is a party or by which it or its properties or
\nassets is bound;<\/p>\n
(k) loan by the Company to any person or entity, incurring by the
\nCompany of any indebtedness, guaranteeing by the Company of any indebtedness,
\nissuance or sale of any debt securities of the Company or guaranteeing of any
\ndebt securities of others;<\/p>\n
(l) waiver or release of any right or claim of the Company, including
\nany write-off or other compromise of any account receivable of the Company other
\nthan in accordance with the Company’s allowance for doubtful accounts as
\nreflected on the Current Balance Sheet;<\/p>\n
(m) the commencement, settlement, notice or, to the knowledge of the
\nCompany threat of, any lawsuit or proceeding by or against the Company or
\ninvestigation of the Company or its affairs;<\/p>\n
(n) notice of any claim (i) of ownership by a third party of any of
\nthe Company’s Intellectual Property Rights or (ii) of infringement by the
\nCompany of any third party’s Intellectual Property Rights;<\/p>\n
-11-<\/p>\n
(o) issuance or sale by the Company of any of its shares of capital
\nstock, or securities exchangeable, convertible or exercisable therefor, or of
\nany other of its securities, or acceleration of vesting of any option or other
\nsecurity of the Company;<\/p>\n
(p) sales returns, notice of product deficiency, obsolescence or other
\nindication that any product sold by the Company did not perform as expected or
\nwas defective in some manner;<\/p>\n
(q) increase in the salary or other compensation payable or to become
\npayable by the Company to any of its officers, directors, shareholders,
\nemployees or advisors (other than normal annual raises for non-officers in
\naccordance with past practice), or the declaration, payment or commitment or
\nobligation of any kind for the payment, by the Company, of a bonus or other
\nadditional salary or compensation to any such person;<\/p>\n
(r) adoption of, or increase in the payments to or benefits under, any
\nprofit sharing, bonus, deferred compensation, savings, insurance, pension,
\nretirement, or other employee benefit plan for or with any employees of the
\nCompany;<\/p>\n
(s) change in any material election in respect of Taxes, adoption or
\nchange in any accounting method in respect of Taxes, agreement or settlement of
\nany claim or assessment in respect of Taxes, or extension or waiver of the
\nlimitation period applicable to any claim or assessment in respect of Taxes;<\/p>\n
(t) entry into, termination, modification or extension of, or receipt
\nof notice of termination of (i) any license, lease, distributorship, dealer,
\nsales representative, joint venture, credit, customer, supplier or similar
\nagreement of at least USD $50,000, or (ii) any contract or transaction involving
\na total remaining commitment by or to the Company of at least USD $50,000; or<\/p>\n
(u) agreement, whether oral or written, by the Company or any officer
\nor employee thereof to do any of the foregoing (other than negotiations with
\nParent and its representatives regarding the transactions contemplated by this
\nAgreement) except for agreements with customers in the ordinary course of
\nbusiness.<\/p>\n
2.12 Tax and Other Returns and Reports
\n ———————————<\/p>\n
(a) Tax Returns and Audits. Except as set forth on the Company
\n ———————-
\n Schedule:<\/p>\n
(i) As of the Effective Time, the Company will have prepared and
\ntimely filed all required federal, state, local and foreign returns, estimates,
\ninformation statements and reports, including amendments thereto (“Returns”)
\n ——-
\nthat are required to have been filed before the Effective Time relating to any
\nand all Taxes concerning or attributable to the Company or its operations,
\nincluding the calculations of net operating losses for purposes of such Returns,
\nand such Returns are true and correct in all material respects and have been
\ncompleted in accordance with applicable law.<\/p>\n
(ii) As of the Effective Time, the Company (A) will have paid all
\nTaxes it is required to pay and will have withheld with respect to its
\nemployees, independent contractors and <\/p>\n
-12-<\/p>\n
other persons (and paid over to the appropriate taxing authority), all federal
\nand state income taxes, FICA, FUTA and other Taxes required to be withheld, and
\n(B) will have accrued on the Current Balance Sheet all Taxes attributable to the
\nperiods preceding the Current Balance Sheet and will not have incurred any
\nliability for Taxes for the period commencing after the date of the Current
\nBalance Sheet and ending immediately prior to the Effective Time, other than in
\nthe ordinary course of business.<\/p>\n
(iii) The Company has not been delinquent in the payment of any
\nTax, nor is there any Tax deficiency outstanding, assessed or proposed against
\nthe Company, nor has the Company executed any waiver of any statute of
\nlimitations on or extending the period for the assessment or collection of any
\nTax which is still outstanding. There are no powers of attorney with respect to
\nTaxes of the Company currently in force. No claim has ever been made by an
\nauthority in a jurisdiction where the Company does not file Returns that the
\nCompany is or may be subject to taxation by that jurisdiction.<\/p>\n
(iv) No audit or other examination of any Return of the Company is
\npresently in progress, nor has the Company been notified of any request for such
\nan audit or other examination.<\/p>\n
(v) As of the date of the Current Balance Sheet the Company does not
\nhave any material liabilities for unpaid Taxes which have not been accrued or
\nreserved on the Current Balance Sheet, whether asserted or unasserted,
\ncontingent or otherwise, and the Company has not incurred any liability for
\nTaxes since the date of the Current Balance Sheet other than in the ordinary
\ncourse of business.<\/p>\n
(vi) The Company has made available to Parent or its legal counsel,
\ncopies of all foreign, federal, state and local income and all state and local
\nsales and use Returns for the Company filed for all periods since its inception.<\/p>\n
(vii) There are (and immediately following the Effective Time
\nthere will be) no Liens on the assets of the Company relating to or attributable
\nto Taxes other than Liens for Taxes not yet due and payable.<\/p>\n
(viii) The Company has no knowledge of any basis for the assertion
\nof any claim relating or attributable to Taxes which, if adversely determined,
\nwould result in any material Lien on the assets of the Company.<\/p>\n
(ix) None of the Company’s assets is treated as “tax-exempt use
\nproperty,” within the meaning of Section 168(h) of the Code.<\/p>\n
(x) The Company has not filed any consent agreement under Section
\n341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to any
\ndisposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
\nCode) owned by the Company.<\/p>\n
(xi) The Company is not a party to any Tax sharing, indemnification
\nor allocation agreement nor does the Company owe any amount under any such
\nagreement.<\/p>\n
-13-<\/p>\n
(xii) The Company’s Tax basis in its assets for purposes of
\ndetermining its future amortization, depreciation and other federal income Tax
\ndeductions is accurately reflected on the Company’s tax books and records.<\/p>\n
(xiii) The Company is not, and has not been at any time, a
\n“United States Real Property Holding Corporation” within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
(xiv) No adjustment relating to any Return filed by the
\nCompany has been proposed formally or, to the Company’s knowledge, informally by
\nany taxing authority to the Company or any representative thereof.<\/p>\n
(xv) The Company has (a) never been a member of an
\naffiliated group (within the meaning of Code (S)1504(a)) filing a consolidated
\nfederal income Tax Return (other than a group the common parent of which was
\nCompany), (b) no liability for the Taxes of any person (other than Company or
\nany of its Subsidiaries) under Treas. Reg. (S) 1.1502-6 (or any similar
\nprovision of state, local or foreign law), as a transferee or successor, by
\ncontract, or otherwise and (c) never been a party to any joint venture,
\npartnership or other agreement that could be treated as a partnership for Tax
\npurposes.<\/p>\n
(xvi) The Company has not constituted either a “distributing
\ncorporation” or a “controlled corporation” in a distribution of stock qualifying
\nfor tax-free treatment under Section 355 of the Code (x) in the two years prior
\nto the date of this Agreement or (y) in a distribution which could otherwise
\nconstitute part of a “plan” or “Series of related transactions” (within the
\nmeaning of Section 355(e) of the Code) in conjunction with the Merger.<\/p>\n
(b) Executive Compensation Tax. There is no contract, agreement,
\n ————————–
\nplan or arrangement to which the Company is a party, including, without
\nlimitation, the provisions of this Agreement, covering any employee or former
\nemployee of the Company, which, individually or collectively, could give rise to
\nthe payment of any amount that would not be deductible pursuant to Sections
\n280G, 404 or 162(m) of the Code.<\/p>\n
2.13 Restrictions on Business Activities. There is no agreement (non-
\n ———————————–
\ncompete or otherwise), commitment, judgment, injunction, order or decree to
\nwhich the Company is a party or, to the Company’s knowledge, is otherwise
\nbinding upon the Company which has or may reasonably be expected to have the
\neffect of prohibiting or impairing any business practice of the Company, any
\nacquisition of property (tangible or intangible) by the Company, the conduct of
\nbusiness by the Company or otherwise limiting the freedom of the Company to
\nengage in any line of business or to compete with any person, other than
\ncustomary non-disclosure and confidentiality obligations contained in non-
\ndisclosure agreements, license agreements or customer agreements entered into in
\nthe ordinary course of business, and other than customary license restrictions
\nthat may be contained in Contracts entered into in the ordinary course of
\nbusiness and which would not have a Material Adverse Effect on the Company’s
\nbusiness as conducted.<\/p>\n
2.14 Title of Properties; Absence of Liens and Encumbrances; Condition of
\n ——————————————————————–
\nEquipment
\n———<\/p>\n
-14-<\/p>\n
(a) The Company does not own any real property, nor has it ever owned
\nany real property. The Company Schedule sets forth a list of all real property
\ncurrently leased by the Company, the name of the lessor, the date of the lease
\nand each amendment thereto and, with respect to any current lease, the aggregate
\nannual rental and\/or other fees payable under any such lease. All such current
\nleases are in full force and effect, are valid and effective in accordance with
\ntheir respective terms, and there is not, under any of such leases, any existing
\ndefault or event of default (or event which with notice or lapse of time, or
\nboth, would constitute a default).<\/p>\n
(b) The Company has good and valid title to, or, in the case of
\nleased properties and assets, valid leasehold interests in, all of its tangible
\nproperties and assets used or held for use in its business, free and clear of
\nany Liens, except as reflected on the Current Balance Sheet and except for Liens
\nfor Taxes not yet due and payable and such imperfections of title and
\nencumbrances, if any, which are not material in character, amount or extent, and
\nwhich do not materially detract from the value, or materially interfere with the
\npresent use, of the property subject thereto or affected thereby.<\/p>\n
(c) The Company Schedule lists all material items of equipment owned
\nor leased by the Company and such equipment is (i) adequate for the conduct of
\nthe business of the Company as currently conducted and (ii) in good operating
\ncondition, regularly and properly maintained, subject to normal wear and tear.<\/p>\n
2.15 Intellectual Property.
\n ———————<\/p>\n
(a) The Company Schedule lists all of Company’s United States and
\nforeign: (i) patents, patent applications (including provisional applications);
\n(ii) registered trademarks, applications to register trademarks, intent-to-use
\napplications, or other registrations related to trademarks; (iii) registered
\ncopyrights and applications for copyright registration; (iv) any other
\nIntellectual Property Rights of the Company that is the subject of an
\napplication, certificate or registration filed with, issued by, or recorded by,
\nany state, government or other public legal authority (all of the foregoing, the
\n“Registered Intellectual Property”).
\n ——————————– <\/p>\n
(b) Each item of Registered Intellectual Property is valid and
\nsubsisting, all necessary registration, maintenance and renewal fees in
\nconnection with such Registered Intellectual Property have been paid and all
\nnecessary documents and certificates in connection with such Registered
\nIntellectual Property have been filed with the relevant patent, copyright,
\ntrademark or other authorities in the United States or foreign jurisdictions, as
\nthe case may be, for the purposes of maintaining such Registered Intellectual
\nProperty.<\/p>\n
(c) (i) Except for ordinary license grants which are non-exclusive
\ncontained in customer Contracts, no third party has any rights to use any of the
\nCompany’s Intellectual Property Rights; and (ii) the Company has not granted to
\nany third party, nor authorized any third party to retain, any of the Company’s
\nIntellectual Property Rights.<\/p>\n
(d) (i) The Company owns and has good and exclusive title to each
\nitem of Registered Intellectual Property listed on the Company Schedule, free
\nand clear of any Liens; and<\/p>\n
-15-<\/p>\n
(ii) the Company owns, or has the right, pursuant to a valid Contract to use or
\noperate under, all other Intellectual Property Rights of the Company.<\/p>\n
(e) To the Company’s knowledge, the operation of the business of the
\nCompany as it currently is conducted does not infringe or misappropriate the
\nIntellectual Property Rights of any other third party, violate the rights of any
\nthird party (including rights to privacy or publicity), or constitute unfair
\ncompetition nor has the Company received notice from any third party claiming
\nthat such operation constitutes any such infringement, misappropriation,
\nviolation or unfair competition.<\/p>\n
(f) The Company owns or has the right to all Intellectual Property
\nRights necessary to the conduct of its business as it currently is conducted.<\/p>\n
(g) There are no Contracts between the Company and any other third
\nparty with respect to Intellectual Property Rights of the Company under which
\nthere is any dispute, to the Company’s knowledge, regarding the scope of such
\nagreement, or performance under such agreement including with respect to any
\npayments to be made or received by the Company thereunder.<\/p>\n
(h) To the Company’s knowledge, no third party is infringing or
\nmisappropriating any of the Company’s Intellectual Property Rights.<\/p>\n
(i) No Intellectual Property Right of the Company or product or
\nservice of the Company is subject to any outstanding decree, order, judgment, or
\nstipulation restricting in any manner the licensing or use thereof by the
\nCompany.<\/p>\n
2.16 Agreements, Contracts and Commitments.
\n ————————————-<\/p>\n
(a) Except as set forth on the Company Schedule, or included in the
\nCurrent Balance Sheet, or footnotes thereto, provided to the Parent, the Company
\ndoes not have, is not a party to nor is it bound by:<\/p>\n
(i) any employment or consulting agreement, contract or
\ncommitment with an employee or individual consultant or salesperson or
\nconsulting or sales agreement, contract or commitment with a firm or other
\norganization;<\/p>\n
(ii) any agreement or plan, including, without limitation, any
\nstock option plan, stock appreciation rights plan or stock purchase plan, any of
\nthe benefits of which will be increased by, or the vesting of benefits of which
\nwill be accelerated by, or which would require the consent of any party thereto
\nas a result of, the occurrence of any of the transactions contemplated by this
\nAgreement or the value of any of the benefits of which will be calculated on the
\nbasis of any of the transactions contemplated by this Agreement;<\/p>\n
(iii) any fidelity or surety bond or completion bond;<\/p>\n
(iv) any lease of personal property having a value in excess of
\nUSD $25,000 individually or USD $50,000 in the aggregate;<\/p>\n
-16-<\/p>\n
(v) any agreement, contract or commitment relating to capital
\nexpenditures and involving future payments in excess of USD $25,000 individually
\nor USD $50,000 in the aggregate;<\/p>\n
(vi) any agreement, contract or commitment relating to the
\ndisposition or acquisition of assets or any interest in any business enterprise
\noutside the ordinary course of the Company’s business;<\/p>\n
(vii) any licensing agreement or other contract with respect to
\nIntellectual Property Rights;<\/p>\n
(viii) any joint venture, partnership, and other contract
\ninvolving a sharing of profits, losses, costs, or liabilities by the Company
\nwith any third party;<\/p>\n
(ix) any contract containing covenants that in any way purport
\nto restrict the business activity of the Company or any affiliate or limit the
\nfreedom of the Company or any affiliate of the Company to engage in any line of
\nbusiness or to compete with any third party, other than customary non-disclosure
\nand confidentiality obligations contained in non-disclosure agreements, license
\nagreements or customer agreements entered into in the ordinary course of
\nbusiness, and other than customary license restrictions that may be contained in
\nContracts entered into in the ordinary course of business and which would not
\nhave a Material Adverse Effect on the Company’s business as conducted.<\/p>\n
(x) any power of attorney or other similar agreement or grant
\nof agency;<\/p>\n
(xi) any contract entered into other than in the ordinary
\ncourse of business that contains or provides for an express undertaking by the
\nCompany to be responsible for consequential damages;<\/p>\n
(xii) any oral or written warranty, guaranty, and or other
\nsimilar undertaking with respect to product or contractual performance sold or
\nextended by the Company other than in the ordinary course of business; or<\/p>\n
(xiii) any amendment, supplement, and modification (whether oral
\nor written) in respect of any of the foregoing.<\/p>\n
(b) All of the Contracts set forth or required to be set forth on the
\nCompany Schedule (“Contracts”) are valid, binding and enforceable in accordance
\n ———
\nwith their respective terms, subject to laws of general application relating to
\nbankruptcy, insolvency and the relief of debtors and other laws of general
\napplication effecting enforcement of creditors’ rights generally, rules of law
\ngoverning specific performance, injunctive relief or other equitable remedies,
\nand limitations of public policy, and shall be in full force and effect without
\npenalty in accordance with their terms upon consummation of the transactions
\ncontemplated hereby. The Company has performed all material obligations
\nrequired to be performed by it and is not in default in any material respect
\nunder or in breach in any material respect of nor in receipt of any claim of
\ndefault or breach under any Contract set forth or required to be set forth on
\nthe Company Schedule; no event has occurred which,<\/p>\n
-17-<\/p>\n
with the passage of time or the giving of notice or both, would result in a
\ndefault, breach or event of noncompliance by the Company in any material respect
\nunder any such Contract; the Company does not have any present expectation or
\nintention of not fully performing on a timely basis in all material respects all
\nsuch obligations required to be performed by the Company under any Contract set
\nforth or required to be set forth on the Company Schedule; no partially-filled
\nor unfilled material customer purchase order or sales order is subject to
\ncancellation or any other material modification by the other party thereto or is
\nsubject to any penalty, right of set-off or other charge by the other party
\nthereto for late performance or delivery; and the Company does not have any
\nknowledge of any cancellation or anticipated cancellation or any breach by the
\nother parties to any Contract set forth or required to be set forth on the
\nCompany Schedule. The Company is not a party to any Contract the performance of
\nwhich could reasonably be expected to have a Company Material Adverse Effect.<\/p>\n
(c) Parent has been given access to a true and correct copy of each
\nof the written Contracts that are set forth on the Company Schedule, together
\nwith all amendments, waivers or other changes thereto.<\/p>\n
2.17 Interested Party Transactions. No officer, director or, to the
\n —————————–
\nCompany’s knowledge, shareholder of the Company (nor any ancestor, sibling,
\ndescendant or spouse of any of such persons, or any trust, partnership or
\ncorporation in which any of such persons has or has had an interest), has or has
\nhad, directly or indirectly, (i) an interest in any entity which furnished or
\nsold, or furnishes or sells, services or products that the Company furnishes or
\nsells, or proposes to furnish or sell, or (ii) any interest in any entity that
\npurchases from or sells or furnishes to the Company, any goods or services, or
\n(iii) a beneficial interest in any Contract to which the Company is a party;
\nprovided, however, that ownership of no more than five percent (5%) of the
\noutstanding voting stock of a publicly traded corporation shall not be deemed to
\nbe an “interest in any entity” for purposes of this Section 2.17.<\/p>\n
2.18 Litigation. There is no action, suit, investigation, claim,
\n ———-
\narbitration or proceeding (“Action”) of any nature pending, or to the Company’s
\n ——
\nknowledge threatened, against the Company, its properties (tangible or
\nintangible) or any of its officers or directors by or before any third party,
\nnor to the Company’s knowledge is there any reasonable basis therefor. No third
\nparty has at any time challenged or questioned the legal right of the Company to
\nconduct its operations as previously or presently conducted.<\/p>\n
2.19 Environmental Matters.
\n ———————<\/p>\n
(a) Condition of Property. As of the Closing, except in compliance
\n ———————
\nwith Environmental Laws in a manner that could not reasonably be expected to
\nsubject the Company to liability, to the knowledge of the Company after
\nreasonable inquiry, no Hazardous Materials are present on any Business Facility
\ncurrently owned, operated, occupied, controlled or leased by the Company or were
\npresent on any other Business Facility at the time it ceased to be owned,
\noperated, occupied, controlled or leased by the Company. Except as set forth on
\nthe Company Schedule, there are no underground storage tanks, asbestos which is
\nfriable or likely to become friable or PCBs present on any Business Facility
\ncurrently owned, operated, occupied, controlled or leased by the Company or as a
\nconsequence of the acts of the Company or its agents.<\/p>\n
-18-<\/p>\n
(b) Hazardous Materials Activities. The Company has conducted all
\n ——————————
\nHazardous Material Activities relating to its business in compliance in all
\nmaterial respects with all applicable Environmental Laws, and the Hazardous
\nMaterials Activities of the Company prior to the Closing have not resulted in
\nthe exposure of any person to a Hazardous Material in a manner which has caused
\nor could reasonably be expected to cause an adverse health effect to any such
\nperson.<\/p>\n
(c) Permits. The Company Schedule accurately describes all of the
\n ——-
\nEnvironmental Permits currently held by the Company and relating to its business
\nand the listed Environmental Permits are all of the Environmental Permits
\nnecessary for the continued conduct of any Hazardous Material Activity of the
\nCompany relating to its business as such activities are currently being
\nconducted. All such Environmental Permits are valid and in full force and
\neffect. The Company has complied in all material respects with all covenants
\nand conditions of any Environmental Permit which is or has been in force with
\nrespect to its Hazardous Materials Activities. No circumstances exist which
\ncould cause any Environmental Permit to be revoked, modified, or rendered non-
\nrenewable upon payment of the permit fee. All Environmental Permits and all
\nother consents and clearances required by any Environmental Law have been
\nobtained or will be obtained prior to the Closing at no cost to Parent or Merger
\nSub.<\/p>\n
(d) Environmental Litigation. Except as set forth on the Company
\n ————————
\nSchedule, no Action, proceeding, revocation proceeding, amendment procedure,
\nwrit, injunction or claim is pending, or to the best of the Company’s knowledge,
\nthreatened, concerning or relating to any Environmental Permit or any Hazardous
\nMaterials Activity of the Company relating to its business, or any Business
\nFacility.<\/p>\n
(e) Offsite Hazardous Material Disposal. The Company has
\n ———————————–
\ntransferred or released Hazardous Materials only to those Disposal Sites set
\nforth on the Company Schedule; and no Action, proceeding, liability or claim
\nexists or is threatened against any Disposal Site or against the Company with
\nrespect to any transfer or release of Hazardous Materials relating to the
\nbusiness of the Company to a Disposal Site which could reasonably be expected to
\nsubject the Company to liability.<\/p>\n
(f) Environmental Liabilities. The Company is not aware of any fact
\n ————————-
\nor circumstance, which could reasonably be expected to result in an
\nenvironmental liability having a Material Adverse Effect on the Company.<\/p>\n
(g) Reports and Records: The Company has delivered to Parent or made
\n ——————-
\navailable for inspection by Parent and its agents, representatives and employees
\nall records in the Company’s possession concerning the Hazardous Materials
\nActivities of the Company relating to its business and all environmental audits
\nand environmental assessments of any Business Facility conducted at the request
\nof, or otherwise in the possession of the Company. To its knowledge, the
\nCompany has complied with all environmental disclosure obligations imposed by
\napplicable law with respect to this transaction.<\/p>\n
2.20 Brokers’ and Finders’ Fees; Third Party Expenses. Except as set forth
\n ————————————————
\non the Company Schedule, the Company has not incurred, nor will it incur,
\ndirectly or indirectly, any<\/p>\n
-19-<\/p>\n
liability for brokerage or finders’ fees or agents’ commissions or any similar
\ncharges in connection with the Agreement or any transaction contemplated hereby.
\nThe Company Schedule sets forth the principal terms and conditions of any
\nagreement, written or oral, with respect to such fees. The Company Schedule sets
\nforth the Company’s current reasonable estimate of all Third Party Expenses
\nexpected to be incurred by the Company in connection with the negotiation and
\neffectuation of the terms and conditions of this Agreement and the transactions
\ncontemplated hereby.<\/p>\n
2.21 Employee Matters and Benefit Plans.
\n ———————————-<\/p>\n
(a) Schedule. The Company Schedule contains an accurate and
\n ——–
\ncomplete list of each Company Employee Plan, and each Employment Agreement. The
\nCompany does not have any plan or commitment to establish any new Company
\nEmployee Plan, International Employee Plan, or Employment Agreement, to modify
\nany Company Employee Plan or Employment Agreement (except to the extent required
\nby law or to conform any such Company Employee Plan or Employment Agreement to
\nthe requirements of any applicable law, in each case as previously disclosed to
\nParent in writing, or as required by this Agreement), or to adopt or enter into
\nany Company Employee Plan, International Employee Plan, or Employment Agreement.<\/p>\n
(b) Documents. The Company has provided to Parent access to correct
\n ———
\nand complete copies of: (i) all documents embodying each Company Employee Plan,
\nInternational Employee Plan, and each Employment Agreement including (without
\nlimitation) all amendments thereto and all related trust documents,
\nadministrative service agreements, group annuity contracts, group insurance
\ncontracts, and policies pertaining to fiduciary liability insurance covering the
\nfiduciaries for each Plan; (ii) the most recent annual actuarial valuations, if
\nany, prepared for each Company Employee Plan; (iii) the three (3) most recent
\nannual reports (Form Series 5500 and all schedules and financial statements
\nattached thereto), if any, required under ERISA or the Code in connection with
\neach Company Employee Plan; (iv) if the Company Employee Plan is funded, the
\nmost recent annual and periodic accounting of Company Employee Plan assets; (v)
\nthe most recent summary plan description together with the summary(ies) of
\nmaterial modifications thereto, if any, required under ERISA with respect to
\neach Company Employee Plan; (vi) all IRS determination, opinion, notification
\nand advisory letters, and all applications and correspondence to or from the IRS
\nor the DOL with respect to any such application or letter; (vii) all
\ncommunications material to any Company Group Employee or Company Group Employees
\nrelating to any Company Employee Plan and any proposed Company Employee Plans,
\nin each case, relating to any amendments, terminations, establishments,
\nincreases or decreases in benefits, acceleration of payments or vesting
\nschedules or other events which would result in any material liability to the
\nCompany; (viii) all correspondence to or from any governmental agency relating
\nto any Company Employee Plan; (ix) all COBRA forms and related notices (or such
\nforms and notices as required under comparable law); and (x) the three (3) most
\nrecent plan years discrimination tests for each Company Employee Plan.<\/p>\n
(c) Employee Plan Compliance. Except as set forth on the Company
\n ————————
\nSchedule, (i) the Company has performed in all material respects all obligations
\nrequired to be performed by it under, is not in default or violation of, and has
\nno knowledge of any default or violation by any other party to each Company
\nEmployee Plan, and each Company Employee Plan has been established and
\nmaintained in all material respects in accordance with its terms and in
\ncompliance with all applicable<\/p>\n
-20-<\/p>\n
laws, statutes, orders, rules and regulations, including but not limited to
\nERISA or the Code; (ii) each Company Employee Plan intended to qualify under
\nSection 401(a) of the Code and each trust intended to qualify under Section
\n501(a) of the Code has either received a favorable determination, opinion,
\nnotification or advisory letter from the IRS with respect to each such Company
\nEmployee Plan as to its qualified status under the Code, including all
\namendments to the Code effected by the Tax Reform Act of 1986 and subsequent
\nlegislation, or has remaining a period of time under applicable Treasury
\nregulations or IRS pronouncements in which to apply for such a letter and make
\nany amendments necessary to obtain a favorable determination as to the qualified
\nstatus of each such Company Employee Plan; (iii) no “prohibited transaction”,
\nwithin the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
\nand not otherwise exempt under Section 4975 of the Code or Section 408 of ERISA
\n(or any administrative class exemption issued thereunder), has occurred with
\nrespect to any Company Employee Plan; (iv) there are no actions, suits or claims
\npending, or, to the knowledge of the Company, threatened or reasonably
\nanticipated (other than routine claims for benefits) against any Company
\nEmployee Plan or against the assets of any Company Employee Plan; (v) each
\nCompany Employee Plan (other than any stock option plan) can be amended,
\nterminated or otherwise discontinued after the Effective Time, without material
\nliability to the Parent, the Company or any of its Related Parties (other than
\nordinary administration expenses); (vi) there are no audits, inquiries or
\nproceedings pending or, to the knowledge of the Company or any Related Parties,
\nthreatened by the IRS or DOL with respect to any Company Employee Plan; and
\n(vii) neither the Company nor any Related Party is subject to any penalty or tax
\nwith respect to any Company Employee Plan under Section 502(i) of ERISA or
\nSections 4975 through 4980 of the Code.<\/p>\n
(d) Pension Plan. Neither the Company nor any Related Party has ever
\n ————
\nmaintained, established, sponsored, participated in, or contributed to, any
\nPension Plan which is subject to Title IV of ERISA or Section 412 of the Code.<\/p>\n
(e) Collectively Bargained, Multiemployer and Multiple Employer
\n ———————————————————–
\nPlans. At no time has the Company or any Related Party contributed to or been
\n—–
\nobligated to contribute to any Multiemployer Plan. Neither the Company, nor any
\nRelated Party has at any time ever maintained, established, sponsored,
\nparticipated in, or contributed to any multiple employer plan, or to any plan
\ndescribed in Section 413 of the Code.<\/p>\n
(f) No Post-Employment Obligations. Except as set forth on the
\n ——————————
\nCompany Schedule, no Company Employee Plan provides, or reflects or represents
\nany liability to provide retiree health to any person for any reason, except as
\nmay be required by COBRA or other applicable statute, and the Company has never
\nrepresented, promised or contracted (whether in oral or written form) to any
\nCompany Group Employee (either individually or to Company Group Employees as a
\ngroup) or any other person that such Company Group Employee(s) or other person
\nwould be provided with retiree health, except to the extent required by statute.<\/p>\n
(g) Health Care Compliance. Neither the Company nor any Related
\n ———————-
\nParty has, prior to the Effective Time and in any material respect, violated any
\nof the health care continuation requirements of COBRA, the requirements of FMLA,
\nthe requirements of the Health Insurance Portability and Accountability Act of
\n1996, the requirements of the Women’s Health and Cancer<\/p>\n
-21-<\/p>\n
Rights Act of 1998, the requirements of the Newborns’ and Mothers’ Health
\nProtection Act of 1996, or any amendment to each such act, or any similar
\nprovisions of state law applicable to its Company Group Employees.<\/p>\n
(h) Effect of Transaction.
\n ——————— <\/p>\n
(i) Except as set forth on the Company Schedule, the execution
\nof this Agreement and the consummation of the transactions contemplated hereby
\nwill not (either alone or upon the occurrence of any additional or subsequent
\nevents) constitute an event under any Company Employee Plan, Employment
\nAgreement, trust or loan that will or may result in any payment (whether of
\nseverance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
\ndistribution, increase in benefits or obligation to fund benefits with respect
\nto any Company Group Employee.<\/p>\n
(ii) Except as set forth on the Company Schedule, no payment or
\nbenefit which will or may be made by the Company or its Related Parties with
\nrespect to any Company Group Employee will be characterized as a “parachute
\npayment”, within the meaning of Section 280G(b)(2) of the Code.<\/p>\n
(i) Employment Matters. The Company: (i) is in compliance in all
\n ——————
\nrespects with all applicable foreign, federal, state and local laws, rules and
\nregulations respecting employment, employment practices, terms and conditions of
\nemployment and wages and hours, in each case, with respect to Company Group
\nEmployees; (ii) has withheld and reported all amounts required by law or by
\nagreement to be withheld and reported with respect to wages, salaries and other
\npayments to Company Group Employees; (iii) is not liable for any arrears of
\nwages or any taxes or any penalty for failure to comply with any of the
\nforegoing; and (iv) is not liable for any payment to any trust or other fund
\ngoverned by or maintained by or on behalf of any governmental authority, with
\nrespect to unemployment compensation benefits, social security or other benefits
\nor obligations for Company Group Employees (other than routine payments to be
\nmade in the normal course of business and consistent with past practice). There
\nare no pending, threatened or reasonably anticipated claims or actions against
\nthe Company under any worker’s compensation policy or long-term disability
\npolicy.<\/p>\n
(j) Labor. No work stoppage or labor strike against the Company is
\n —–
\npending, threatened or reasonably anticipated. The Company does not know of any
\nactivities or proceedings of any labor union to organize any Company Group
\nEmployees. Except as set forth on the Company Schedule, there are no actions,
\nsuits, claims, labor disputes or grievances pending, or, to the knowledge of the
\nCompany, threatened or reasonably anticipated relating to any labor, safety or
\ndiscrimination matters involving any Company Group Employee, including, without
\nlimitation, charges of unfair labor practices or discrimination complaints,
\nwhich, if adversely determined, would, individually or in the aggregate, result
\nin any material liability to the Company. Neither the Company nor any of its
\nsubsidiaries has engaged in any unfair labor practices within the meaning of the
\nNational Labor Relations Act. Except as set forth on the Company Schedule, the
\nCompany is not presently, nor has it been in the past, a party to, or bound by,
\nany collective bargaining agreement or union contract with respect to Company
\nGroup Employees and no collective bargaining agreement is being negotiated by
\nthe Company.<\/p>\n
-22-<\/p>\n
(k) International Employee Plan. The Company does not now, nor has
\n —————————
\n it ever had the obligation to, maintain, establish, sponsor, participate in, or
\ncontribute to any International Employee Plan.<\/p>\n
(l) No Interference or Conflict. To the Company’s knowledge, no
\n —————————
\nshareholder, officer, employee or consultant of the Company is obligated under
\nany contract or agreement subject to any judgment, decree or order of any court
\nor administrative agency that would interfere with such person’s efforts to
\npromote the interests of the Company or that would interfere with the Company’s
\nbusiness. Neither the execution nor delivery of this Agreement, nor the
\ncarrying on of the Company’s business as presently conducted nor any activity of
\nsuch officers, directors, employees or consultants in connection with the
\ncarrying on of the Company’s business as presently conducted will, to the
\nCompany’s knowledge, conflict with or result in a breach of the terms,
\nconditions or provisions of, or constitute a default under, any contract or
\nagreement under which any of such officers, directors, employees or consultants
\nis now bound.<\/p>\n
2.22 Compliance with Legal Requirements. To the best of the Company’s
\n ———————————-
\nknowledge, and after diligent inquiry, the Company has complied in all material
\nrespects with, is not in violation of, and has not received any notices of
\nviolation with respect to, any foreign, federal, state or local statute, law or
\nregulation.<\/p>\n
2.23 Insurance. The Company Schedule sets forth a list of all insurance
\n ———
\npolicies and fidelity bonds covering the assets, business, equipment,
\nproperties, operations, employees, officers and directors of the Company or any
\naffiliate. There is no claim by the Company or any affiliate pending under any
\nof such policies or bonds as to which coverage has been questioned, denied or
\ndisputed by the underwriters of such policies or bonds. All premiums due and
\npayable under all such policies and bonds have been paid, and the Company and
\nits affiliates are otherwise in material compliance with the terms of such
\npolicies and bonds (or other policies and bonds providing substantially similar
\ninsurance coverage). The Company has no knowledge of threatened termination of,
\nor premium increase with respect to, any of such policies.<\/p>\n
2.24 Employees. The Company Schedule contains a complete and accurate list
\n ———
\nof the following information for each employee (including full-time, part-time
\nand contract employees) and director of the Company, including each employee on
\nleave of absence; employer (for contract employees); name; job title; age;
\ngender; current compensation paid or payable and any change in compensation
\nsince January 1, 2000; vacation accrued; number of options held (if any); and
\nservice credited for purposes of vesting and eligibility to participate under
\nthe Company’s various benefit plans. To the Company’s knowledge, except as set
\nforth on the Company Schedule, no employee of the Company has the immediate
\nintention to terminate his or her employment with the Company.<\/p>\n
2.25 Product Warranty. All products and equipment manufactured, sold,
\n —————-
\nleased or delivered by the Company and all services rendered by the Company have
\nbeen in conformity with all applicable contractual commitments and all express
\nand implied warranties, and the Company does not have any liability for
\nreplacement or repair thereof or other damages in connection therewith in excess
\nof any warranty reserve established with respect thereto and included on the
\nCurrent Balance Sheet. Except as set forth on the Company Schedule, no products
\nor equipment<\/p>\n
-23-<\/p>\n
manufactured, sold, leased or delivered by the Company and no services rendered
\nby the Company are subject to any guaranty, warranty or other indemnity beyond
\nthe applicable standard terms and conditions of such sale, lease or service
\n(including as a result of any course of conduct between the Company and any
\nthird party or as a result of any statements in any of the Company’s product or
\npromotional literature). The Company Schedule includes copies of such standard
\nterms and conditions of sale, lease and service for the Company (containing
\napplicable guaranty, warranty and indemnity provisions). The Company has not
\nbeen notified in writing of any claims for (and the Company has no knowledge of
\nany threatened claims for) any extraordinary product returns, warranty
\nobligations or product services relating to any of its products or services.<\/p>\n
2.26 Product Liability; Product Recalls, etc. To the Company’s knowledge,
\n —————————————
\nexcept as set forth on the Company Schedule, the Company does not have any
\nliability arising out of any injury to individuals or property as a result of
\nthe ownership, possession or use of any products or equipment manufactured,
\nsold, leased or delivered by the Company or with respect to any services
\nrendered by the Company. Except as set forth on the Company Schedule, there
\nhave been no product or equipment recalls, withdrawals or seizures with respect
\nto any products or equipment manufactured, sold, leased or delivered by the
\nCompany or with respect to any services rendered by the Company.<\/p>\n
2.27 Books and Records. The minute books of the Company contain accurate
\n —————–
\nand complete records of all meetings held of, and material corporate action
\ntaken by, the shareholders and the Board of Directors. No material action has
\nbeen taken by a committee of the Board of Directors of the Company for which
\nminutes have not been prepared and are not contained in such minute books. As of
\nthe Closing, no meeting of the Boards of Directors or the shareholders will have
\nbeen held for which minutes have not been prepared and are not contained in such
\nminute books. At the Closing, all of the minute books will be in the possession
\nof the Company.<\/p>\n
2.28 Customers and Suppliers. The Company Schedule sets forth the names
\n ———————–
\nand addresses of the ten (10) most significant customers and suppliers of the
\nCompany by dollar volume of sale and purchases, respectively for the fiscal year
\nended December 31, 1999. Except as set forth on the Company Schedule, the
\nCompany has not received any notice that any such customer of the Company has
\nceased, or will cease, to use the products, equipment, goods or services of the
\nCompany, or has substantially reduced, or will substantially reduce, the use of
\nsuch products, equipment, goods or services at any time. Except as set forth on
\nthe Company Schedule, the Company has not received any notice from any of such
\nsuppliers of the Company to the effect that such supplier will stop, materially
\ndecrease the rate of, or materially change the terms (whether related to
\npayment, price or otherwise) with respect to, supplying materials, products or
\nservices to the Company (whether as a result of the consummation of the
\ntransactions contemplated hereby or otherwise).<\/p>\n
2.29 Complete Copies of Materials. The Company has delivered or made
\n —————————-
\navailable true and complete copies of each document (or summaries of same) that
\nhas been requested by Parent or its counsel.<\/p>\n
2.30 Representations Complete. Neither any of the representations or
\n ————————
\nwarranties made by the Company (as modified by the Company Schedules) in this
\nAgreement, nor any statements made<\/p>\n
-24-<\/p>\n
in any exhibit, schedule or certificate furnished by the Company pursuant to
\nthis Agreement taken as a whole contains any untrue statement of a material
\nfact, or omits to state any material fact necessary in order to make the
\nstatements contained herein or therein, in the light of the circumstances under
\nwhich made, not misleading. The information regarding the Company furnished in
\nany documents mailed, delivered or otherwise furnished to Shareholders in
\nconnection with the solicitation of their consent to this Agreement and the
\nMerger, will not contain, at or prior to the Effective Time, any untrue
\nstatement of a material fact and will not omit to state any material fact
\nnecessary in order to make the statements made therein, in light of the
\ncircumstances under which made, not misleading with respect to the Company.<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB<\/p>\n
Parent and Merger Sub hereby represent and warrant to the Company, subject
\nto such exceptions as are specifically disclosed in the disclosure letter
\n(referencing the appropriate section and paragraph numbers and any other section
\nand\/or paragraph number to which it is reasonably apparent on the face of such
\ndisclosure that such disclosure relates) supplied by the Parent to Company (the
\n“Parent Schedule”) and dated as of the date hereof, that on the date hereof
\n —————
\n(provided, that the representations and warranties made as of a specified date
\nwill be true and correct as of such date):<\/p>\n
3.1 Organization, Standing and Power. Each of Parent and Merger Sub is a
\n ——————————–
\ncorporation duly organized, validly existing and in good standing under the laws
\nof the State of California. Each of Parent and Merger Sub has the corporate
\npower to own its properties and to carry on its business as now being conducted
\nand is duly qualified or licensed to do business and is in good standing in each
\njurisdiction in which the failure to be so qualified or licensed would have a
\nParent Material Adverse Effect. Parent has not taken any action that in any
\nrespect conflicts with, constitutes a default under or results in a violation of
\nany provision of its Organizational Documents. The Parent Schedule sets forth
\n(i) true and correct copies of the Organizational Documents of Parent, each as
\nin effect on the date hereof, and (ii) the directors and officers of Parent.<\/p>\n
3.2 Capital Structure.
\n —————–<\/p>\n
(a) The authorized stock of Parent consists of 48,000,000 shares of
\nCommon Stock, USD $.001 par value, of which approximately 6,205,559 shares were
\nissued and outstanding as of July 12, 2000, 1,300,000 shares of Series A
\nPreferred Stock, all of which are issued and outstanding as of the date hereof,
\n1,281,000 shares of Series B Preferred Stock, all of which are issued and
\noutstanding as of the date hereof, 544,998 shares of Series C Preferred Stock,
\nall of which are issued and outstanding as of the date hereof, 1,500,000 shares
\nof Series D Preferred Stock, all of which are issued and outstanding as of the
\ndate hereof, 857,988 shares of Series E-1 Preferred Stock, all of which are
\nissued and outstanding as of the date hereof, 6,621,268 shares of Series E-2
\nPreferred Stock, all of which are issued and outstanding as of the date hereof,
\nand 8,071,207 shares of Series F Preferred Stock, all of which are issued and
\noutstanding as of the date hereof. All such<\/p>\n
-25-<\/p>\n
shares have been duly authorized, and all such issued and outstanding shares
\nhave been validly issued, are fully paid and nonassessable and are free of any
\nliens or encumbrances other than any liens or encumbrances created by or imposed
\nupon the holders thereof. Parent has also reserved 9,872,968 shares of Common
\nStock for issuance pursuant to its employee and director stock and option plans.
\nOther than warrants to purchase 373,210 shares of Common Stock, there are no
\nother options, warrants, calls, rights, commitments or agreements of any
\ncharacter to which Parent is a party or by which it is bound obligating Parent
\nto issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
\nsold, repurchased or redeemed, any shares of the capital stock of Parent or
\nobligating Parent to grant, extend or enter into any such option, warrant, call,
\nright, commitment or agreement. There are no outstanding or authorized stock
\nappreciation, phantom stock, profit participation, or other similar rights with
\nrespect to Parent.<\/p>\n
(b) The shares of Parent Common Stock to be issued pursuant to the
\nMerger will be duly authorized, validly issued, fully paid, non-assessable, free
\nof any liens or encumbrances and not subject to any preemptive rights or rights
\nof first refusal created by statute or the certificate of incorporation or
\nbylaws of Parent or any agreement to which Parent is a party or is bound except
\nas provided in this Agreement.<\/p>\n
3.3 Capital Resources. Parent has sufficient capital resources to perform
\n —————–
\nits obligations with respect to the Merger Consideration and to consummate all
\nof the transactions contemplated by the Agreement and the Related Agreements.<\/p>\n
3.4 Authority. Each of Parent and Merger Sub has all requisite corporate
\n ———
\npower and authority to enter into this Agreement and any Related Agreements to
\nwhich it is a party and to consummate the transactions contemplated hereby and
\nthereby. The execution and delivery of this Agreement and any Related Agreements
\nto which it is a party and the consummation of the transactions contemplated
\nhereby and thereby have been duly authorized by all necessary corporate action
\non the part of Parent and Merger Sub. This Agreement and any Related Agreements
\nto which Parent and Merger Sub are parties have been duly executed and delivered
\nby Parent and Merger Sub and constitute the valid and binding obligations of
\nParent and Merger Sub, enforceable in accordance with their terms, except as
\nsuch enforceability may be limited by principles of public policy and merger
\nsubject to the laws of general application relating to bankruptcy, insolvency
\nand the relief of debtors and rules of law governing specific performance,
\ninjunctive relief or other equitable remedies.<\/p>\n
3.5 No Conflict. The execution and delivery by the Parent and Merger Sub
\n ———–
\nof this Agreement and any Related Agreement to which the Parent and Merger Sub
\nare a party, and the consummation of the transactions contemplated hereby and
\nthereby, will not conflict with or result in any violation of or default under
\n(with or without notice or lapse of time, or both) or give rise to a right of
\ntermination, cancellation, modification or acceleration of any obligation or
\nloss of any benefit under (any such event, a “Conflict”) (i) any provision of
\n ——–
\nthe Organizational Documents of the Parent or Merger Sub, (ii) any Contract, or
\n(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
\napplicable to the Parent or Merger Sub any of its properties (tangible and
\nintangible) or assets. Parent and Merger Sub are in material compliance with
\nand have not materially breached, violated or defaulted under, or received
\nnotice that they have breached, violated<\/p>\n
-26-<\/p>\n
or defaulted under, any of the terms or conditions of any Contract, nor is the
\nParent or Merger Sub aware of any event that would constitute such a material
\nbreach, violation or default with the lapse of time, giving of notice or both.
\nEach Contract is in full force and effect and, to the Parent’s knowledge, no
\nother party is obligated to the Parent or Merger Sub pursuant to any such
\nContract in material default thereunder. The Parent has obtained, or will obtain
\nprior to the Effective Time, all necessary consents, waivers and approvals of
\nparties to any Contract as are required (i) thereunder in connection with the
\nMerger, (ii) and for any such Contract to remain in full force and effect
\nwithout limitation, modification or alteration after the Effective Time.<\/p>\n
3.6 Consents. No consent, waiver, approval, order or authorization of, or
\n ——–
\nregistration, declaration or filing with, any Governmental Entity, or any third
\nparty is required by or with respect to Parent or Merger Sub in connection with
\nthe execution and delivery of this Agreement and any Related Agreements to which
\nParent or Merger Sub is a party or the consummation of the transactions
\ncontemplated hereby and thereby, except for (i) such consents, waivers,
\napprovals, orders, authorizations, registrations, declarations and filings as
\nmay be required under applicable securities laws; (ii) the filing of the
\nAgreement of Merger with the Secretary of State of the State of California; and
\n(iii) such other consents, waivers, approvals, orders, authorizations,
\nregistrations, declarations and filings which, if not obtained or made, would
\nnot have a Parent Material Adverse Effect.<\/p>\n
3.7 Absence of Certain Changes or Events. Since the date of Parent’s
\n ————————————
\nbalance sheet provided to the Company (the “Parent Balance Sheet”), except with
\n ——————–
\nrespect to the actions contemplated by this Agreement, Parent and its
\nsubsidiaries have conducted their businesses only in the ordinary course and in
\na manner consistent with past practice and, since such date, there has not been
\n(i) any Parent Material Adverse Effect, or any development that reasonably would
\nbe expected to cause a Parent Material Adverse Effect; (ii) any damage,
\ndestruction or loss (whether or not covered by insurance) having a Parent
\nMaterial Adverse Effect; (iii) any material change by Parent in its accounting
\nmethods, principles or practices, except as required by concurrent changes in
\nGAAP; or (iv) any material revaluation by Parent of any of its assets including,
\nwithout limitation, writing down the value of capitalized software or inventory
\nor writing off notes or accounts receivable other than in the ordinary course of
\nbusiness.<\/p>\n
3.8 Absence of Liens and Encumbrances. Parent has good and valid title
\n ———————————
\nto, or, in the case of leased properties and assets, valid leasehold interests
\nin, all of its material tangible properties and assets, real, personal and
\nmixed, used in its business, free and clear of any liens or encumbrances except
\nas reflected in Parent’s financial statements provided to the Company and except
\nfor liens for taxes not yet due and payable and such imperfections of title and
\nencumbrances, if any, which are not material in character, amount or extent, and
\nwhich do not materially detract from the value, or materially interfere with the
\npresent use, of the property subject thereto or affected thereby.<\/p>\n
3.9 Parent Financial Statements. The Parent has made available to the
\n —————————
\nCompany the Parent’s (i) audited balance sheets as of April 30, 1999 and as of
\nApril 30, 1998, and the related audited statements of income, cash flow and
\nstockholders’ equity for the twelve (12) month periods ended April 30, 1999 and
\nApril 30, 1998, respectively (collectively, the “Year-End Financials”), and (ii)
\n ——————-
\nunaudited balance sheet as of April 30, 2000, and the related unaudited
\nstatements of income,<\/p>\n
-27-<\/p>\n
cash flow and stockholders’ equity for the twelve (12) month period then ended
\n(the “Interim Financials”). The Year-End Financials and the Interim Financials
\n ——————
\nhave been prepared in accordance with GAAP consistently applied on a basis
\nconsistent throughout the periods indicated and consistent with each other. The
\nYear-End Financials and Interim Financials present fairly the financial
\ncondition, operating results and cash flows of the Parent as of the dates and
\nduring the periods indicated therein, subject in the case of the Interim
\nFinancials to normal year-end adjustments, which are not material in amount in
\nany individual case or in the aggregate. The Parent’s unaudited balance sheet as
\nof April 30, 2000 is referred to hereinafter as the “Current Balance Sheet.”
\n ——————— <\/p>\n
3.10 Minute Books. The Parent has made available to the Company, records
\n ————
\nreflecting the actions taken by Parent’s board of directors prior and subsequent
\nto Parent’s most recent preferred financing.<\/p>\n
3.11 No Undisclosed Liabilities. The Parent does not have any material
\n ————————–
\nliability, indebtedness, obligation, expense, claim, deficiency, guaranty or
\nendorsement of any type, whether accrued, absolute, contingent, matured,
\nunmatured or other (whether or not required to be reflected in financial
\nstatements in accordance with GAAP), which has not been reflected on the Current
\nBalance Sheet. The Parent Schedule sets forth a schedule of all Parent
\nindebtedness (including the amounts of Parent indebtedness, names of creditors,
\nand a summary of the pertinent terms of such Parent indebtedness) as of the date
\nof this Agreement.<\/p>\n
3.12 Tax and Other Returns and Reports.
\n ———————————<\/p>\n
(a) Tax Returns and Audits. Except as set forth on the Parent
\n ———————-
\nSchedule:<\/p>\n
(i) As of the Effective Time, the Parent will have prepared
\nand timely filed all required federal, state, local and foreign returns,
\nestimates, information statements and reports, including amendments thereto
\n(“Returns”) that are required to have been filed before the Effective Time
\n ——-
\nrelating to any and all Taxes concerning or attributable to the Parent or its
\noperations, including the calculations of net operating losses for purposes of
\nsuch Returns, and such Returns are true and correct in all material respects and
\nhave been completed in accordance with applicable law.<\/p>\n
(ii) As of the Effective Time, the Parent (A) will have paid
\nall Taxes it is required to pay and will have withheld with respect to its
\nemployees, independent contractors and other persons, all federal and state
\nincome taxes, FICA, FUTA and other Taxes required to be withheld, and (B) will
\nhave accrued on the Current Balance Sheet all Taxes attributable to the periods
\npreceding the Current Balance Sheet and will not have incurred any liability for
\nTaxes for the period commencing after the date of the Current Balance Sheet and
\nending immediately prior to the Effective Time, other than in the ordinary
\ncourse of business.<\/p>\n
(iii) The Parent has not been delinquent in the payment of
\nany Tax, nor is there any Tax deficiency outstanding, assessed or proposed
\nagainst the Parent, nor has the Parent executed any waiver of any statute of
\nlimitations on or extending the period for the assessment or<\/p>\n
-28-<\/p>\n
collection of any Tax which is still outstanding. There are no powers of
\nattorney with respect to Taxes of the Parent currently in force. No claim has
\never been made by an authority in a jurisdiction where the Parent does not file
\nReturns that the Parent is or may be subject to taxation by that jurisdiction.<\/p>\n
(iv) No audit or other examination of any Return of the
\nParent is presently in progress, nor has the Parent been notified of any request
\nfor such an audit or other examination.<\/p>\n
(v) As of the date of the Current Balance Sheet Date, the
\nParent does not have any material liabilities for unpaid Taxes have not been
\naccrued or reserved on the Current Balance Sheet, whether asserted or
\nunasserted, contingent or otherwise, and the Parent has not incurred any
\nliability for Taxes since the date of the Current Balance Sheet other than in
\nthe ordinary course of business.<\/p>\n
(vi) The Parent has made available to Company or its legal
\ncounsel, copies of all foreign, federal, state and local income and all state
\nand local sales and use Returns for the Parent filed for all periods since its
\ninception.<\/p>\n
(vii) There are (and immediately following the Effective Time
\nthere will be) no Liens on the assets of the Parent relating to or attributable
\nto Taxes other than Liens for Taxes not yet due and payable.<\/p>\n
(viii) The Parent has no knowledge of any basis for the
\nassertion of any claim relating or attributable to Taxes which, if adversely
\ndetermined, would result in any material Lien on the assets of the Parent.<\/p>\n
(ix) The Parent is not a party to any Tax sharing,
\nindemnification or allocation agreement nor does the Parent owe any amount under
\nany such agreement.<\/p>\n
(x) The Parent’s Tax basis in its assets for purposes of
\ndetermining its future amortization, depreciation and other federal income Tax
\ndeductions is accurately reflected on the Parent ‘s tax books and records.<\/p>\n
(xi) The Parent is not, and has not been at any time, a
\n“United States Real Property Holding Corporation” within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
(xii) No adjustment relating to any Return filed by the
\nParent has been proposed formally or, to the Parent’s knowledge, informally by
\nany taxing authority to the Parent or any representative thereof.<\/p>\n
(b) Executive Compensation Tax. There is no contract, agreement,
\n ————————–
\nplan or arrangement to which the Parent is a party, including, without
\nlimitation, the provisions of this Agreement, covering any employee or former
\nemployee of the Parent, which, individually or collectively, could give rise to
\nthe payment of any amount that would not be deductible pursuant to Sections
\n280G, 404 or 162(m) of the Code.<\/p>\n
-29-<\/p>\n
3.13 Restrictions on Business Activities. There is no agreement (non-
\n ———————————–
\ncompete or otherwise), commitment, judgment, injunction, order or decree to
\nwhich the Parent is a party or, to the Parent’s knowledge, is otherwise binding
\nupon the Parent which has or may reasonably be expected to have the effect of
\nprohibiting or impairing any business practice of the Parent , any acquisition
\nof property (tangible or intangible) by the Parent, the conduct of business by
\nthe Parent or otherwise limiting the freedom of the Parent to engage in any line
\nof business or to compete with any person, other than customary non-disclosure
\nand confidentiality obligations contained in non-disclosure agreements, license
\nagreements or customer agreements entered into in the ordinary course of
\nbusiness, and other than customary license restrictions that may be contained in
\nContracts entered into in the ordinary course of business.<\/p>\n
3.14 Intellectual Property.
\n ———————<\/p>\n
(a) Parent and its subsidiaries own, or have the right to use, sell
\nor license all material intellectual property rights necessary or required for
\nthe conduct of their respective businesses as presently conducted (such
\nintellectual property rights are collectively referred to as the “Parent IP
\n ———
\nRights”);
\n——<\/p>\n
(b) The execution, delivery and performance of this Agreement and the
\nconsummation of the transactions contemplated hereby will not constitute a
\nmaterial breach of any instrument or agreement governing any Parent IP Right
\n(the “Parent IP Rights Agreements”), will not cause the forfeiture or
\n —————————
\ntermination or give rise to a right of forfeiture or termination of any Parent
\nIP Right or materially impair the right of Parent and its subsidiaries or the
\nSurviving Corporation to use, sell or license any Parent IP Right or portion
\nthereof.<\/p>\n
(c) Neither the manufacture, marketing, license, sale or intended use
\nof any product currently licensed or sold by Parent or any of its subsidiaries
\nor currently under development by Parent or any of its subsidiaries violates any
\nlicense or agreement between Parent or any of its subsidiaries and any third
\nparty or infringes any intellectual property right of any other party; and there
\nis no pending or, to the best knowledge of Parent, threatened claim or
\nlitigation contesting the validity, ownership or right to use, sell, license or
\ndispose of any Parent IP Right nor, to the best knowledge of Parent, is there
\nany basis for any such claim, nor has Parent received any notice asserting that
\nany Parent IP Right or the proposed use, sale, license or disposition thereof
\nconflicts or will conflict with the rights of any other party, nor, to the best
\nknowledge of Parent, is there any basis for any such assertion.<\/p>\n
(d) Parent has taken reasonable and practicable steps designed to
\nsafeguard and maintain the secrecy and confidentiality of, and its proprietary
\nrights in, all material Parent IP Rights.<\/p>\n
3.15 Agreements, Contracts and Commitments.
\n ————————————-<\/p>\n
(a) Except as set forth on the Parent Schedule, the Parent does not
\nhave, is not a party to nor is it bound by:<\/p>\n
-30-<\/p>\n
(i) any employment or consulting agreement, contract or
\ncommitment with an employee or individual consultant or salesperson or
\nconsulting or sales agreement, contract or commitment with a firm or other
\norganization;<\/p>\n
(ii) any agreement or plan, including, without limitation, any
\nstock option plan, stock appreciation rights plan or stock purchase plan, any of
\nthe benefits of which will be increased by, or the vesting of benefits of which
\nwill be accelerated by, or which would require the consent of any party thereto
\nas a result of, the occurrence of any of the transactions contemplated by this
\nAgreement or the value of any of the benefits of which will be calculated on the
\nbasis of any of the transactions contemplated by this Agreement;<\/p>\n
(iii) any fidelity or surety bond or completion bond;<\/p>\n
(iv) any lease of personal property having a value in excess of
\nUSD $50,000 individually or USD $100,000 in the aggregate;<\/p>\n
(v) any agreement, contract or commitment relating to capital
\nexpenditures and involving future payments in excess of USD $100,000
\nindividually or USD $250,000 in the aggregate;<\/p>\n
(vi) any agreement, contract or commitment relating to the
\ndisposition or acquisition of assets or any interest in any business enterprise
\noutside the ordinary course of the Parent’s business;<\/p>\n
(vii) any licensing agreement or other contract with respect to
\nIntellectual Property Rights;<\/p>\n
(viii) any joint venture, partnership, and other contract
\ninvolving a sharing of profits, losses, costs, or liabilities by the Parent with
\nany third party;<\/p>\n
(ix) any contract containing covenants that in any way purport
\nto restrict the business activity of the Parent or any affiliate or limit the
\nfreedom of the Parent or any affiliate of the Parent to engage in any line of
\nbusiness or to compete with any third party, other than customary non-disclosure
\nand confidentiality obligations contained in non-disclosure agreements entered
\ninto in the ordinary course of business, license agreements or customer
\nagreements, and other than customary license restrictions that may be contained
\nin Contracts entered into in the ordinary course of business;<\/p>\n
(x) any power of attorney or other similar agreement or grant
\nof agency;<\/p>\n
(xi) any contract entered into other than in the ordinary
\ncourse of business that contains or provides for an express undertaking by the
\nParent to be responsible for consequential damages;<\/p>\n
-31-<\/p>\n
(xii) any oral or written warranty, guaranty, and or other
\nsimilar undertaking with respect to product or contractual performance sold or
\nextended by the Parent other than in the ordinary course of business; or<\/p>\n
(xiii) any amendment, supplement, and modification (whether oral
\nor written) in respect of any of the foregoing.<\/p>\n
(b) All of the Contracts set forth or required to be set forth on the
\nParent Schedule (“Contracts”) are valid, binding and enforceable in accordance
\n ———
\nwith their respective terms, subject to laws of general application relating to
\nbankruptcy, insolvency and the relief of debtors and other laws of general
\napplication effecting enforcement of creditors’ rights generally, rules of law
\ngoverning specific performance, injunctive relief or other equitable remedies,
\nand limitations of public policy; and shall be in full force and effect without
\npenalty in accordance with their terms upon consummation of the transactions
\ncontemplated hereby. The Parent does not have any present expectation or
\nintention of not fully performing on a timely basis in all material respects all
\nsuch obligations required to be performed by the Parent under any Contract set
\nforth or required to be set forth on the Parent Schedule; no partially-filled or
\nunfilled material customer purchase order or sales order is subject to
\ncancellation or any other material modification by the other party thereto or is
\nsubject to any penalty, right of set-off or other charge by the other party
\nthereto for late performance or delivery; and the Parent does not have any
\nknowledge of any cancellation or anticipated cancellation or any breach by the
\nother parties to any Contract set forth or required to be set forth on the
\nParent Schedule. The Parent is not a party to any Contract the performance of
\nwhich could reasonably be expected to have a Parent Material Adverse Effect.<\/p>\n
(c) Company has been given access to a true and correct copy of each
\nof the written Contracts that are set forth on the Parent Schedule, together
\nwith all amendments, waivers or other changes thereto.<\/p>\n
3.16 Interested Party Transactions. No officer, director or, to the
\n —————————–
\nParent’s knowledge, shareholder of the Parent (nor any ancestor, sibling,
\ndescendant or spouse of any of such persons, or any trust, partnership or
\ncorporation in which any of such persons has or has had an interest), has or has
\nhad, directly or indirectly, (i) an interest in any entity which furnished or
\nsold, or furnishes or sells, services or products that the Parent furnishes or
\nsells, or proposes to furnish or sell, or (ii) any interest in any entity that
\npurchases from or sells or furnishes to the Parent , any goods or services, or
\n(iii) a beneficial interest in any Contract to which the Parent is a party;
\nprovided, however, that ownership of no more than five percent (5%) of the
\noutstanding voting stock of a publicly traded corporation shall not be deemed to
\nbe an “interest in any entity” for purposes of this Section 3.16.<\/p>\n
3.17 Litigation. There is no action, suit, proceeding, claim, arbitration
\n ———-
\nor investigation pending, or as to which Parent or any of its subsidiaries has
\nreceived any notice of assertion nor, to Parent’s best knowledge, is there a
\nthreatened action, suit, proceeding, claim, arbitration or investigation against
\nParent or any of its subsidiaries which reasonably would be expected to be
\nmaterial to Parent, or which in any manner challenges or seeks to prevent,
\nenjoin, alter or delay any of the transactions contemplated by this Agreement or
\nParent’s business.<\/p>\n
-32-<\/p>\n
3.18 Compliance With Laws. Parent has complied in all material respects
\n ——————–
\nwith, is not in material violation of, and has not received any notices of
\nviolation with respect to, any foreign, federal, state or local statute, law or
\nregulation with respect to the conduct of its business, or the ownership or
\noperation of its business, except in any such case as reasonably would not be
\nexpected to be material to Parent.<\/p>\n
3.19 Environmental Matters.
\n ———————<\/p>\n
(a) Condition of Property. As of the Closing, except in compliance
\n ———————
\nwith Environmental Laws in a manner that could not reasonably be expected to
\nsubject the Parent to liability, to the knowledge of the Parent after reasonable
\ninquiry, no Hazardous Materials are present on any Business Facility currently
\nowned, operated, occupied, controlled or leased by the Parent or were present on
\nany other Business Facility at the time it ceased to be owned, operated,
\noccupied, controlled or leased by the Parent. Except as set forth on the Parent
\nSchedule, there are no underground storage tanks, asbestos which is friable or
\nlikely to become friable or PCBs present on any Business Facility currently
\nowned, operated, occupied, controlled or leased by the Parent or as a
\nconsequence of the acts of the Parent or its agents.<\/p>\n
(b) Hazardous Materials Activities. The Parent has conducted all
\n ——————————
\nHazardous Material Activities relating to its business in compliance in all
\nmaterial respects with all applicable Environmental Laws, and the Hazardous
\nMaterials Activities of the Parent prior to the Closing have not resulted in the
\nexposure of any person to a Hazardous Material in a manner which has caused or
\ncould reasonably be expected to cause an adverse health effect to any such
\nperson.<\/p>\n
(c) Permits. The Parent Schedule accurately describes all of the
\n ——-
\nEnvironmental Permits currently held by the Parent and relating to its business
\nand the listed Environmental Permits are all of the Environmental Permits
\nnecessary for the continued conduct of any Hazardous Material Activity of the
\nParent relating to its business as such activities are currently being
\nconducted. All such Environmental Permits are valid and in full force and
\neffect. The Parent has complied in all material respects with all covenants and
\nconditions of any Environmental Permit which is or has been in force with
\nrespect to its Hazardous Materials Activities. No circumstances exist which
\ncould cause any Environmental Permit to be revoked, modified, or rendered non-
\nrenewable upon payment of the permit fee. All Environmental Permits and all
\nother consents and clearances required by any Environmental Law have been
\nobtained or will be obtained prior to the Closing at no cost to Parent or Merger
\nSub.<\/p>\n
(d) Environmental Litigation. Except as set forth on the Parent
\n ————————
\nSchedule, no Action, proceeding, revocation proceeding, amendment procedure,
\nwrit, injunction or claim is pending, or to the best of the Parent’s knowledge,
\nthreatened, concerning or relating to any Environmental Permit or any Hazardous
\nMaterials Activity of the Parent relating to its business, or any Business
\nFacility.<\/p>\n
(e) Offsite Hazardous Material Disposal. The Parent has transferred
\n ———————————–
\nor released Hazardous Materials only to those Disposal Sites set forth on the
\nParent Schedule; and no Action, proceeding, liability or claim exists or is
\nthreatened against any Disposal Site or against the Parent <\/p>\n
-33-<\/p>\n
with respect to any transfer or release of Hazardous Materials relating to the
\nbusiness of the Parent to a Disposal Site which could reasonably be expected to
\nsubject the Parent to liability.<\/p>\n
(f) Environmental Liabilities. The Parent is not aware of any fact
\n ————————-
\nor circumstance, which could reasonably be expected to result in an
\nenvironmental liability having a Material Adverse Effect on the Parent.<\/p>\n
(g) Reports and Records: The Parent has delivered to Parent or made
\n ——————-
\navailable for inspection by Parent and its agents, representatives and employees
\nall records in the Parent’s possession concerning the Hazardous Materials
\nActivities of the Parent relating to its business and all environmental audits
\nand environmental assessments of any Business Facility conducted at the request
\nof, or otherwise in the possession of the Parent. To its knowledge, the Parent
\nhas complied with all environmental disclosure obligations imposed by applicable
\nlaw with respect to this transaction.<\/p>\n
3.20 Brokers’ and Finders’ Fees; Third Party Expenses. Except as set forth
\n ————————————————
\non the Parent Schedule, the Parent has not incurred, nor will it incur, directly
\nor indirectly, any liability for brokerage or finders’ fees or agents’
\ncommissions or any similar charges in connection with the Agreement or any
\ntransaction contemplated hereby. The Parent Schedule sets forth the principal
\nterms and conditions of any agreement, written or oral, with respect to such
\nfees. The Parent Schedule sets forth the Parent’s current reasonable estimate of
\nall Third Party Expenses expected to be incurred by the Parent in connection
\nwith the negotiation and effectuation of the terms and conditions of this
\nAgreement and the transactions contemplated hereby.<\/p>\n
3.21 Employee Matters and Benefit Plans.
\n ———————————-<\/p>\n
(a) Schedule. The Parent Schedule contains an accurate and complete
\n ——–
\nlist of each Parent Employee Plan and each Employment Agreement. The Parent does
\nnot have any plan or commitment to establish any new Parent Employee Plan,
\nInternational Employee Plan, or Employment Agreement, to modify any Parent
\nEmployee Plan or Employment Agreement (except to the extent required by law or
\nto conform any such Parent Employee Plan or Employment Agreement to the
\nrequirements of any applicable law, in each case as previously disclosed to
\nParent in writing, or as required by this Agreement), or to adopt or enter into
\nany Parent Employee Plan, International Employee Plan, or Employment Agreement.<\/p>\n
(b) Documents. The Parent has provided to the Company access to
\n ———
\ncorrect and complete copies of: (i) all documents embodying each Parent Employee
\nPlan, International Employee Plan, and each Employment Agreement including
\n(without limitation) all amendments thereto and all related trust documents,
\nadministrative service agreements, group annuity contracts, group insurance
\ncontracts, and policies pertaining to fiduciary liability insurance covering the
\nfiduciaries for each Plan; (ii) the most recent annual actuarial valuations, if
\nany, prepared for each Parent Employee Plan; (iii) the three (3) most recent
\nannual reports (Form Series 5500 and all schedules and financial statements
\nattached thereto), if any, required under ERISA or the Code in connection with
\neach Parent Employee Plan; (iv) if the Parent Employee Plan is funded, the most
\nrecent annual and periodic accounting of Parent Employee Plan assets; (v) the
\nmost recent summary<\/p>\n
-34-<\/p>\n
plan description together with the summary(ies) of material modifications
\nthereto, if any, required under ERISA with respect to each Parent Employee Plan;
\n(vi) all IRS determination, opinion, notification and advisory letters, and all
\napplications and correspondence to or from the IRS or the DOL with respect to
\nany such application or letter; (vii) all communications material to any Parent
\nGroup Employee or Parent Group Employees relating to any Parent Employee Plan
\nand any proposed Parent Employee Plans, in each case, relating to any
\namendments, terminations, establishments, increases or decreases in benefits,
\nacceleration of payments or vesting schedules or other events which would result
\nin any material liability to the Parent; (viii) all correspondence to or from
\nany governmental agency relating to any Parent Employee Plan; (ix) all COBRA
\nforms and related notices (or such forms and notices as required under
\ncomparable law); and (x) the three (3) most recent plan years discrimination
\ntests for each Parent Employee Plan.<\/p>\n
(c) Employee Plan Compliance. Except as set forth on the Parent
\n ————————
\nSchedule, (i) the Parent has performed in all material respects all obligations
\nrequired to be performed by it under, is not in default or violation of, and has
\nno knowledge of any default or violation by any other party to each Parent
\nEmployee Plan, and each Parent Employee Plan has been established and maintained
\nin all material respects in accordance with its terms and in compliance with all
\napplicable laws, statutes, orders, rules and regulations, including but not
\nlimited to ERISA or the Code; (ii) each Parent Employee Plan intended to qualify
\nunder Section 401(a) of the Code and each trust intended to qualify under
\nSection 501(a) of the Code has either received a favorable determination,
\nopinion, notification or advisory letter from the IRS with respect to each such
\nParent Employee Plan as to its qualified status under the Code, including all
\namendments to the Code effected by the Tax Reform Act of 1986 and subsequent
\nlegislation, or has remaining a period of time under applicable Treasury
\nregulations or IRS pronouncements in which to apply for such a letter and make
\nany amendments necessary to obtain a favorable determination as to the qualified
\nstatus of each such Parent Employee Plan; (iii) no “prohibited transaction”,
\nwithin the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
\nand not otherwise exempt under Section 4975 of the Code or Section 408 of ERISA
\n(or any administrative class exemption issued thereunder), has occurred with
\nrespect to any Parent Employee Plan; (iv) there are no actions, suits or claims
\npending, or, to the knowledge of the Parent, threatened or reasonably
\nanticipated (other than routine claims for benefits) against any Parent Employee
\nPlan or against the assets of any Parent Employee Plan; (v) each Parent Employee
\nPlan (other than any stock option plan) can be amended, terminated or otherwise
\ndiscontinued after the Effective Time, without material liability to the Parent,
\nthe Parent or any of its Related Parties (other than ordinary administration
\nexpenses); (vi) there are no audits, inquiries or proceedings pending or, to the
\nknowledge of the Parent or any Related Parties, threatened by the IRS or DOL
\nwith respect to any Parent Employee Plan; and (vii) neither the Parent nor any
\nRelated Party is subject to any penalty or tax with respect to any Parent
\nEmployee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the
\nCode.<\/p>\n
(d) Pension Plan. Neither the Parent nor any Related Party has ever
\n ————
\nmaintained, established, sponsored, participated in, or contributed to, any
\nPension Plan which is subject to Title IV of ERISA or Section 412 of the Code.<\/p>\n
(e) Collectively Bargained, Multiemployer and Multiple Employer
\n ———————————————————–
\nPlans. At no time has the Parent or any Related Party contributed to or been
\n—–
\nobligated to contribute to any <\/p>\n
-35-<\/p>\n
Multiemployer Plan. Neither the Parent, nor any Related Party has at any time
\never maintained, established, sponsored, participated in, or contributed to any
\nmultiple employer plan, or to any plan described in Section 413 of the Code.<\/p>\n
(f) No Post-Employment Obligations. Except as set forth on the
\n ——————————
\nParent Schedule, no Parent Employee Plan provides, or reflects or represents any
\nliability to provide retiree health to any person for any reason, except as may
\nbe required by COBRA or other applicable statute, and the Parent has never
\nrepresented, promised or contracted (whether in oral or written form) to any
\nParent Group Employee (either individually or to Parent Group Employees as a
\ngroup) or any other person that such Parent Group Employee(s) or other person
\nwould be provided with retiree health, except to the extent required by statute.<\/p>\n
(g) Health Care Compliance. Neither the Parent nor any Related
\n ———————-
\nParty has, prior to the Effective Time and in any material respect, violated any
\nof the health care continuation requirements of COBRA, the requirements of FMLA,
\nthe requirements of the Health Insurance Portability and Accountability Act of
\n1996, the requirements of the Women’s Health and Cancer Rights Act of 1998, the
\nrequirements of the Newborns’ and Mothers’ Health Protection Act of 1996, or any
\namendment to each such act, or any similar provisions of state law applicable to
\nits Parent Group Employees.<\/p>\n
(h) Effect of Transaction.
\n ——————— <\/p>\n
(i) Except as set forth on the Parent Schedule, the execution of
\nthis Agreement and the consummation of the transactions contemplated hereby will
\nnot (either alone or upon the occurrence of any additional or subsequent events)
\nconstitute an event under any Parent Employee Plan, Employment Agreement, trust
\nor loan that will or may result in any payment (whether of severance pay or
\notherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
\nincrease in benefits or obligation to fund benefits with respect to any Parent
\nGroup Employee.<\/p>\n
(ii) Except as set forth on the Parent Schedule, no payment or
\nbenefit which will or may be made by the Parent or its Related Parties with
\nrespect to any Parent Group Employee will be characterized as a “parachute
\npayment”, within the meaning of Section 280G(b)(2) of the Code.<\/p>\n
(i) Employment Matters. The Parent: (i) is in compliance in all
\n ——————
\nrespects with all applicable foreign, federal, state and local laws, rules and
\nregulations respecting employment, employment practices, terms and conditions of
\nemployment and wages and hours, in each case, with respect to Parent Group
\nEmployees; (ii) has withheld and reported all amounts required by law or by
\nagreement to be withheld and reported with respect to wages, salaries and other
\npayments to Parent Group Employees; (iii) is not liable for any arrears of wages
\nor any taxes or any penalty for failure to comply with any of the foregoing; and
\n(iv) is not liable for any payment to any trust or other fund governed by or
\nmaintained by or on behalf of any governmental authority, with respect to
\nunemployment compensation benefits, social security or other benefits or
\nobligations for Parent Group Employees (other than routine payments to be made
\nin the normal course of business and <\/p>\n
-36-<\/p>\n
consistent with past practice). There are no pending, threatened or reasonably
\nanticipated claims or actions against the Parent under any worker’s compensation
\npolicy or long-term disability policy.<\/p>\n
(j) Labor. No work stoppage or labor strike against the Parent is
\n —–
\npending, threatened or reasonably anticipated. The Parent does not know of any
\nactivities or proceedings of any labor union to organize any Parent Group
\nEmployees. Except as set forth on the Parent Schedule, there are no actions,
\nsuits, claims, labor disputes or grievances pending, or, to the knowledge of the
\nParent, threatened or reasonably anticipated relating to any labor, safety or
\ndiscrimination matters involving any Parent Group Employee, including, without
\nlimitation, charges of unfair labor practices or discrimination complaints,
\nwhich, if adversely determined, would, individually or in the aggregate, result
\nin any material liability to the Parent. Neither the Parent nor any of its
\nsubsidiaries has engaged in any unfair labor practices within the meaning of the
\nNational Labor Relations Act. Except as set forth on the Parent Schedule, the
\nParent is not presently, nor has it been in the past, a party to, or bound by,
\nany collective bargaining agreement or union contract with respect to Parent
\nGroup Employees and no collective bargaining agreement is being negotiated by
\nthe Parent.<\/p>\n
(k) International Employee Plan. The Parent does not now, nor has
\n —————————
\nit ever had the obligation to, maintain, establish, sponsor, participate in, or
\ncontribute to any International Employee Plan.<\/p>\n
No Interference or Conflict. To the Parent’s knowledge, no shareholder,
\n —————————
\nofficer, employee or consultant of the Parent is obligated under any contract or
\nagreement subject to any judgment, decree or order of any court or
\nadministrative agency that would interfere with such person’s efforts to promote
\nthe interests of the Parent or that would interfere with the Parent’s business.
\nNeither the execution nor delivery of this Agreement, nor the carrying on of the
\nParent’s business as presently conducted nor any activity of such officers,
\ndirectors, employees or consultants in connection with the carrying on of the
\nParent’s business as presently conducted will, to the Parent’s knowledge,
\nconflict with or result in a breach of the terms, conditions or provisions of,
\nor constitute a default under, any contract or agreement under which any of such
\nofficers, directors, employees or consultants is now bound.<\/p>\n
3.22 Compliance with Legal Requirements. The Parent has complied in all
\n ———————————-
\nmaterial respects with, is not in violation of, and has not received any notices
\nof violation with respect to, any foreign, federal, state or local statute, law
\nor regulation.<\/p>\n
3.23 Insurance. The Parent Schedule sets forth a list of all insurance
\n ———
\npolicies and fidelity bonds covering the assets, business, equipment,
\nproperties, operations, employees, officers and directors of the Parent or any
\naffiliate. There is no claim by the Parent or any affiliate pending under any of
\nsuch policies or bonds as to which coverage has been questioned, denied or
\ndisputed by the underwriters of such policies or bonds. All premiums due and
\npayable under all such policies and bonds have been paid, and the Parent and its
\naffiliates are otherwise in material compliance with the terms of such policies
\nand bonds (or other policies and bonds providing substantially similar insurance
\ncoverage). The Parent has no knowledge of threatened termination of, or premium
\nincrease with respect to, any of such policies.<\/p>\n
-37-<\/p>\n
3.24 Product Warranty. All products and equipment manufactured, sold,
\n —————-
\nleased or delivered by the Parent and all services rendered by the Parent have
\nbeen in material conformity with all applicable contractual commitments and all
\nexpress and implied warranties, and the Parent does not have any liability for
\nreplacement or repair thereof or other damages in connection therewith in excess
\nof any warranty reserve established with respect thereto and included on the
\nCurrent Balance Sheet. Except as set forth on the Parent Schedule, no products
\nor equipment manufactured, sold, leased or delivered by the Parent and no
\nservices rendered by the Parent are subject to any guaranty, warranty or other
\nindemnity beyond the applicable standard terms and conditions of such sale,
\nlease or service (including as a result of any course of conduct between the
\nParent and any third party or as a result of any statements in any of the
\nParent’s product or promotional literature). The Parent Schedule includes copies
\nof such standard terms and conditions of sale, lease and service for the Parent
\n(containing applicable guaranty, warranty and indemnity provisions). The Parent
\nhas not been notified in writing of any claims for (and the Parent has no
\nknowledge of any threatened claims for) any extraordinary product returns,
\nwarranty obligations or product services relating to any of its products or
\nservices.<\/p>\n
3.25 Product Liability; Product Recalls, etc. To the Parent’s knowledge,
\n —————————————
\nexcept as set forth on the Parent Schedule, the Parent does not have any
\nliability arising out of any injury to individuals or property as a result of
\nthe ownership, possession or use of any products or equipment manufactured,
\nsold, leased or delivered by the Parent or with respect to any services rendered
\nby the Parent. Except as set forth on the Parent Schedule, there have been no
\nproduct or equipment recalls, withdrawals or seizures with respect to any
\nproducts or equipment manufactured, sold, leased or delivered by the Parent or
\nwith respect to any services rendered by the Parent.<\/p>\n
3.26 Books and Records. The minute books of the Parent contain accurate
\n —————–
\nand complete records of all meetings held of, and material corporate action
\ntaken by, the shareholders and the Board of Directors. No material action has
\nbeen taken by a committee of the Board of Directors of the Parent for which
\nminutes have not been prepared and are not contained in such minute books. As of
\nthe Closing, no meeting of the Boards of Directors or the shareholders will have
\nbeen held for which minutes have not been prepared and are not contained in such
\nminute books. At the Closing, all of the minute books will be in the possession
\nof the Parent.<\/p>\n
3.27 Customers and Suppliers. Except as set forth on the Parent Schedule,
\n ———————–
\nthe Parent has not received any notice that any of customers of the Parent has
\nceased, or will cease, to use the products, equipment, goods or services of the
\nParent, or has substantially reduced, or will substantially reduce, the use of
\nsuch products, equipment, goods or services at any time.<\/p>\n
3.28 Complete Copies of Materials. The Parent has delivered or made
\n —————————-
\navailable true and complete copies of each document (or summaries of same) that
\nhas been requested by Company or its counsel.<\/p>\n
3.29 Representations Complete. Neither any of the representations or
\n ————————
\nwarranties made by the Parent (as modified by the Parent Schedule) in this
\nAgreement, nor any statements made in any exhibit, schedule or certificate
\nfurnished by the Parent pursuant to this Agreement taken as a whole contains,
\nany untrue statement of a material fact, or omits to state any material fact
\nnecessary in<\/p>\n
-38-<\/p>\n
order to make the statements contained herein or therein, in the light of the
\ncircumstances under which made, not misleading. The information regarding the
\nParent furnished in any documents mailed, delivered or otherwise furnished to
\nShareholders in connection with the solicitation of their consent to this
\nAgreement and the Merger, will not contain, at or prior to the Effective Time,
\nany untrue statement of a material fact and will not omit to state any material
\nfact necessary in order to make the statements made therein, in light of the
\ncircumstances under which made, not misleading with respect to the Parent.<\/p>\n
ARTICLE IV<\/p>\n
CONDUCT PRIOR TO THE EFFECTIVE TIME<\/p>\n
4.1 Conduct of Business of the Company. During the period from the
\n ———————————-
\ndate of this Agreement and continuing until the earlier of the termination of
\nthis Agreement or the Effective Time, the Company agrees, except to the extent
\nthat Parent shall otherwise consent in writing, to use all reasonable efforts to
\ncarry on the Company’s business in the usual, regular and ordinary course in
\nsubstantially the same manner as heretofore conducted, to pay the debts and
\nTaxes of the Company when due, to pay or perform other obligations when due,
\nand, to the extent consistent with such business, use commercially reasonable
\nefforts consistent with past practice and policies to preserve intact the
\nCompany’s present business organizations, keep available the services of the
\nCompany’s present officers and key employees and preserve the Company’s
\nrelationships with customers, suppliers, distributors, licensors, licensees, and
\nothers having business dealings with it, all with the goal of preserving
\nunimpaired the Company’s goodwill and ongoing business at the Effective Time.
\nThe Company shall promptly notify Parent of any event or occurrence or emergency
\nnot in the ordinary course of business of the Company and any material event
\ninvolving the Company. From and after the date hereof, the Company will use
\ncommercially reasonable efforts to collect any and all appropriate and necessary
\nreseller certificates on a timely basis from any reseller to whom sales are
\nmade. Except as expressly contemplated by this Agreement as set forth on the
\nCompany Schedule hereto, the Company shall not without the prior written consent
\nof Parent:<\/p>\n
(a) make any expenditures or enter into (i) any purchase commitment
\nexceeding USD $25,000 individually or USD $50,000 in the aggregate or (ii) any
\nother commitment or transaction of the type described in Section 2.11 hereof
\nwhich is outside the ordinary course of business;<\/p>\n
(b) except in the ordinary course of business or as previously
\ndisclosed in writing to Parent, (i) sell, license or transfer to any person or
\nentity any rights to any of the Company’s Intellectual Property Rights or enter
\ninto any agreement with respect to any of the Company’s Intellectual Property
\nRights with any third party or with respect to any Intellectual Property Right
\nof any third party, (ii) buy or license any Intellectual Property Rights or
\nenter into any agreement with respect to the Intellectual Property Rights of any
\nthird party, (iii) enter into any agreement with respect to the development of
\nany Intellectual Property Rights with a third party, (iv) or change <\/p>\n
-39-<\/p>\n
pricing or royalties charged by the Company to its customers or licensees, or
\nthe pricing or royalties set or charged by third parties who have licensed
\nIntellectual Property Rights to the Company;<\/p>\n
(c) enter into or amend any Contract pursuant to which any other
\nparty is granted marketing, distribution, development or similar rights of any
\ntype or scope with respect to any products or technology of the Company, except
\nin the ordinary course of business consistent with past practice;<\/p>\n
(d) amend, modify or terminate (or agree to do so), except in the
\nordinary course of business, or violate the terms of, any of the Contracts;<\/p>\n
(e) commence or settle any litigation;<\/p>\n
(f) declare, set aside or pay any dividends on or make any other
\ndistributions (whether in cash, stock or property) in respect of any Company
\nCapital Stock, or split, combine or reclassify any Company Capital Stock or
\nissue or authorize the issuance of any other securities in respect of, in lieu
\nof or in substitution for, shares of Company Capital Stock, or repurchase,
\nredeem or otherwise acquire, directly or indirectly, any shares of Company
\nCapital Stock (or options, warrants or other rights exercisable therefor) except
\nfor (i) repurchases of Company Capital Stock upon the termination of service of
\nany service providers of the Company in accordance with the standard terms set
\nforth in the agreements governing such repurchases, all of which agreements have
\nbeen provided or made available to Parent, and (ii) the exercise of Company
\nWarrants;<\/p>\n
(g) issue, grant, deliver or sell or authorize or propose the
\nissuance, grant, delivery or sale of, or purchase or propose the purchase of,
\nany shares of Company Capital Stock or securities convertible into, or
\nsubscriptions, rights, warrants or options to acquire, or other agreements or
\ncommitments of any character obligating it to issue or purchase any such shares
\nor other convertible securities, except for the exercise of stock options or
\nCompany Warrants, or accelerate the vesting of any outstanding option or other
\nsecurity; provided, that this restriction shall not apply to stock option grants
\nto new employees and any other stock option grants mutually agreeable to the
\nParent and the Company;<\/p>\n
(h) cause or permit any amendments to the Organizational Documents of
\nthe Company;<\/p>\n
(i) acquire or agree to acquire by merging or consolidating with, or
\nby purchasing any assets or equity securities of, or by any other manner, any
\nbusiness or any corporation, partnership, association or other business
\norganization or division thereof, or otherwise acquire or agree to acquire any
\nassets which are material, individually or in the aggregate, to the Company’s
\nbusiness;<\/p>\n
(j) sell, lease, license or otherwise dispose of any of its
\nproperties or assets, except in the ordinary course of business and consistent
\nwith past practices;<\/p>\n
-40-<\/p>\n
(k) incur any indebtedness or guarantee any indebtedness or issue or
\nsell any debt securities or guarantee any debt securities of others except for
\nborrowings under existing credit facilities;<\/p>\n
(l) grant any loans to others or purchase debt securities of others
\nor amend the terms of any outstanding loan agreement;<\/p>\n
(m) grant any severance or termination pay to any director or
\nofficer, or to any other employee, except for obligations under existing
\nagreements which have been previously delivered to Parent’s legal counsel;<\/p>\n
(n) adopt or amend any employee benefit plan, or enter into any
\nemployment contract, pay or agree to pay any special bonus or special
\nremuneration to any director or employee, or increase the salaries or wage rates
\nof its employees, provided that this restriction shall not apply to salary
\nadjustments in the ordinary course of business, or as mutually agreed between
\nParent and the Company;<\/p>\n
(o) revalue any of its assets, including without limitation writing
\ndown the value of inventory or writing off notes or Accounts Receivable other
\nthan in the ordinary course of business;<\/p>\n
(p) pay, waive, discharge or satisfy, in an amount in excess of USD
\n$25,000 in any one case, or USD $50,000 in the aggregate, any claim, liability
\nor obligation (absolute, accrued, asserted or unasserted, contingent or
\notherwise), other than the payment, discharge or satisfaction of liabilities
\nincurred in the ordinary course of business or the repayment of shareholder
\nloans pursuant to Section 5.16;<\/p>\n
(q) make or change any material election in respect of Taxes, adopt
\nor change any accounting method in respect of Taxes, enter into any closing
\nagreement, settle any claim or assessment in respect of Taxes, or consent to any
\nextension or waiver of the limitation period applicable to any claim or
\nassessment in respect of Taxes;<\/p>\n
(r) enter into any strategic alliance or joint marketing arrangement
\nor agreement;<\/p>\n
(s) hire any employee, except to replace a terminated employee or
\nexcept as reasonably necessary consistent with the needs of the business of the
\nCompany; not terminate the employment of any employee other than for “cause”; or<\/p>\n
(t) take, or agree in writing or otherwise to take, any of the
\nactions described in Sections 4.1(a) through 4.1(s) hereof, or any other action
\nthat would prevent the Company from performing or cause the Company not to
\nperform its covenants hereunder.<\/p>\n
4.2 Conduct of Business of the Parent. During the period from the date of
\n ———————————
\nthis Agreement and continuing until the earlier of the termination of this
\nAgreement or the Effective Time, the Parent agrees, except to the extent that
\nCompany shall otherwise consent in writing, to use all reasonable efforts to
\ncarry on the Parent’s business in the usual, regular and ordinary course in<\/p>\n
-41-<\/p>\n
substantially the same manner as heretofore conducted, to pay the debts and
\nTaxes of the Parent when due, to pay or perform other obligations when due, and,
\nto the extent consistent with such business, use commercially reasonable efforts
\nconsistent with past practice and policies to preserve intact the Parent’s
\npresent business organizations, keep available the services of the Parent’s
\npresent officers and key employees and preserve the Parent’s relationships with
\ncustomers, suppliers, distributors, licensors, licensees, and others having
\nbusiness dealings with it, all with the goal of preserving unimpaired the
\nParent’s goodwill and ongoing business at the Effective Time. The Parent shall
\npromptly notify Company of any event or occurrence or emergency not in the
\nordinary course of business of the Parent and any material event involving the
\nParent. From and after the date hereof, the Parent will use commercially
\nreasonable efforts to collect any and all appropriate and necessary reseller
\ncertificates on a timely basis from any reseller to whom sales are made. Except
\nas expressly contemplated by this Agreement as set forth on the Parent Schedule
\nhereto, the Parent shall not without the prior written consent of Company:<\/p>\n
(a) declare, set aside or pay any dividends on or make any other
\ndistributions (whether in cash, stock or property) in respect of any Parent
\nCapital Stock, or split, combine or reclassify any Parent Capital Stock or issue
\nor authorize the issuance of any other securities in respect of, in lieu of or
\nin substitution for, shares of Parent Capital Stock, or repurchase, redeem or
\notherwise acquire, directly or indirectly, any shares of Parent Capital Stock
\n(or options, warrants or other rights exercisable therefor) except for (i)
\nrepurchases of Parent Capital Stock upon the termination of service of any
\nservice providers of the Parent in accordance with the standard terms set forth
\nin the agreements governing such repurchases, all of which agreements have been
\nprovided or made available to Company, and (ii) the exercise of warrants;<\/p>\n
(b) issue, grant, deliver or sell or authorize or propose the
\nissuance, grant, delivery or sale of, or purchase or propose the purchase of,
\nany shares of Parent Capital Stock or securities convertible into, or
\nsubscriptions, rights, warrants or options to acquire, or other agreements or
\ncommitments of any character obligating it to issue or purchase any such shares
\nor other convertible securities, except for the exercise of stock options or
\nwarrants, or accelerate the vesting of any outstanding option or other security;
\nprovided that this restriction shall not apply to stock option grants to new
\nemployees;<\/p>\n
(c) cause or permit any amendments to the Organizational Documents of
\nthe Parent unless appropriately disclosed to the Shareholder Representative;<\/p>\n
(d) acquire or agree to acquire by merging or consolidating with, or
\nby purchasing any assets or equity securities of, or by any other manner, any
\nbusiness or any corporation, partnership, association or other business
\norganization or division thereof, or otherwise acquire or agree to acquire any
\nassets which are material, individually or in the aggregate, to the Parent’s
\nbusiness;<\/p>\n
(e) sell, lease, license or otherwise dispose of any of its
\nproperties or assets, except in the ordinary course of business and consistent
\nwith past practices;<\/p>\n
-42-<\/p>\n
(f) grant any severance or termination pay to any director or
\nofficer, or to any other employee, except for obligations under existing
\nagreements which have been previously made available to Company’s legal counsel;<\/p>\n
(g) adopt or amend any employee benefit plan, or enter into any
\nemployment contract, pay or agree to pay any special bonus or special
\nremuneration to any director or employee, or increase the salaries or wage rates
\nof its employees provided that this restriction shall not apply to adjustments
\nin salary in the normal course of business;<\/p>\n
(h) revalue any of its assets, including without limitation writing
\ndown the value of inventory or writing off notes or Accounts Receivable other
\nthan in the ordinary course of business;<\/p>\n
(i) take, or agree in writing or otherwise to take, any of the
\nactions described in Sections 4.2(a) through 4.2(h) hereof, or any other action
\nthat would prevent the Parent from performing or cause the Parent not to perform
\nits covenants hereunder.<\/p>\n
4.3 No Solicitation. Until the earlier of (i) the Effective Time, or
\n —————
\n(ii) the date of termination of this Agreement pursuant to the provisions of
\nSection 8.1 hereof, the Company shall not (nor shall the Company permit, as
\napplicable, any of the Company’s officers, directors, employees, agents, or
\nrepresentatives to), directly or indirectly, take any of the following actions
\nwith any party other than Parent and its designees: (a) solicit, encourage,
\ninitiate or participate in any inquiry, negotiations or discussions, or enter
\ninto any agreement, with respect to any offer or proposal to acquire all or any
\nmaterial part of the Company’s business, properties or technologies, or any
\nmaterial amount of the Company Capital Stock (whether or not outstanding),
\nwhether by merger, purchase of assets, tender offer or otherwise, or effect any
\nsuch transaction, (b) disclose any information not customarily disclosed to any
\nthird party concerning the Company’s business, technologies or properties, or
\nafford to any person or entity access to its properties, technologies, books or
\nrecords, not customarily afforded such access, (c) assist or cooperate with any
\nthird party to make any proposal to purchase all or any material part of the
\nCompany Capital Stock or assets of the Company other than inventory in the
\nordinary course of business, or (d) enter into any agreement with any third
\nparty providing for the acquisition of the Company, whether by merger, purchase
\nof assets, tender offer or otherwise. In the event that the Company or any of
\nthe Company’s affiliates shall receive, prior to the Effective Time or the
\ntermination of this Agreement, any offer, proposal, or request, directly or
\nindirectly, of the type referenced in clause (a) or (c) above, or any request
\nfor disclosure or access pursuant to clause (b) above, the Company shall
\nimmediately notify Parent thereof, including information as to the identity of
\nthe offeror or the party making any such offer or proposal and the specific
\nterms of such offer or proposal, as the case may be, and such other information
\nrelated thereto as Parent may reasonably request. The parties hereto agree that
\nirreparable damage would occur in the event that the provisions of this Section
\n4.3 were not performed in accordance with their specific terms or were otherwise
\nbreached. It is accordingly agreed by the parties hereto that Parent shall be
\nentitled to seek an injunction or injunctions to prevent breaches of the
\nprovisions of this Section 4.3 and to enforce specifically the terms and
\nprovisions hereof in any court of the United States or any state having
\njurisdiction, this being in addition to any other remedy to which Parent may be
\nentitled at law or in equity.<\/p>\n
-43-<\/p>\n
ARTICLE V<\/p>\n
ADDITIONAL AGREEMENTS<\/p>\n
5.1 Preparation of Permit Application, Hearing Request, Hearing Notice and
\n ———————————————————————-
\nInformation Statement. As promptly as practicable after execution of this
\n———————
\nAgreement, Parent shall prepare and file with the California Commissioner of
\nCorporations the documents required by the California Corporate Securities Law
\nof 1968, as amended (the “CCSL”), including, but not limited to, any required
\n“Permit Application,” “Hearing Request,” and “Hearing Notice”, pursuant to
\nSections 25121 and 25142 of the CCSL (collectively, the “Notice Materials”), in
\nconnection with the Merger, in order to perfect the exemption from registration
\nprovided by Section 3(a)(10) of the 1933 Act. Each of Parent and the Company
\nshall use reasonable efforts to have the Permit Application, Hearing Request and
\nHearing Notice declared effective under the CCSL as promptly as practicable
\nafter such filing. In addition, Parent and the Company will prepare and the
\nCompany will distribute an information statement or proxy statement (the
\n“Information Statement”) along with the Notice Materials, as may be required by
\nCalifornia Law, at the earliest practicable date to submit this Agreement, the
\nMerger and related matters for the consideration and approval of the Company’s
\nShareholders, which approval will be recommended by the Board of Directors and
\nmanagement of the Company. Such Information Statement will contain information
\nand will be solicited in compliance with applicable law. Parent and the Company
\nwill promptly provide all information relating to their respective business and
\noperations necessary for inclusion in the Notice Materials to satisfy all
\nrequirements of applicable state and federal securities laws. Each of Parent and
\nthe Company shall be solely responsible for any statement, information or
\nomission in the Notice Materials relating to it or its affiliates based upon
\nwritten information furnished by it.<\/p>\n
5.2 Shareholder Approval. Upon compliance with applicable federal and
\n ——————–
\nstate securities laws, the Company shall promptly submit this Agreement and the
\ntransactions contemplated hereby to the Shareholders for approval and adoption
\nas provided by California Law and the Organizational Documents of the Company.
\nThe Company shall use its commercially reasonable efforts to obtain the consent
\nof the Shareholders sufficient to approve the Merger and this Agreement and to
\nenable the Closing to occur as promptly as practicable. The materials to be
\nsubmitted to the Shareholders in connection with the solicitation of their
\napproval of the Merger and this Agreement shall be subject to review and
\napproval by Parent and shall include information regarding the Company, Parent,
\nthe terms of the Merger and this Agreement and the recommendation of the Board
\nof Directors of the Company in favor of the Merger and this Agreement.<\/p>\n
5.3 Access to Information. Each party shall afford the other party and
\n ———————
\nits accountants, counsel and other representatives, reasonable access during the
\nperiod prior to the Effective Time to (i) all of the party’s properties, books,
\ncontracts, commitments and records, (ii) all other information concerning the
\nbusiness, properties and personnel of the party as the requesting party may
\nreasonably request, and (iii) all employees of the party. Each party agrees to
\nprovide to the other party and its accountants, counsel and other
\nrepresentatives copies of internal financial statements (including Returns and
\nsupporting documentation) promptly upon request. No information or knowledge
\nobtained in any investigation pursuant to this Section 5.2 shall affect or be
\ndeemed to modify any<\/p>\n
-44-<\/p>\n
representation or warranty contained herein or the conditions to the obligations
\nof the parties to consummate the Merger in accordance with the terms and
\nprovisions hereof.<\/p>\n
5.4 Confidentiality. Each of the parties hereto hereby agrees that the
\n —————
\ninformation obtained in any investigation pursuant to Section 5.2 hereof, or
\npursuant to the negotiation and execution of this Agreement or the effectuation
\nof the transactions contemplated hereby, shall be governed by the terms of the
\nConfidentiality Agreement.<\/p>\n
5.5 Expenses. Whether or not the Merger is consummated, all fees and
\n ——–
\nexpenses incurred in connection with the Merger including, without limitation,
\nall legal, accounting, financial advisory, consulting and all other fees and
\nexpenses of third parties (“Third Party Expenses”) incurred by a party in
\n ——————–
\nconnection with the negotiation and effectuation of the terms and conditions of
\nthis Agreement and the transactions contemplated hereby, shall be the obligation
\nof the respective party incurring such fees and expenses. Upon consummation of
\nthe Merger, the Surviving Corporation and\/or Parent shall promptly pay, on
\nbehalf of the Company, any Third Party Expenses of the Company in an amount up
\nto $250,000 that have not been paid before the Effective Time.<\/p>\n
5.6 Public Disclosure. Unless otherwise required by law, prior to the
\n —————–
\nEffective Time, no disclosure (whether or not in response to an inquiry) shall
\nbe made by any party hereto regarding the subject matter of this Agreement
\nunless approved by the other party hereto prior to release.<\/p>\n
5.7 Consents. The Company shall use commercially reasonable efforts to
\n ——–
\nobtain the consents, waivers, assignments and approvals under any of the
\nContracts as may be required in connection with the Merger so as to preserve all
\nrights of, and benefits to, the Company thereunder.<\/p>\n
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
\n ——————
\nthis Agreement, each of the parties hereto shall use commercially reasonable
\nefforts to take promptly, or cause to be taken, all actions, and to do promptly,
\nor cause to be done, all things necessary, proper or advisable under applicable
\nlaws and regulations to consummate and make effective the transactions
\ncontemplated hereby, to obtain all necessary waivers, consents and approvals and
\nto effect all necessary registrations and filings and to remove any injunctions
\nor other impediments or delays, legal or otherwise, in order to consummate and
\nmake effective the transactions contemplated by this Agreement for the purpose
\nof securing to the parties hereto the benefits contemplated by this Agreement;
\nprovided that Parent shall not be required to agree to any divestiture by Parent
\nor the Company or any of Parent’s subsidiaries or affiliates of shares of
\ncapital stock or of any business, assets or property of Parent or its
\nsubsidiaries or affiliates or of the Company or its affiliates, or the
\nimposition of any material limitation on the ability of any of them to conduct
\ntheir businesses or to own or exercise control of such assets, properties and
\nstock.<\/p>\n
5.9 Securities Laws Compliance. Parent shall take such steps as may be
\n ————————–
\nnecessary to comply with the securities and blue sky laws of all jurisdictions
\nwhich are applicable to the issuance of the Merger Consideration and the
\nassumption of stock options and warrants of the Company as contemplated by this
\nAgreement. The Company shall use its reasonable efforts to assist Parent as may
\nbe necessary to comply with the securities and blue sky laws of all
\njurisdictions which are applicable in connection with the issuance of the Merger
\nConsideration in connection with the<\/p>\n
-45-<\/p>\n
Merger, including but not limited to using its reasonable efforts to cause each
\nShareholder to execute and deliver to Parent an investor suitability
\nquestionnaire or other form deemed necessary by Parent.<\/p>\n
5.10 Notification of Certain Matters; Financial Statements.
\n —————————————————–<\/p>\n
(a) The Company shall give prompt notice to Parent of (i) any Action
\ninitiated by or against the Company or threatened against the Company, (ii) the
\noccurrence or non-occurrence of any event, the occurrence or non-occurrence of
\nwhich is likely to cause any representation or warranty of the Company contained
\nin this Agreement to be untrue or inaccurate at or prior to the Effective Time
\nand (iii) any failure of the Company to comply with or satisfy any covenant,
\ncondition or agreement to be complied with or satisfied by it hereunder in each
\ncase such that the conditions contained in Section 6.3(a) would not be
\nsatisfied; provided, however, that the delivery of any notice pursuant to this
\nSection 5.10 shall not (x) limit or otherwise affect any remedies available to
\nthe party receiving such notice or (y) constitute an acknowledgment or admission
\nof a breach of this Agreement by the Company. No disclosure by the Company
\npursuant to this Section 5.10, however, shall be deemed to amend or supplement
\nthe Company Schedule or prevent or cure any misrepresentations, breach of
\nwarranty or breach of covenant.<\/p>\n
(b) Parent shall give prompt notice to the Company of (i) any Action
\ninitiated by or against the Parent or threatened against the Parent, (ii) the
\noccurrence or non-occurrence of any event, the occurrence or non-occurrence of
\nwhich is likely to cause any representation or warranty of Parent contained in
\nthis Agreement to be untrue or inaccurate at or prior to the Effective Time and
\n(iii) any failure of Parent to comply with or satisfy any covenant, condition or
\nagreement to be complied with or satisfied by it hereunder in each case such
\nthat the conditions contained in Section 6.2(a) would not be satisfied;
\nprovided, however, that the delivery of any notice pursuant to this Section 5.10
\nshall not limit or otherwise affect any remedies available to the party
\nreceiving such notice or constitute an acknowledgment or admission of a breach
\nof this Agreement by Parent. No disclosure by Parent pursuant to this Section
\n5.10, however, shall be deemed to prevent or cure any misrepresentations, breach
\nof warranty or breach of covenant.<\/p>\n
(c) Each of the Company and Parent shall deliver to the other party,
\nas soon as practicable but in any event within forty-five (45) calendar days
\nafter the end of each monthly accounting period beginning with the month ended
\nApril 30, 2000 and ending with the monthly accounting period occurring before
\nthe earlier of the Closing Date or the termination of this Agreement in
\naccordance with its terms, an unaudited consolidated balance sheet and a
\nstatement of operations for that party, which financial statements shall be
\nprepared in the ordinary course of business, in accordance with the party’s
\nbooks and records and shall fairly present the consolidated financial position
\nof the party as of their respective dates and the results of the party’s
\noperations for the periods then ended.<\/p>\n
5.11 Additional Documents and Further Assurances. Each party hereto, at
\n ——————————————-
\nthe request of another party hereto, shall execute and deliver such other
\ninstruments and do and perform such other acts and things as may be necessary or
\ndesirable for effecting completely the consummation of this Agreement and the
\ntransactions contemplated hereby.<\/p>\n
-46-<\/p>\n
5.12 Notice to Holders of Company Options and Company Warrants. The
\n ———————————————————
\nCompany shall give notice of the transactions contemplated hereby to holders of
\nCompany Options and Company Warrants in accordance with the terms of such
\nCompany Options and Company Warrants or otherwise obtain the written waiver of
\nsuch notice obligations.<\/p>\n
5.13 Employee Plans and Benefit Arrangements. The Company and its
\n —————————————
\nAffiliates, as applicable, shall each terminate, effective as of the day
\nimmediately preceding the Effective Time: (i) any and all group severance,
\nseparation or salary continuation plans, programs, or arrangements, and (ii) any
\nand all 401(k) plans, unless Parent provides notice to the Company that such
\n401(k) plan(s) shall not be terminated. Parent shall receive from Company
\nevidence that Company’s and each Affiliate’s, as applicable, plan(s) and\/or
\nprogram(s) have been terminated pursuant to resolutions of each such entity’s
\nBoard of Directors (the form and substance of such resolutions shall be subject
\nto review and approval of Parent), effective as of the day immediately preceding
\nthe Effective Time. In the event that distribution or rollover of assets from
\nthe trust of a 401(k) plan which is terminated is reasonably anticipated to
\ntrigger liquidation charges, surrender charges, or other fees to be imposed upon
\nthe account of any participant or beneficiary of such terminated plan, or upon
\nthe Company or plan sponsor, then the Company shall take such actions as are
\nnecessary to reasonably estimate the amount of such charges and\/or fees and
\nprovide such estimate in writing to Parent prior to the Effective Time.<\/p>\n
5.14 Reorganization under Section 368(a) of the Code. None of the Company,
\n ———————————————–
\nParent or Merger Sub, nor any of their affiliates, shall engage in any action
\nthat could reasonably be expected to cause the Merger to fail to qualify as a
\n“reorganization” under Section 368(a) of the Code, whether or not otherwise
\npermitted by the provisions of this Agreement.<\/p>\n
5.15 Period of Employment. Each Company employee’s period of employment
\n ——————–
\nwith the Company will be fully credited for all purposes, including seniority,
\nbenefits and vesting of prior option grants, under any Parent Employee Plan.<\/p>\n
5.16 Shareholder Loans. On or before the Closing, the Company may repay
\n —————–
\nprincipal and accrued interest on loans (up to $900,000 of principal and accrued
\ninterest through the Closing Date) previously made by Reza Soliman-Noori to the
\nCompany, as disclosed in the Company Schedule. Parent and Surviving Corporation
\nshall assume such obligations and pay the remaining balance of such loans by
\nDecember 31, 2000.<\/p>\n
5.17 Registration on Form S-8. All Company Stock Options that are assumed
\n ————————
\nby Parent will be treated similarly to other LynuxWorks stock options with
\nrespect to registration of such shares on Form S-8 (including any Form S-3
\nresale prospectus included therein). If LynuxWorks becomes a public reporting
\ncompany, then in connection with the first Form S-8 registration statement that
\nLynuxWorks files, LynuxWorks agrees to include (if allowed by applicable SEC
\nrules and regulations) a Form S-3 resale prospectus registering the public
\nresale of shares acquired by former shareholders of the Company pursuant to the
\nexercise of Company Options, to the same extent as such a Form S-3 resale
\nprospectus is included for LynuxWorks employees.<\/p>\n
-47-<\/p>\n
5.18 Offer Letters. All of the employees listed on the Company Schedule
\n ————-
\nshall have received employment offer letters from the Parent.<\/p>\n
5.19 Visa Applications. Parent will continue to process certain H-1 visa
\n —————–
\nand permanent residency applications for individuals previously agreed upon
\nbetween the Company and Parent.<\/p>\n
5.20 “Market Stand-Off” Agreement. In connection with the initial public
\n —————————
\noffering of Parent, if requested by Parent and the managing underwriter of such
\noffering, and only to the same extent as executive officers and directors of the
\nParent, the Shareholders agree not to sell or otherwise transfer or dispose of
\nany Common Stock (or other securities) of Parent held by the Shareholders
\nwithout the prior written consent of Parent or such managing underwriter for
\nsuch period of time as may be requested by Parent or such managing underwriter
\n(not to exceed one hundred eighty (180) days after the effective date of such
\nregistration statement). The Shareholders agree to use their best efforts to
\ncause all employees of the Company who become employees of the Parent to enter
\ninto the same Market Stand-Off Agreement to the same extent as employees of the
\nParent. The employment offer letters contemplated by Section 5.18 will contain
\n7such a Market Stand-off Agreement.<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS TO THE MERGER<\/p>\n
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
\n ————————————————————
\nrespective obligations of the Company and Parent to effect the Merger shall be
\nsubject to the satisfaction at or prior to the Effective Time of the following
\nconditions:<\/p>\n
(a) No Injunctions or Restraints; Illegality. No temporary
\n —————————————-
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal restraint or prohibition
\npreventing the consummation of the Merger shall be in effect; provided, that
\nParent, Merger Sub and the Company have used reasonable efforts to remove such
\ninjunction, order, restraint or prohibition; nor shall any proceeding brought by
\na Governmental Entity, domestic or foreign, seeking any of the foregoing be
\npending; nor shall there be any action taken, or any statute, rule, regulation
\nor order enacted, entered, enforced or deemed applicable to the Merger, which
\nmakes the consummation of the Merger illegal.<\/p>\n
(b) Permit. The California Commissioner of Corporations shall have
\n ——
\nissued a permit declaring the Permit Application, Hearing Request, and Hearing
\nNotice effective with respect to the Merger.<\/p>\n
(c) Parent and the Company shall each have received written opinions
\nfrom their counsel, Wilson Sonsini Goodrich & Rosati, Professional Corporation,
\nand Fenwick & West LLP, respectively, in form and substance reasonably
\nsatisfactory to them, to the effect that the Merger will constitute a
\nreorganization within the meaning of Section 368(a) of the Code. The parties to
\nthis<\/p>\n
-48-<\/p>\n
Agreement agree to make reasonable representations as requested by such counsel
\nfor the purpose of rendering such opinions.<\/p>\n
6.2 Additional Conditions to Obligations of Company. The obligations of
\n ———————————————–
\nthe Company to consummate and effect this Agreement and the transactions
\ncontemplated hereby shall be subject to the satisfaction at or prior to the
\nEffective Time of each of the following conditions, any of which may be waived,
\nin writing, exclusively by the Company:<\/p>\n
(a) Representations, Warranties and Covenants. (i) The
\n —————————————–
\nrepresentations and warranties of Parent and Merger Sub in this Agreement shall
\nbe true and correct as of the date hereof and shall be true and correct in all
\nmaterial respects on and as of the Closing Date as though made on and as of the
\nClosing Date, except that, to the extent such representations and warranties
\naddress matters only as of a particular date, such representations and
\nwarranties shall, to such extent, be true and correct on and as of such
\nparticular date as if made on and as of such particular date, and (ii) Parent
\nshall have performed and complied with all covenants, obligations and conditions
\nof this Agreement required to be performed and complied with by it as of the
\nEffective Time.<\/p>\n
(b) Certificate of Parent. Company shall have been provided with a
\n ———————
\ncertificate executed on behalf of Parent by an authorized officer to the effect
\nthat, as of the Effective Time:<\/p>\n
(i) All representations and warranties of Parent and Merger
\nSub in this Agreement (other than the representations and warranties of Parent
\nand Merger Sub as of a specified date, which will be true and correct as of such
\ndate) shall be true and correct in all material respects on and as of the
\nEffective Time as though such representations and warranties were made on and as
\nof such time; and<\/p>\n
(ii) all covenants, obligations and conditions of this
\nAgreement to be performed by Parent on or before such date have been so
\nperformed.<\/p>\n
(iii) the condition set forth in Section 6.2(c) has been
\nsatisfied.<\/p>\n
(c) No Material Adverse Changes. There shall not have occurred any
\n —————————
\nchange in the business, assets, prospects, financial condition or results of
\noperations of Parent that would cause a Parent Material Adverse Effect.<\/p>\n
(d) Legal Opinion. The Company shall have received a legal opinion
\n ————-
\nfrom Wilson Sonsini Goodrich & Rosati, legal counsel to Parent, in the form
\nattached as Exhibit D hereto.
\n ——— <\/p>\n
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
\n —————————————————————–
\nThe obligations of Parent and Merger Sub to consummate and effect this Agreement
\nand the transactions contemplated hereby shall be subject to the satisfaction at
\nor prior to the Effective Time of each of the following conditions, any of which
\nmay be waived, in writing, exclusively by Parent:<\/p>\n
(a) Representations, Warranties and Covenants. (i) The
\n —————————————–
\nrepresentations and warranties of the Company in this Agreement shall be true
\nand correct as of the date hereof and shall be true and correct in all material
\nrespects on and as of the Closing Date as though made on and as of<\/p>\n
-49-<\/p>\n
the Closing Date, except that, to the extent such representations and warranties
\naddress matters only as of a particular date, such representations and
\nwarranties shall, to such extent, be true and correct on and as of such
\nparticular date as if made on and as of such particular date, and (ii) the
\nCompany shall have performed and complied with all covenants, obligations and
\nconditions of this Agreement required to be performed and complied with by it as
\nof the Effective Time.<\/p>\n
(b) Certificate of the Company. Parent shall have been provided
\n ————————–
\nwith a certificate executed on behalf of the Company by its President to the
\neffect that, as of the Effective Time:<\/p>\n
(i) All representations and warranties of the Company in this
\nAgreement (other than the representations and warranties of the Company as of a
\nspecified date, which will be true and correct as of such date) shall be true
\nand correct in all material respects on and as of the Effective Time as though
\nsuch representations and warranties were made on and as of such time;<\/p>\n
(ii) all covenants, obligations and conditions of this Agreement
\nto be performed by the Company on or before such date have been so performed;<\/p>\n
(iii) the conditions set forth in Sections 6.3(b), (d), (e), (f)
\nand (g) have been satisfied.<\/p>\n
(c) Employment and Non-Competition Agreements. Each of the persons
\n —————————————–
\nset forth on Schedule 6.3(c) hereto (collectively, the “Key Employees”) shall
\n ————-
\nhave executed and delivered to Parent an Employment and Non-Competition
\nAgreement in the form attached as Exhibit C hereto, each such Employment and
\n ———
\nNon-Competition Agreement shall be in full force and effect, and each of the Key
\nEmployees shall be employed by the Company immediately prior to the Effective
\nTime.<\/p>\n
(d) Employment Offers. Each Key Employee and eighty percent (80%)
\n —————–
\nof the other employees listed on the Company Schedule who shall have received an
\noffer of employment from Parent shall have accepted such offer of employment
\nfrom Parent on the terms and subject to the conditions set forth in such offer;
\nand each such person shall be employed by the Company immediately prior to the
\nEffective Time.<\/p>\n
(e) Third Party Consents. The consents, waivers, assignments and
\n ——————–
\n approvals listed on the Company Schedule hereto shall have been obtained.<\/p>\n
(f) Shareholder Approval; Dissenters’ Rights. Shareholders holding
\n ———————————-
\nat least ninety-five percent (95%) of the Company Capital Stock, including not
\nless than the requisite vote of outstanding shares of each series or class of
\nCompany Capital Stock necessary to approve this Agreement, the Merger and the
\ntransactions contemplated hereby and thereby, shall have approved this
\nAgreement, the Merger and the transactions contemplated hereby and thereby.<\/p>\n
(g) No Material Adverse Changes. There shall not have occurred any
\n —————————
\n change in the business, assets, prospects, financial condition or results of
\noperations of the Company that would cause a Company Material Adverse Effect.<\/p>\n
(h) Litigation. No Action shall have been initiated by or against
\n ———-
\nthe Company.<\/p>\n
-50-<\/p>\n
(i) Termination of 401(k) Plan. Parent shall be reasonably
\n ————————–
\nsatisfied that the Company has taken all steps necessary to terminate the
\nCompany’s 401(k) plan effective as of the day immediately preceding the Closing
\nDate.<\/p>\n
(j) Legal Opinion. Parent shall have received a legal opinion from
\n ————-
\nFenwick & West, LLP legal counsel to the Company, in the form attached as
\nExhibit E hereto.
\n———<\/p>\n
ARTICLE VII<\/p>\n
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW<\/p>\n
7.1 Survival of Representations, Warranties and Covenants. The
\n —————————————————–
\nrepresentations, warranties and covenants of the Company and of the Parent and
\nMerger Sub in this Agreement or in any instrument delivered pursuant hereto
\nshall terminate on the one (1) year anniversary of the Closing Date (the “Escrow
\n ——
\nTermination Date”).
\n——————<\/p>\n
7.2 Escrow Arrangements
\n ——————-<\/p>\n
(a) Escrow Fund. As security for the representations and warranties
\n ———–
\nmade by the Company in this Agreement at the Effective Time and without any act
\nof the Company, the Company will be deemed to have received and deposited with
\nFirstar Bank, N.A. (the “Escrow Agent”) the Escrow Amount issued in the name of
\n ————
\nthe Escrow Agent (plus any additional shares as may be issued upon any stock
\nsplit, stock dividend or recapitalization effected by Parent after the Effective
\nTime with respect to the Escrow Amount), such deposit to constitute an escrow
\nfund (the “Escrow Fund”) to be governed by the terms set forth herein. The
\n ———–
\nportion of the Escrow Amount contributed on behalf of each Shareholder shall be
\nin proportion to the Merger Consideration such Shareholder is otherwise entitled
\nto receive in the Merger by virtue of ownership of shares of Company Capital
\nStock issued and outstanding immediately prior to the Effective Time. The
\nEscrow Agent may execute this Agreement following the date hereof and prior to
\nthe Effective Time, and such latter execution shall not affect the binding
\nnature of this Agreement as of the date hereof among the signatories hereto.
\nThe Escrow Fund shall be the sole and exclusive remedy of Parent for all Losses
\nincurred by Parent. Notwithstanding the preceding sentence, nothing herein
\nshall limit the liability of the Company for any breach of any representation,
\nwarranty or covenant contained in this Agreement if the Merger does not close.
\nParent may not receive any shares from the Escrow Fund unless and until one or
\nmore Officer’s Certificates identifying Losses in excess of One Hundred and
\nFifty Thousand Dollars (USD $150,000) in the aggregate (the “Basket Amount”) has
\n ————-
\nor have been delivered to the Escrow Agent as provided in Section 7.2(d) hereof,
\nin which case Parent shall be entitled to recover all Losses so identified,
\nincluding without limitation the Basket Amount. If, as of the Escrow
\nTermination Date, no Loss or Losses have been identified which, in the
\naggregate, exceed the Basket Amount, then the Escrow Fund shall be released in
\nfull to the Shareholders.<\/p>\n
(b) Escrow Period; Distribution upon Termination of Escrow Period.
\n ————————————————————-
\nSubject to the following requirements, the Escrow Fund shall be in existence
\nimmediately following the <\/p>\n
-51-<\/p>\n
Effective Time and shall terminate at 5:00 p.m. (San Francisco Time) on the
\nEscrow Termination Date (the “Escrow Period”); provided, however, that the
\n ————-
\nEscrow Period shall not terminate with respect to any portion of the Escrow Fund
\nwhich, in the reasonable judgment of Parent, subject to the objection of the
\nShareholder Representative, is necessary to satisfy any then pending and
\nunsatisfied claims specified in any Officer’s Certificate timely delivered to
\nthe Escrow Agent prior to the termination of the Escrow Period with respect to
\nfacts and circumstances existing prior to the termination of such Escrow Period.
\nAs soon as all such claims have been resolved and all Third Party Expenses have
\nbeen paid pursuant to Section 5.4 hereof, the Escrow Agent shall deliver to the
\nShareholders the remaining portion of the Escrow Fund, if any, not required to
\nsatisfy such claims and Third Party Expenses. Deliveries of Escrow Amounts to
\nthe Shareholders shall be made in proportion to their respective contributions
\nto the Escrow Fund.<\/p>\n
(c) Protection of Escrow Fund.
\n ————————- <\/p>\n
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
\nduring the Escrow Period, shall treat such fund as a trust fund in accordance
\nwith the terms of this Agreement and not as the property of Parent and shall
\nhold and dispose of the Escrow Fund only in accordance with the terms hereof.<\/p>\n
(ii) Any shares of Parent Common Stock or other equity
\nsecurities issued or distributed by Parent (including shares issued upon a stock
\nsplit) (“New Shares”) in respect of Parent Common Stock in the Escrow Fund which
\n ———-
\nhave not been released from the Escrow Fund shall be added to the Escrow Fund
\nand become a part thereof. New Shares issued in respect of shares of Parent
\nCommon Stock which have been released from the Escrow Fund shall not be added to
\nthe Escrow Fund but shall be distributed to the record holders thereof. Cash
\ndividends on Parent Common Stock shall not be added to the Escrow Fund but shall
\nbe distributed to the record holders thereof.<\/p>\n
(iii) Each Shareholder shall have voting rights and the right
\nto distributions of cash dividends with respect to the shares of Parent Common
\nStock contributed to the Escrow Fund by such Shareholders (and on any voting
\nsecurities added to the Escrow Fund in respect of such shares of Parent Common
\nStock). Parent shall show the Parent Common Stock contributed to the Escrow Fund
\nas issued and outstanding on its balance sheet.<\/p>\n
(d) Claims Against the Escrow Fund. Upon receipt by the Escrow
\n ——————————
\nAgent of an Officer’s Certificate at any time on or before the last day of the
\nEscrow Period (but in all events within 60 days after Parent becomes aware that
\nit may have a claim for indemnity), the Escrow Agent shall, subject to the
\nprovision of Section 7.2(e) hereof, deliver to Parent out of the Escrow Fund as
\npromptly as possible, shares of Parent Common Stock held in the Escrow Fund in
\nan amount equal to the Losses specified in the Officer’s Certificate. For
\npurposes hereof, “Officer’s Certificate” shall mean a certificate signed by any
\n ———————
\nofficer of Parent: (A) stating that Parent has paid, incurred or properly
\naccrued or reasonably anticipates that it will have to pay, incur or accrue
\nLosses; (B) specifying in reasonable detail the individual items of Losses
\nincluded in the amount so stated, the date each such item was paid, incurred or
\nproperly accrued, or the basis for such anticipated liability, and the nature of
\nthe misrepresentation, breach of warranty or covenant to which such item<\/p>\n
-52-<\/p>\n
is related; (C) specifying whether the Losses are subject to the Basket Amount
\nas provided in Section 7.2(a) hereof; and (D) specifying the number of shares of
\nParent Common Stock to be delivered to Parent. For purposes of determining the
\nnumber of shares of Parent Common Stock to be delivered to Parent out of the
\nEscrow Fund as indemnity pursuant to Section 7.2(b) hereof and this Section, the
\nshares of Parent Common Stock shall be valued in good faith by the Board of
\nDirectors of Parent as of the date of the Officer’s Certificate. The Escrow
\nAgent may rely on the valuation of the Parent Common Stock by Parent. Parent and
\nthe Company shall use their best efforts to provide monthly notification to the
\nShareholder Representative of any known claims.<\/p>\n
(e) Objections to Claims. At the time of delivery of any Officer’s
\n ——————–
\nCertificate to the Escrow Agent, a duplicate copy of such certificate shall be
\ndelivered to the Shareholder Representative and for a period of thirty (30) days
\nafter such delivery, the Escrow Agent shall make no delivery to Parent of any
\nEscrow Amounts pursuant to Section 7.2(d) unless the Escrow Agent shall have
\nreceived written authorization from the Shareholder Representative to make such
\ndelivery. After the expiration of such thirty (30) day period, the Escrow Agent
\nshall make delivery of shares of Parent Common Stock from the Escrow Fund in
\naccordance with Section 7.2(d) hereof; provided, however, that no such delivery
\nmay be made if the Shareholder Representative shall object in a written
\nstatement to the claim made in the Officer’s Certificate, and such statement
\nshall contain specific bases upon which such objection is being made and shall
\nhave been delivered to the Escrow Agent prior to the expiration of such thirty
\n(30) day period.<\/p>\n
(f) Resolution of Conflicts; Arbitration.
\n ———————————— <\/p>\n
(i) In case the Shareholder Representative shall object in
\nwriting to any claim or claims made in any Officer’s Certificate, the
\nShareholder Representative and Parent shall attempt in good faith to agree upon
\nthe rights of the respective parties with respect to each of such claims. If the
\nShareholder Representative and Parent should so agree, a memorandum setting
\nforth such agreement shall be prepared and signed by Parent and the Shareholder
\nRepresentative and shall be furnished to the Escrow Agent. The Escrow Agent
\nshall be entitled to rely on any such memorandum and distribute shares of Parent
\nCommon Stock from the Escrow Fund in accordance with the terms thereof.<\/p>\n
(ii) If no such agreement can be reached after good faith
\nnegotiation, either Parent or the Shareholder Representative may demand
\narbitration of the matter unless the amount of the Loss is at issue in pending
\nlitigation with a third party, in which event arbitration shall not be commenced
\nuntil such amount is ascertained or both parties agree to arbitration, and in
\neither such event the matter shall be settled by arbitration conducted by one
\narbitrator mutually agreeable to Parent and the Shareholder Representative. In
\nthe event that within forty-five (45) days after submission of any dispute to
\narbitration, Parent and the Shareholder Representative cannot mutually agree on
\none arbitrator, Parent and the Shareholder Representative shall each select one
\narbitrator who has relevant experience and who is not affiliated with any party
\nhereto, and the two arbitrators so selected shall select a third arbitrator who
\nhas relevant experience and who is not affiliated with any party hereto. The
\narbitrator or arbitrators, as the case may be, shall set a limited time period
\nand establish procedures designed to reduce the cost and time for discovery
\nwhile allowing the parties an opportunity, adequate in the sole judgment of the
\narbitrator or majority of the three arbitrators, as the<\/p>\n
-53-<\/p>\n
case may be, to discover relevant information from the opposing parties about
\nthe subject matter of the dispute. The arbitrator or a majority of the three
\narbitrators, as the case may be, shall rule upon motions to compel or limit
\ndiscovery and shall have the authority to impose sanctions, including attorneys’
\nfees and costs, to the same extent as a competent court of law or equity, should
\nthe arbitrator or a majority of the three arbitrators, as the case may be,
\ndetermine that discovery was sought without substantial justification or that
\ndiscovery was refused or objected to without substantial justification. The
\ndecision of the arbitrator or a majority of the three arbitrators, as the case
\nmay be, as to the validity and amount of any claim in such Officer’s Certificate
\nshall be binding and conclusive upon the parties to this Agreement, and
\nnotwithstanding anything in Section 7.2(e) hereof, the Escrow Agent shall be
\nentitled to act in accordance with such decision and make or withhold delivery
\nof shares of Parent Common Stock out of the Escrow Fund in accordance therewith.
\nSuch decision shall be written and shall be supported by written findings of
\nfact and conclusions which shall set forth the award, judgment, decree or order
\nawarded by the arbitrator(s).<\/p>\n
(iii) Judgment upon any award rendered by the arbitrator(s) may
\nbe entered in any court having jurisdiction. Any such arbitration shall be held
\nin Santa Clara County, California, USA under the rules then in effect of the
\nAmerican Arbitration Association. The arbitrator(s) shall determine how all
\nexpenses relating to the arbitration shall be paid, including without
\nlimitation, the respective expenses of each party, the fees of each arbitrator
\nand the administrative fee of the American Arbitration Association.<\/p>\n
(g) Third-Party Claims. In the event Parent becomes aware of a
\n ——————
\nthird-party claim which Parent reasonably believes may result in a demand
\nagainst the Escrow Fund, Parent shall promptly notify the Shareholder
\nRepresentative of such claim, and the Shareholder Representative and the
\nShareholders of the Company shall be entitled, at their expense, to participate
\nin, but not to determine or conduct, the defense of such claim. Parent shall
\nhave the right in its sole discretion to conduct the defense of and settle any
\nsuch claim; provided, however, that except with the consent of the Shareholder
\nRepresentative, no settlement of any such claim with third-party claimants shall
\nbe determinative of the amount of any claim for Losses relating to such matter.
\nIn the event that the Shareholder Representative has consented to any such
\nsettlement, neither the Shareholder Representative nor the Shareholders shall
\nhave any power or authority to object under any provision of this Article VII to
\nthe amount of any claim by Parent against the Escrow Fund with respect to such
\nsettlement.<\/p>\n
(h) Fractional Shares. Fractional shares of Parent Common Stock
\n —————–
\nwill not be issued. Accordingly, each Officer’s Certificate shall round up
\nLosses so that an even number of shares can be issued.<\/p>\n
7.3 Shareholder Representative
\n ————————–<\/p>\n
(a) Concurrently with approving this Agreement and the Merger, the
\nShareholders shall appoint Reza Soliman-Noori as their agent and attorney-in-
\nfact, as the shareholder representative for and on behalf of the Shareholders
\n(the “Shareholder Representative”), to give and receive notices and
\n ————————–
\ncommunications, to object to such retention, to agree to, negotiate, enter into
\nsettlements and compromises of, and demand arbitration and comply with orders of
\ncourts and<\/p>\n
-54-<\/p>\n
awards of arbitrators with respect to such claims, and to take all other actions
\nthat are either (i) necessary or appropriate in the judgment of the Shareholder
\nRepresentative for the accomplishment of the foregoing or (ii) specifically
\nmandated by the terms of this Agreement. Such agency may be changed by the
\nShareholders from time to time upon not less than ten (10) days prior written
\nnotice to Parent; provided, however, that the Shareholder Representative may not
\nbe removed unless holders of a majority interest of the Escrow Fund agree to
\nsuch removal and to the identity of the substituted agent. The Shareholder
\nRepresentative may resign at any time upon written notice to Parent and the
\nShareholders. Any vacancy in the position of Shareholder Representative may be
\nfilled by the holders of a simple majority interest of the Escrow Fund. No bond
\nshall be required of the Shareholder Representative, and the Shareholder
\nRepresentative shall not receive compensation for its services. Notices or
\ncommunications to or from the Shareholder Representative shall constitute notice
\nto or from the Shareholders.<\/p>\n
(b) The Shareholder Representative shall not be liable for any act
\ndone or omitted hereunder as the Shareholder Representative while acting in good
\nfaith and in the exercise of reasonable judgment. The Shareholders on whose
\nbehalf the Escrow Amount is contributed to the Escrow Fund shall indemnify the
\nShareholder Representative and hold the Shareholder Representative harmless
\nagainst any loss, liability or expense incurred without negligence or bad faith
\non the part of the Shareholder Representative and arising out of or in
\nconnection with the acceptance or administration of the Shareholder
\nRepresentative’s duties hereunder, including the reasonable fees and expenses of
\nany legal counsel retained by the Shareholder Representative.<\/p>\n
(c) A decision, act, consent or instruction of the Shareholder
\nRepresentative, including but not limited to an amendment, extension or waiver
\nof this Agreement pursuant to Section 8.3 and Section 8.4 hereof, shall
\nconstitute a decision of the Shareholders and shall be final, binding and
\nconclusive upon the Shareholders; and Parent may rely upon any such decision,
\nact, consent or instruction of the Shareholder Representative as being the
\ndecision, act, consent or instruction of the Shareholders. The Parent is hereby
\nrelieved from any liability to any person for any acts done by them in
\naccordance with such decision, act, consent or instruction of the Shareholder
\nRepresentative.<\/p>\n
(d) Subject to Parent’s prior claims for indemnification against the
\nEscrow Fund, the Shareholder Representative shall be entitled to receive payment
\nfor its reasonable and documented expenses therefrom, prior to any payments to
\nthe Shareholders.<\/p>\n
7.4 Escrow Agent.
\n ————<\/p>\n
(a) Escrow Agent’s Duties.
\n ——————— <\/p>\n
(i) The Escrow Agent shall be obligated only for the performance
\nof such duties as are specifically set forth herein, and as set forth in any
\nadditional written escrow instructions which the Escrow Agent may receive after
\nthe date of this Agreement which are signed by an officer of Parent and the
\nShareholder Representative, and may rely and shall be protected in relying or
\nrefraining from acting on any instrument reasonably believed to be genuine and
\nto have been signed or presented by the proper party or parties. The Escrow
\nAgent shall not be charged with<\/p>\n
-55-<\/p>\n
any knowledge of any agreements referred to herein, including this Agreement,
\nexcept for Articles VII and X hereof. The Escrow Agent shall not be liable for
\nany act done or omitted hereunder as Escrow Agent while acting in good faith and
\nin the exercise of reasonable judgment, and any act done or omitted pursuant to
\nthe advice of legal counsel shall be conclusive evidence of such good faith.<\/p>\n
(ii) The Escrow Agent is hereby expressly authorized to
\ndisregard any and all warnings given by any of the parties hereto or by any
\nother person, excepting only orders or process of courts of law, and is hereby
\nexpressly authorized to comply with and obey orders, judgments or decrees of any
\ncourt. In case the Escrow Agent obeys or complies with any such order, judgment
\nor decree of any court, the Escrow Agent shall not be liable to any of the
\nparties hereto or to any other person by reason of such compliance,
\nnotwithstanding any such order, judgment or decree being subsequently reversed,
\nmodified, annulled, set aside, vacated or found to have been entered without
\njurisdiction.<\/p>\n
(iii) The Escrow Agent shall not be liable in any respect on
\naccount of the identity, authority or rights of the parties executing or
\ndelivering or purporting to execute or deliver this Agreement or any documents
\nor papers deposited or called for hereunder.<\/p>\n
(iv) The Escrow Agent shall not be liable for the expiration of
\nany rights under any statute of limitations with respect to this Agreement or
\nany documents deposited with the Escrow Agent.<\/p>\n
(v) In performing any duties under this Agreement, the Escrow
\nAgent shall not be liable to any party for damages, losses, or expenses, except
\nfor negligence or willful misconduct on the part of the Escrow Agent. The Escrow
\nAgent shall not incur any such liability for (A) any act or failure to act made
\nor omitted in good faith, or (B) any action taken or omitted in reliance upon
\nany instrument, including any written statement of affidavit provided for in
\nthis Agreement that the Escrow Agent shall in good faith believe to be genuine,
\nnor will the Escrow Agent be liable or responsible for forgeries, fraud,
\nimpersonations, or determining the scope of any representative authority. In
\naddition, the Escrow Agent may consult with legal counsel in connection with
\nperforming the Escrow Agent’s duties under this Agreement and shall be fully
\nprotected in any act taken, suffered, or permitted by the Escrow Agent in good
\nfaith in accordance with the advice of counsel. The Escrow Agent is not
\nresponsible for determining and verifying the authority of any person acting or
\npurporting to act on behalf of any party to this Agreement.<\/p>\n
(vi) If any controversy arises between the parties to this
\nAgreement, or with any other party, concerning the subject matter of this
\nAgreement, its terms or conditions, the Escrow Agent will not be required to
\ndetermine the controversy or to take any action regarding it. The Escrow Agent
\nmay hold all documents and the Escrow Amount and may wait for settlement of any
\nsuch controversy by final appropriate legal proceedings or other means as, in
\nthe Escrow Agent’s discretion, may be required, despite what may be set forth
\nelsewhere in this Agreement. In such event, the Escrow Agent will not be liable
\nfor damages. Furthermore, the Escrow Agent may at its option, file an action of
\ninterpleader requiring the parties to answer and litigate any claims and rights
\namong themselves. The Escrow Agent is authorized to deposit with the clerk of
\nthe court all<\/p>\n
-56-<\/p>\n
documents and the Escrow Amounts held in escrow, except all costs, expenses,
\ncharges and reasonable attorney fees incurred by the Escrow Agent due to the
\ninterpleader action and which the parties jointly and severally agree to pay.
\nUpon initiating such action, the Escrow Agent shall be fully released and
\ndischarged of and from all obligations and liability imposed by the terms of
\nthis Agreement.<\/p>\n
(vii) The parties and their respective successors and assigns
\nagree jointly and severally to indemnify and hold the Escrow Agent harmless
\nagainst any and all losses, claims, damages, liabilities, and expenses,
\nincluding reasonable costs of investigation, counsel fees, including allocated
\ncosts of in-house counsel and disbursements that may be imposed on Escrow Agent
\nor incurred by the Escrow Agent in connection with the execution and delivery
\nof, and the performance of its duties under, this Agreement, including but not
\nlimited to any litigation arising from this Agreement or involving its subject
\nmatter, other than those arising out of the negligence or willful misconduct of
\nthe Escrow Agent.<\/p>\n
(viii) The Escrow Agent may resign at any time upon giving at
\nleast thirty (30) days written notice to the Parent and the Shareholder
\nRepresentative; provided, however, that no such resignation shall become
\neffective until the appointment of a successor escrow agent which shall be
\naccomplished as follows: Parent and the Shareholder Representative shall use
\ntheir best efforts to mutually agree on a successor escrow agent within thirty
\n(30) days after receiving such notice. If the parties fail to agree upon a
\nsuccessor escrow agent within such time, the Escrow Agent shall have the right
\nto appoint a successor escrow agent authorized to do business in the State of
\nCalifornia. The successor escrow agent shall execute and deliver an instrument
\naccepting such appointment and it shall, without further acts, be vested with
\nall the estates, properties, rights, powers, and duties of the predecessor
\nescrow agent as if originally named as escrow agent. Upon appointment of a
\nsuccessor escrow agent, the Escrow Agent shall be discharged from any further
\nduties and liability under this Agreement.<\/p>\n
(b) Fees. All fees of the Escrow Agent for performance of its
\n —-
\nduties hereunder shall be paid by Parent in accordance with the standard fee
\nschedule of the Escrow Agent. It is understood that the fees and usual charges
\nagreed upon for services of the Escrow Agent shall be considered compensation
\nfor ordinary services as contemplated by this Agreement. In the event that the
\nconditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
\nrenders any service not provided for in this Agreement, or if the parties
\nrequest a substantial modification of its terms, or if any controversy arises,
\nor if the Escrow Agent is made a party to, or intervenes in, any litigation
\npertaining to the Escrow Fund or its subject matter, the Escrow Agent shall be
\nreasonably compensated for such extraordinary services and reimbursed for all
\ncosts, attorney’s fees, including allocated costs of in-house counsel, and
\nexpenses occasioned by such default, delay, controversy or litigation.<\/p>\n
(c) Consequential Damages. In no event shall the Escrow Agent be
\n ———————
\nliable for special, indirect, punitive or consequential loss or damage of any
\nkind whatsoever (including but not limited to lost profits), even if the Escrow
\nAgent has been advised of the likelihood of such loss or damage and regardless
\nof the form of action.<\/p>\n
-57-<\/p>\n
(d) Successor Escrow Agents. Any corporation into which the Escrow
\n ———————–
\nAgent in its individual capacity may be merged or converted or with which it may
\nbe consolidated, or any corporation resulting from any merger, conversion or
\nconsolidation to which the Escrow Agent in its individual capacity shall be a
\nparty, or any corporation to which substantially all the corporate trust
\nbusiness of the Escrow Agent in its individual capacity may be transferred,
\nshall be the Escrow Agent under the escrow agreement without further act.<\/p>\n
7.5 Shareholder Claims Against Parent.
\n ———————————<\/p>\n
(a) With respect to Shareholder Claims against Parent arising out of
\nany breach of representation, warranty, or covenant of Parent or Merger Sub in
\nthis Agreement or in any instrument delivered pursuant hereto, the Shareholder
\nRepresentative must deliver a Shareholders’ Certificate promptly (but in all
\nevents within 60 days) after the Shareholder Representative becomes aware that
\nthe Shareholders may have a claim for indemnity; provided that, any such
\nShareholder Certificate must be delivered no later than the later of the Escrow
\nTermination Date or the distribution of the Escrow Fund under Section 7.2(b).
\nThe Parent shall compensate the Shareholders as promptly as possible for an
\namount equal to the Losses specified in a timely Shareholders’ Certificate. For
\npurposes hereof, “Shareholders’s Certificate” shall mean a certificate signed by
\n ————————–
\nthe Shareholder Representative: (A) stating that the Shareholders has paid,
\nincurred or properly accrued or reasonably anticipates that it will have to pay,
\nincur or accrue Losses; (B) specifying in reasonable detail the individual
\nitems of Losses included in the amount so stated, the date each such item was
\npaid, incurred or properly accrued, or the basis for such anticipated liability,
\nand the nature of the misrepresentation, breach of warranty or covenant to which
\nsuch item is related; (C) specifying whether the Losses are subject to the
\nShareholder Basket Amount (as defined below). Shareholder may not receive any
\ncompensation for Losses unless and until one or more Shareholder Certificates
\nidentifying Losses in excess of One Hundred and Fifty Thousand Dollars (USD
\n$150,000) in the aggregate (the “Shareholder Basket Amount”) has or have been
\n ————————-
\ndelivered to Parent, in which case the Shareholders shall be entitled to recover
\nall Losses so identified, including without limitation the Shareholder Basket
\nAmount. The Shareholders may not recover for Losses exceeding $600,000. The
\nParent may compensate the Shareholders for Losses either in cash or shares of
\nthe Parent Common Stock valued at the then-current fair market value of such
\nstock.<\/p>\n
(b) Resolution of Conflicts; Arbitration.
\n ———————————— <\/p>\n
(i) In case the Parent shall object in writing to any claim or
\nclaims made in a Shareholder Certificate by the Shareholder Representative, the
\nShareholder Representative and Parent shall attempt in good faith to agree upon
\nthe rights of the respective parties with respect to each of such claims.<\/p>\n
(ii) If no such agreement can be reached after good faith
\nnegotiation, either Parent or the Shareholder Representative may demand
\narbitration of the matter unless the amount of the Loss is at issue in pending
\nlitigation with a third party, in which event arbitration shall not be commenced
\nuntil such amount is ascertained or both parties agree to arbitration, and in
\neither such event the matter shall be settled by arbitration conducted by one
\narbitrator mutually agreeable to Parent and the Shareholder Representative. In
\nthe event that within forty-five (45) days after<\/p>\n
-58-<\/p>\n
submission of any dispute to arbitration, Parent and the Shareholder
\nRepresentative cannot mutually agree on one arbitrator, Parent and the
\nShareholder Representative shall each select one arbitrator, who has relevant
\nexperience and who is not affiliated with any party hereto, and the two
\narbitrators so selected shall select a third arbitrator, who has relevant
\nexperience and who is not affiliated with any party hereto. The arbitrator or
\narbitrators, as the case may be, shall set a limited time period and establish
\nprocedures designed to reduce the cost and time for discovery while allowing the
\nparties an opportunity, adequate in the sole judgment of the arbitrator or
\nmajority of the three arbitrators, as the case may be, to discover relevant
\ninformation from the opposing parties about the subject matter of the dispute.
\nThe arbitrator or a majority of the three arbitrators, as the case may be, shall
\nrule upon motions to compel or limit discovery and shall have the authority to
\nimpose sanctions, including attorneys’ fees and costs, to the same extent as a
\ncompetent court of law or equity, should the arbitrator or a majority of the
\nthree arbitrators, as the case may be, determine that discovery was sought
\nwithout substantial justification or that discovery was refused or objected to
\nwithout substantial justification. The decision of the arbitrator or a majority
\nof the three arbitrators, as the case may be, as to the validity and amount of
\nany claim in such Officer’s Certificate shall be binding and conclusive upon the
\nparties to this Agreement.<\/p>\n
(iii) Judgment upon any award rendered by the arbitrator(s) may
\nbe entered in any court having jurisdiction. Any such arbitration shall be held
\nin Santa Clara County, California, USA under the rules then in effect of the
\nAmerican Arbitration Association. The arbitrator(s) shall determine how all
\nexpenses relating to the arbitration shall be paid, including without
\nlimitation, the respective expenses of each party, the fees of each arbitrator
\nand the administrative fee of the American Arbitration Association.<\/p>\n
ARTICLE VIII<\/p>\n
TERMINATION, AMENDMENT AND WAIVER<\/p>\n
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
\n ———–
\n may be terminated and the Merger abandoned at any time prior to the Closing:<\/p>\n
(a) by mutual agreement of the Company and Parent;<\/p>\n
(b) by the Company or Parent if: (i) the Closing has not occurred by
\nOctober 31, 2000; provided, however, that the right to terminate this Agreement
\nunder this Section 8.1(b) shall not be available to any party whose action or
\nfailure to act has been a principal cause of or resulted in the failure of the
\nMerger to occur on or before such date and such action or failure to act
\nconstitutes a breach of this Agreement; (ii) there shall be a final
\nnonappealable order of a federal or state court in effect preventing
\nconsummation of the Merger; or (iii) there shall be any statute, rule,
\nregulation or order enacted, promulgated or issued or deemed applicable to the
\nMerger by any Governmental Entity that would make consummation of the Merger
\nillegal;<\/p>\n
(c) by Parent if there shall be any action taken, or any statute,
\nrule, regulation or order enacted, promulgated or issued or deemed applicable to
\nthe Merger by any Governmental<\/p>\n
-59-<\/p>\n
Entity, which would: (i) prohibit Parent’s ownership or operation of all or a
\nportion of the business of the Company or (ii) compel Parent or the Company to
\ndispose of or hold separate all or a portion of the business or assets of the
\nCompany or Parent as a result of the Merger;<\/p>\n
(d) by Parent if it is not in material breach of its obligations
\nunder this Agreement and there has been a material breach of any material
\nprovision contained in this Agreement on the part of the Company and such breach
\nhas not been cured within thirty (30) business days after written notice to the
\nCompany; provided, however, no cure period shall be required for such a breach
\nwhich by its nature cannot be cured; and that a failure of a representation or
\nwarranty of the Company to be true shall not be deemed a material breach under
\nthis Section 8.1(d) and (e) if such failure would give rise to a Loss less than
\n20% of the Escrow Amount; or<\/p>\n
(e) by the Company if it is not in material breach of its obligations
\nunder this Agreement and there has been a material breach of any material
\nprovision contained in this Agreement on the part of Parent or Merger Sub and
\nsuch breach has not been cured within thirty (30) business days after written
\nnotice to Parent, provided, however, no cure period shall be required for such a
\nbreach which by its nature cannot be cured.<\/p>\n
Where action is taken to terminate this Agreement pursuant to this Section
\n8.1, it shall be sufficient for such action to be authorized by the Board of
\nDirectors (as applicable) of the party taking such action.<\/p>\n
8.2 Effect of Termination. In the event of termination of this Agreement
\n ———————
\nas provided in Section 8.1, this Agreement shall forthwith become void and there
\nshall be no liability or obligation on the part of Parent, Merger Sub or the
\nCompany, or their respective officers, directors or shareholders; provided,
\nhowever, each party shall remain liable for any breaches of this Agreement prior
\nto its termination; and provided further, however, that, the provisions of
\nSections 5.3, 5.4 and 5.5, Articles IX and X hereof and this Section 8.2 shall
\nremain in full force and effect and survive any termination of this Agreement
\npursuant to the terms of this Article VIII.<\/p>\n
8.3 Amendment. This Agreement may be amended by the parties hereto at any
\n ———
\ntime by execution of an instrument in writing signed on behalf of each of the
\nparties hereto. For purposes of this Section 8.3, the Shareholders agree that
\nany amendment of this Agreement signed by the Shareholder Representative shall
\nbe binding upon and effective against the Shareholders whether or not they have
\nsigned such amendment.<\/p>\n
8.4 Extension; Waiver. At any time prior to the Closing, Parent, on the
\n —————–
\none hand, and the Company and the Shareholder Representative, on the other hand,
\nmay, to the extent legally allowed, (i) extend the time for the performance of
\nany of the obligations of the other party hereto, (ii) waive any inaccuracies in
\nthe representations and warranties made to such party contained herein or in any
\ndocument delivered pursuant hereto, and (iii) waive compliance with any of the
\nagreements or conditions for the benefit of such party contained herein. Any
\nagreement on the part of a party hereto to any such extension or waiver shall be
\nvalid only if set forth in an instrument in writing signed on behalf of such
\nparty. For purposes of this Section 8.4, the Shareholders agree that any<\/p>\n
-60-<\/p>\n
extension or waiver signed by the Shareholder Representative shall be binding
\nupon and effective against all Shareholders whether or not they have signed such
\nextension or waiver.<\/p>\n
ARTICLE IX<\/p>\n
DEFINITIONS<\/p>\n
9.1 Defined Terms. As used in this Agreement, the following terms shall
\n ————-
\nhave the following meanings:<\/p>\n
“1933 Act” shall mean the Securities Act of 1933, as amended.
\n ——– <\/p>\n
“2000 Plan” shall mean the Company’s 2000 Equity Incentive Plan.
\n ——— <\/p>\n
“2000 Executive Plan” shall mean the Company’s 2000 Executive Equity
\n ——————-
\nIncentive Plan.<\/p>\n
“Accounts Receivable” shall have the meaning set forth in Section 2.8 of
\n ——————-
\nthis Agreement.<\/p>\n
“Action” shall have the meaning set forth in Section 2.18 of this
\n ——
\nAgreement.<\/p>\n
“Agreement” shall mean this Agreement and Plan of Reorganization, dated as
\n ———
\nof July ___, 2000, among the Company, Parent, Merger Sub, and, with respect to
\nthe matters set forth in Articles VII and X only, the Shareholder Representative
\nand the Escrow Agent (including the Exhibits and Schedules hereto) and all
\namendments hereto made in accordance with the provisions of Section 8.3 hereof.<\/p>\n
“Basket Amount” shall have the meaning set forth in Section 7.2 of this
\n ————-
\nAgreement.<\/p>\n
“Business Facility” shall mean any property including the land, the
\n —————–
\nimprovements thereon, the groundwater thereunder and the surface water thereon,
\nthat is or at any time has been owned, operated, occupied, controlled or leased
\nby the Company in connection with the operation of its business.<\/p>\n
“California Law” shall have the meaning set forth in Section 1.1 of this
\n ————–
\nAgreement.<\/p>\n
“CCSL” shall have the meaning set forth in Section 5.1 of this Agreement.
\n —- <\/p>\n
“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of
\n —–
\n1985, as amended.<\/p>\n
“Certificate” shall have the meaning set forth in Section 1.8 of this
\n ———–
\nAgreement.<\/p>\n
“Closing” shall have the meaning set forth in Section 1.2 of this
\n ——-
\nAgreement.<\/p>\n
“Closing Date” shall have the meaning set forth in Section 1.2 of this
\n ————
\nAgreement.<\/p>\n
-61-<\/p>\n
“Code” shall mean the Internal Revenue Code of 1986, as amended.
\n —- <\/p>\n
“Company” shall have the meaning set forth in the first paragraph of this
\n ——-
\nAgreement.<\/p>\n
“Company Capital Stock” shall mean shares of Company Common, and shares of
\n ———————
\nany other capital stock of the Company, including any shares of capital stock of
\nthe Company issuable upon exercise or conversion of any Company Convertible
\nIndebtedness outstanding immediately prior to the Effective Time.<\/p>\n
“Company Common” shall mean shares of Common Stock of the Company.
\n ————– <\/p>\n
“Company Employee Plan” shall mean any plan, program, policy, practice,
\n ———————
\ncontract, agreement or other arrangement providing for compensation, severance,
\ntermination pay, deferred compensation, performance awards, stock or stock-
\nrelated awards, fringe benefits or other employee benefits or remuneration of
\nany kind, whether written or unwritten or otherwise, funded or unfunded,
\nincluding without limitation, each “employee benefit plan”, within the meaning
\nof Section 3(3) of ERISA which is or has been maintained, contributed to, or
\nrequired to be contributed to, by the Company or any Related Party for the
\nbenefit of any Company Group Employee, or with respect to which the Company or
\nany Related Party has or may have any liability or obligation.<\/p>\n
“Company Group Employee” shall mean any current or former or retired
\n ———————-
\nemployee, consultant or director of the Company or any Related Party.<\/p>\n
“Company Material Adverse Effect” shall have the meaning set forth in
\n ——————————-
\nSection 2.1 of this Agreement.<\/p>\n
“Company Option” shall mean each issued and outstanding option granted
\n ————–
\nunder the Option Plans to purchase or otherwise acquire Company Capital Stock.<\/p>\n
“Company Schedule” shall have the meaning set forth in the introductory
\n —————-
\nparagraph of Article II.<\/p>\n
“Company Warrant” shall mean each issued and outstanding right to purchase
\n —————
\nor otherwise acquire Company Capital Stock, excluding Company Options.<\/p>\n
“Confidentiality Agreement” shall mean the Confidentiality Agreement dated
\n ————————-
\nas of May 19, 2000 and entered into by and between the Company and Parent.<\/p>\n
“Conflict” shall have the meaning set forth in Section 2.5 of this
\n ——–
\nAgreement.<\/p>\n
“Contract” shall have the meaning set forth in Section 2.16(b) of this
\n ——–
\nAgreement.<\/p>\n
“Current Balance Sheet” shall have the meaning set forth in Section 2.7 of
\n ———————
\nthis Agreement.<\/p>\n
“DOL” shall mean the Department of Labor.
\n — <\/p>\n
-62-<\/p>\n
“Disposal Site” shall mean a landfill, disposal agent, waste hauler or
\n ————-
\nrecycler of Hazardous Materials.<\/p>\n
“Dissenting Shares” shall have the meaning set forth in Section 1.7 of this
\n —————–
\nAgreement.<\/p>\n
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
\n —–
\namended.<\/p>\n
“Employment Agreement” shall mean each management, employment, severance,
\n ——————–
\nconsulting, relocation, repatriation, expatriation, visas, work permit or other
\nagreement, contract or understanding between the Company or any Related Party
\nand any Company Group Employee or between the Parent or any Related Party and
\nany Parent Group Employee.<\/p>\n
“Employment and Non-Competition Agreements” shall have the meaning set
\n —————————————–
\nforth in the recitals of this Agreement.<\/p>\n
“Environmental Laws” shall mean all applicable laws, rules, regulations,
\n ——————
\norders, treaties, statutes, and codes promulgated by any Governmental Entity
\nwhich prohibit, regulate or control any Hazardous Material or any Hazardous
\nMaterial Activity, including, without limitation, the Comprehensive
\nEnvironmental Response, Compensation, and Liability Act of 1980, the Resource
\nRecovery and Conservation Act of 1976, the Federal Water Pollution Control Act,
\nthe Clean Air Act, the Hazardous Materials Transportation Act, the Clean Water
\nAct, comparable laws, rules, regulations, ordinances, orders, treaties,
\nstatutes, and codes of other Governmental Entities, the regulations promulgated
\npursuant to any of the foregoing, and all amendments and modifications of any of
\nthe foregoing, all as amended to date.<\/p>\n
“Environmental Permit” shall mean any approval, permit, license, clearance
\n ——————–
\nor consent required to be obtained from any private person or any Governmental
\nEntity with respect to a Hazardous Materials Activity which is or was conducted
\nby the Company or by the Parent.<\/p>\n
“Escrow Agent” shall have the meaning set forth in Section 7.2 of this
\n ————
\nAgreement.<\/p>\n
“Escrow Amount” shall have the meaning set forth in Section 1.8 of this
\n ————-
\nAgreement.<\/p>\n
“Escrow Fund” shall have the meaning set forth in Section 7.2 of this
\n ———–
\nAgreement.<\/p>\n
“Escrow Period” shall have the meaning set forth in Section 7.2 of this
\n ————-
\nAgreement.<\/p>\n
“Escrow Termination Date” shall have the meaning set forth in Section 7.1
\n ———————–
\nof this Agreement.<\/p>\n
“Exchange Agent” shall have the meaning set forth in Section 1.8 of this
\n ————–
\nAgreement.<\/p>\n
“Exchange Ratio” shall mean the number determined by dividing (i) the
\n ————–
\nMerger Consideration by (ii) the Total Outstanding Shares.<\/p>\n
“FICA” shall mean the Federal Insurance Contribution Act.
\n —- <\/p>\n
-63-<\/p>\n
“FUTA” shall mean the Federal Unemployment Tax Act.
\n —- <\/p>\n
“FMLA” shall mean the Family Medical Leave Act of 1993, as amended.
\n —- <\/p>\n
“GAAP” shall mean U.S. generally accepted accounting principles.
\n —- <\/p>\n
“Governmental Entity” shall mean any local, state, provincial, federal, or
\n ——————-
\ninternational governmental authority or agency which has had or now has
\njurisdiction over any portion of the subject matter of this Agreement, any
\nBusiness Facility or the Company.<\/p>\n
“Hazardous Material” shall mean any material or substance that is
\n ——————
\nprohibited or regulated by any Environmental Law or that has been designated by
\nany Governmental Entity to be radioactive, toxic, hazardous or otherwise a
\ndanger to health, reproduction or the environment.<\/p>\n
“Hazardous Materials Activity” shall mean the transportation, transfer,
\n —————————-
\nrecycling, storage, use, treatment, manufacture, removal, remediation, release,
\nexposure of others to, sale, or distribution of any Hazardous Material or any
\nproduct containing a Hazardous Material.<\/p>\n
“Hearing Notice” shall have the meaning set forth in Section 5.1 of this
\n ————–
\nAgreement.<\/p>\n
“Hearing Request” shall have the meaning set forth in Section 5.1 of this
\n —————
\nAgreement.<\/p>\n
“Holder” shall mean (i) a Shareholder, (ii) the Escrow Agent, or (iii) a
\n ——
\ntransferee.<\/p>\n
“IRS” shall mean the Internal Revenue Service.
\n — <\/p>\n
“Information Statement” shall have the meaning set forth in Section 5.1 of
\n ———————
\nthis Agreement.<\/p>\n
“Intellectual Property Rights” shall mean any or all of the following and
\n —————————-
\nall rights in, arising out of, or associated therewith: (i) all United States
\nand foreign patents and applications therefor and all reissues, divisions,
\nrenewals, extensions, provisionals, continuations and continuations-in-part
\nthereof; (ii) all inventions (whether patentable or not), invention disclosures,
\nimprovements, trade secrets, proprietary information, know how, technology,
\ntechnical data and customer lists, and all documentation relating to any of the
\nforegoing; (iii) all copyrights, copyrights registrations and applications
\ntherefor, and all other rights corresponding thereto throughout the world; (iv)
\nall industrial designs and any registrations and applications therefor
\nthroughout the world; (v) all trade names, logos, common law trademarks and
\nservice marks; trademark and service mark registrations and applications
\ntherefor throughout the world; (vi) all databases and data collections and all
\nrights therein throughout the world; and (vii) all computer software including
\nall source code, object code, firmware, development tools, files, records and
\ndata, all media on which any of the foregoing is recorded, and all documentation
\nrelated to any of the foregoing throughout the world.<\/p>\n
“International Employee Plan” shall mean each Company or Parent Employee
\n —————————
\nPlan that has been adopted or maintained by the Company, the Parent, or any
\nRelated Party, whether informally or formally, or with respect to which the
\nCompany, the Parent, or any Related Party will or may have<\/p>\n
-64-<\/p>\n
any liability, for the benefit of Company Group Employees or Parent Group
\nEmployees who perform services outside the United States.<\/p>\n
“Interim Financials” shall have the meaning set forth in Section 2.7 of
\n ——————
\nthis Agreement.<\/p>\n
“Key Employees” shall have the meaning set forth in Section 6.3 hereof.
\n ————- <\/p>\n
“Lien” means any security interest, pledge, mortgage, lien (including,
\n —-
\nwithout limitation, environmental and tax liens), charge, encumbrance, adverse
\nclaim, preferential arrangement or restriction of any kind, including, without
\nlimitation, any restriction on the use, voting, transfer, receipt of income or
\nother exercise of any attributes of ownership.<\/p>\n
“Loss” shall mean any losses, liabilities, damages, deficiencies, costs and
\n —-
\nexpenses, including reasonable attorneys’ fees and expenses of investigation and
\ndefense incurred by the Parent or by the Company directly or indirectly as a
\nresult of: (i) any inaccuracy or breach of a representation or warranty
\ncontained in this Agreement; (ii) any failure to perform or comply with any
\ncovenant contained in this Agreement.<\/p>\n
“Market Stand-Off Agreement” shall have the meaning set forth in Section
\n ————————–
\n5.20 of this Agreement.<\/p>\n
“Material Adverse Effect” shall have the meaning set forth in Section 2.1
\n ———————–
\nof this Agreement.<\/p>\n
“Merger” shall have the meaning set forth in the recitals of this
\n ——
\nAgreement.<\/p>\n
“Merger Consideration” shall mean 6,004,594 shares of Parent Common Stock,
\n ——————–
\nincluding options to purchase shares of Parent Common Stock as contemplated by
\nSection 1.6(b).<\/p>\n
“Merger Sub” shall have the meaning set forth in the first paragraph of
\n ———-
\nthis Agreement.<\/p>\n
“Multiemployer Plan” shall mean any Pension Plan which is a “multiemployer
\n ——————
\nplan”, as defined in Section 3(37) of ERISA.<\/p>\n
“NASD” shall mean the National Association of Securities Dealers, Inc.
\n —- <\/p>\n
“New Shares” shall have the meaning set forth in Section 7.2 of this
\n ———-
\nAgreement.<\/p>\n
“Notice Materials” shall have the meaning set forth in Section 5.1 of this
\n —————-
\nAgreement.<\/p>\n
“Officer’s Certificate” shall have the meaning set forth in Section 7.2 of
\n ———————
\nthis Agreement.<\/p>\n
“Option Plans” shall mean the Company’s 2000 Plan and 2000 Executive Plan.
\n ———— <\/p>\n
“Organizational Documents” shall mean the Company’s Articles of
\n ————————
\nIncorporation and Bylaws, each as amended to date.<\/p>\n
“Parent” shall have the meaning set forth in the first paragraph of this
\n ——
\nAgreement.<\/p>\n
-65-<\/p>\n
“Parent Balance Sheet” shall have the meaning set forth in Section 3.6 of
\n ——————–
\nthis Agreement.<\/p>\n
“Parent Common Stock” shall mean shares of common stock of Parent.
\n ——————- <\/p>\n
“Parent Employee Plan” shall mean any plan, program, policy, practice,
\n ——————–
\ncontract, agreement or other arrangement providing for compensation, severance,
\ntermination pay, deferred compensation, performance awards, stock or stock-
\nrelated awards, fringe benefits or other employee benefits or remuneration of
\nany kind, whether written or unwritten or otherwise, funded or unfunded,
\nincluding without limitation, each “employee benefit plan”, within the meaning
\nof Section 3(3) of ERISA which is or has been maintained, contributed to, or
\nrequired to be contributed to, by the Parent or any Related Party for the
\nbenefit of any Parent Group Employee, or with respect to which the Parent or any
\nRelated Party has or may have any liability or obligation.<\/p>\n
“Parent Group Employee” shall mean any current or former or retired
\n ———————
\nemployee, consultant or director of the Parent or any Related Party.<\/p>\n
“Parent IP Rights” shall have the meaning set forth in Section 3.8 of this
\n —————-
\nAgreement.<\/p>\n
“Parent IP Rights Agreement” shall have the meaning set forth in Section
\n ————————–
\n3.8 of this Agreement.<\/p>\n
“Parent Material Adverse Effect” shall have the meaning set forth in
\n ——————————
\nSection 2.1 of this Agreement.<\/p>\n
“Pension Plan” shall mean each Company Employee Plan which is an “employee
\n ————
\npension benefit plan”, within the meaning of Section 3(2) of ERISA.<\/p>\n
“Registered Intellectual Property” shall have the meaning set forth in
\n ——————————–
\nSection 2.15 of this Agreement.<\/p>\n
“Registrable Securities” shall mean for each Holder the number of shares of
\n ———————-
\nParent Common Stock issued to such Holder pursuant to the terms hereof.<\/p>\n
“Related Agreement” shall have the meaning set forth in Section 2.4 of this
\n —————–
\nAgreement.<\/p>\n
“Related Party” shall mean any other person or entity under common control
\n ————-
\nwith the Company or Parent, as applicable, within the meaning of Section 414(b),
\n(c), (m) or (o) of the Code and the regulations issued thereunder.<\/p>\n
“Returns” shall have the meaning set forth in Section 2.12 of this
\n ——-
\nAgreement.<\/p>\n
“SEC” shall mean the Securities and Exchange Commission.
\n — <\/p>\n
“Shareholder” shall mean each holder of any Company Capital Stock issued
\n ———–
\nand outstanding immediately prior to the Effective Time.<\/p>\n
-66-<\/p>\n
“Shareholder Representative” shall have the meaning set forth in Section
\n ————————–
\n7.3 of this Agreement.<\/p>\n
“Surviving Corporation” shall have the meaning set forth in Section 1.1 of
\n ———————
\nthis Agreement.<\/p>\n
“Taxes” shall mean (i) any and all federal, state, local and foreign taxes,
\n —–
\nassessments and other governmental charges, duties, impositions and liabilities,
\nincluding taxes based upon or measured by gross receipts, income, profits,
\nsales, use and occupation, and value added, ad valorem, transfer, franchise,
\nwithholding, payroll, recapture, employment, excise and property taxes, together
\nwith all interest, penalties and additions imposed with respect to such amounts;
\n(ii) any liability for the payment of any amounts of the type described in
\nclause (i) of this definition as a result of being a member of an affiliated,
\nconsolidated, combined or unitary group for any period; and (iii) any liability
\nfor the payment of any amounts of the type described in clauses (i) or (ii) of
\nthis definition as a result of any express or implied obligation to indemnify
\nany other person or as a result of any obligations under any agreements or
\narrangements with any other person with respect to such amounts and including
\nany liability for taxes of a predecessor entity.<\/p>\n
“Third Party Expenses” shall have the meaning set forth in Section 5.4 of
\n ——————–
\nthis Agreement.<\/p>\n
“Total Outstanding Shares” shall mean the aggregate number of shares of
\n ————————
\nCompany Common Stock outstanding immediately prior to the Effective Time plus
\nthe aggregate number of shares of Company Common Stock issuable, with or without
\nthe passage of time or satisfaction of other conditions, upon exercise or
\nconversion of all options, warrants and other rights to acquire or receive
\nshares of Company Common Stock outstanding immediately prior to the Effective
\nTime.<\/p>\n
“Year-End Financials” shall have the meaning set forth in Section 2.7 of
\n ——————-
\nthis Agreement.<\/p>\n
ARTICLE X<\/p>\n
GENERAL PROVISIONS<\/p>\n
10.1 Notices. All notices and other communications hereunder shall be in
\n ——-
\nwriting and shall be deemed given if delivered personally or by commercial
\ndelivery service, or mailed by registered or certified mail (return receipt
\nrequested) or sent via facsimile (with acknowledgement of complete transmission)
\nto the parties at the following addresses (or at such other address for a party
\nas shall be specified by like notice):<\/p>\n
(a) if to Parent or Merger Sub, to:<\/p>\n
LynuxWorks, Inc.
\n 2239 Samaritan Drive
\n San Jose, CA 95124
\n Attention: Inder Singh
\n Facsimile No.: (408) 879-3920<\/p>\n
-67-<\/p>\n
with a copy to:<\/p>\n
Wilson Sonsini Goodrich & Rosati, P.C.
\n 650 Page Mill Road
\n Palo Alto, California 94304-1050
\n Attention: Steven E. Bochner
\n Facsimile No.: (650) 461-5375<\/p>\n
(b) if to the Company, to:<\/p>\n
Integrated Software & Devices Corporation
\n 2160 Lundy Avenue, Suite 110
\n San Jose, California 95131
\n Attention: Arthur L. Swift
\n Facsimile No.: (408) 383-9809<\/p>\n
with a copy to:
\n Fenwick & West LLP
\n Two Palo Alto Square
\n Palo Alto, CA 94306
\n Attention: Kevin Kelso
\n Facsimile No.: (650) 494-1417<\/p>\n
(c) if to the Shareholder Representative, to:<\/p>\n
Reza Soliman-Noori
\n 2160 Lundy Avenue, Suite 110
\n San Jose, CA 95131
\n Facsimile No.: (408) 383-9809<\/p>\n
(d) if to the Escrow Agent, to:<\/p>\n
Firstar Bank, N.A.
\n Corporate Trust Dept.
\n 101 East Fifth Street
\n St. Paul, Minnesota 55101
\n Attention: Frank Leslie
\n Facsimile No.: (651) 229-6415<\/p>\n
10.2 Interpretation. The words “include,” “includes” and “including” when
\n ————–
\nused herein shall be deemed in each case to be followed by the words “without
\nlimitation.” The table of contents and headings contained in this Agreement are
\nfor reference purposes only and shall not affect in any way the meaning or
\ninterpretation of this Agreement.<\/p>\n
-68-<\/p>\n
10.3 Counterparts. This Agreement may be executed in one or more
\n ————
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other party, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
10.4 Entire Agreement; Assignment. This Agreement (including the
\n —————————-
\nrecitals), the Exhibits hereto, the Company Schedules and the documents and
\ninstruments and other agreements among the parties hereto referenced herein: (a)
\nconstitute the entire agreement among the parties with respect to the subject
\nmatter hereof and supersede all prior agreements and understandings, both
\nwritten and oral, among the parties with respect to the subject matter hereof;
\n(b) are not intended to confer upon any other person any rights or remedies
\nhereunder; and (c) shall not be assigned by operation of law or otherwise except
\nas otherwise specifically provided in this Agreement; provided, however, that
\nParent may assign all, but not less than all of its rights and obligations under
\nthis Agreement, either before or after the Effective Time, to its parent or to
\nany subsidiary or affiliate provided that the assignee agrees to be bound by the
\nprovisions of this Agreement to the same extent as Parent is bound prior to the
\nassignment.<\/p>\n
10.5 Severability. In the event that any provision of this Agreement or
\n ————
\nthe application thereof, becomes or is declared by a court of competent
\njurisdiction to be illegal, void or unenforceable, the remainder of this
\nAgreement will continue in full force and effect and the application of such
\nprovision to other persons or circumstances will be interpreted so as reasonably
\nto effect the intent of the parties hereto. The parties further agree to replace
\nsuch void or unenforceable provision of this Agreement with a valid and
\nenforceable provision that will achieve, to the extent possible, the economic,
\nbusiness and other purposes of such void or unenforceable provision.<\/p>\n
10.6 Other Remedies. Except as otherwise provided herein, any and all
\n ————–
\nremedies herein expressly conferred upon a party will be deemed cumulative with
\nand not exclusive of any other remedy conferred hereby, or by law or equity upon
\nsuch party, and the exercise by a party of any one remedy will not preclude the
\nexercise of any other remedy.<\/p>\n
10.7 Governing Law. This Agreement shall be governed by and construed in
\n ————-
\naccordance with the laws of the State of California, regardless of the laws that
\nmight otherwise govern under applicable principles of conflicts of laws thereof.
\nEach of the parties hereto irrevocably consents to the exclusive jurisdiction
\nand venue of any court within Santa Clara County, State of California, in
\nconnection with any matter based upon or arising out of this Agreement or the
\nmatters contemplated herein, agrees that process may be served upon them in any
\nmanner authorized by the laws of the State of California for such persons and
\nwaives and covenants not to assert or plead any objection which they might
\notherwise have to such jurisdiction, venue and such process.<\/p>\n
10.8 Rules of Construction. The parties hereto agree that they have been
\n ———————
\nrepresented by counsel during the negotiation and execution of this Agreement
\nand, therefore, waive the application of any law, regulation, holding or rule of
\nconstruction providing that ambiguities in an agreement or other document will
\nbe construed against the party drafting such agreement or document.<\/p>\n
-69-<\/p>\n
10.9 No Third Party Beneficiary. This Agreement is for the sole benefit of
\n ————————–
\nthe parties and their permitted successors and assigns and nothing herein
\nexpressed or implied shall give or be construed to give any third party, other
\nthan the parties hereto and such permitted successors and assigns, any legal or
\nequitable rights hereunder.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<\/p>\n
-70-<\/p>\n
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Shareholder
\nRepresentative and the Escrow Agent have caused this Agreement and Plan of
\nReorganization to be duly signed, all as of the date first written above.<\/p>\n
LYNUXWORKS, INC. INTEGRATED SOFTWARE & DEVICES CORPORATION<\/p>\n
By: \/s\/ [ILLEGIBLE]^^ By: \/s\/ Reza Joliman-Noori
\n ————————- ———————————
\nName:________________________ Name: Reza Joliman-Noori
\n ——————————-
\nTitle: CEO Title: Chairman & CEO
\n ———————– —————————–<\/p>\n
LWORKS, INC. SHAREHOLDER REPRESENTATIVE*<\/p>\n
Print: Inder Singh Print: Reza Joliman-Noori
\n ———————– ——————————-
\nName: Inder Singh Signature: \/s\/ Reza Joliman-Noori
\n ———————– ————————-
\nTitle: CEO
\n ———————-<\/p>\n
ESCROW AGENT*<\/p>\n
FIRSTAR BANK, N.A.<\/p>\n
Print:_______________________________<\/p>\n
Name:________________________________<\/p>\n
Title:_______________________________<\/p>\n
* With respect to the matters set forth in Articles VII and X hereof only.<\/p>\n
-71-<\/p>\n
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Shareholder
\nRepresentative and the Escrow Agent have caused this Agreement and Plan of
\nReorganization to be duly signed, all as of the date first written above.<\/p>\n
LYNUXWORKS, INC. INTEGRATED SOFTWARE & DEVICES CORPORATION<\/p>\n
By: _________________________ By: _______________________________<\/p>\n
Name:________________________ Name: _____________________________<\/p>\n
Title:_______________________ Title: ____________________________<\/p>\n
LWORKS, INC. SHAREHOLDER REPRESENTATIVE*<\/p>\n
Print:_______________________ Print:_____________________________<\/p>\n
Name: _______________________ Signature:_________________________<\/p>\n
Title:_______________________<\/p>\n
ESCROW AGENT*<\/p>\n
FIRSTAR BANK, N.A.<\/p>\n
Print: Frank P. Leslie. III<\/p>\n
Signature: \/s\/ [ILLEGIBLE]^^
\n ————————<\/p>\n
Title:_______________________<\/p>\n
ESCROW AGENT*<\/p>\n
FIRSTAR BANK, N.A.<\/p>\n
Title:Vice President<\/p>\n
* With respect to the matters set forth in Articles VII and X hereof only<\/p>\n
-72-<\/p>\n
INDEX OF EXHIBITS<\/p>\n
Exhibit Description
\n ——- ———–<\/p>\n
Exhibit A Company Schedule
\n ——— <\/p>\n
Exhibit B Parent Schedule
\n ——— <\/p>\n
Exhibit C Form of Employment and Non-Competition Agreement
\n ——— <\/p>\n
Exhibit D Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati
\n ——— <\/p>\n
Exhibit E Form of Legal Opinion of Fenwick & West LLP
\n ——— <\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8098],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9622,9626],"class_list":["post-43192","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-lynuxworks-inc","corporate_contracts_industries-technology__programming","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43192"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43192"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43192"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}