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EXHIBIT 2.1
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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
NEWPORT COMMUNICATIONS, INC.
AND
THE OTHER PARTIES SIGNATORY HERETO
DATED AS OF AUGUST 9, 2000
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER ...................................................... 2
1.1 The Merger ......................................................... 2
1.2 Effective Time ..................................................... 2
1.3 Effect of the Merger on Constituent Corporations ................... 2
1.4 Articles of Incorporation and By-Laws of Surviving
Corporation ........................................................ 3
1.5 Directors and Officers of Surviving Corporation .................... 3
1.6 Maximum Number of Shares of Broadcom Common Stock to be
Issued; Effect on Outstanding Securities of the Company ............ 3
1.7 Reservation of Shares .............................................. 5
1.8 Adjustments to Exchange Ratio ...................................... 6
1.9 Fractional Shares .................................................. 6
1.10 Dissenting Shares .................................................. 6
1.11 Exchange Procedures ................................................ 6
1.12 No Further Ownership Rights in Company Capital Stock ............... 8
1.13 Lost, Stolen or Destroyed Certificates ............................. 8
1.14 Exemption From Registration; California Permit ..................... 8
1.15 Taking of Necessary Action; Further Action ......................... 9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 9
2.1 Organization and Qualification ..................................... 9
2.2 Authority Relative to this Agreement ............................... 10
2.3 Capital Stock ...................................................... 10
2.4 No Subsidiaries .................................................... 12
2.5 Directors and Officers ............................................. 12
2.6 No Conflicts ....................................................... 12
2.7 Books and Records; Organizational Documents ........................ 12
2.8 Company Financial Statements ....................................... 13
2.9 Absence of Changes ................................................. 13
2.10 No Undisclosed Liabilities ......................................... 17
2.11 Taxes .............................................................. 17
2.12 Legal Proceedings .................................................. 19
2.13 Compliance with Laws and Orders .................................... 20
2.14 Plans; ERISA ....................................................... 20
2.15 Real Property ...................................................... 23
2.16 Tangible Personal Property ......................................... 24
2.17 Intellectual Property .............................................. 24
2.18 Contracts .......................................................... 28
2.19 Insurance .......................................................... 28
2.20 Affiliate Transactions ............................................. 29
2.21 Employees; Labor Relations ......................................... 29
2.22 Environmental Matters .............................................. 31
2.23 Substantial Suppliers .............................................. 31
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2.24 Accounts Receivable ................................................ 31
2.25 Other Negotiations; Brokers; Third Party Expenses .................. 31
2.26 Banks and Brokerage Accounts ....................................... 32
2.27 Warranty Obligations ............................................... 32
2.28 Foreign Corrupt Practices Act ...................................... 32
2.29 Operating Plan ..................................................... 32
2.30 Approvals .......................................................... 33
2.31 Takeover Statutes .................................................. 33
2.32 Permit Application; Information Statement .......................... 34
2.33 No Solicitation .................................................... 34
2.34 Design-Wins ........................................................ 34
2.35 Products ........................................................... 34
2.36 Backlog ............................................................ 34
2.37 Disclosure ......................................................... 34
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BROADCOM ...................... 35
3.1 Organization and Qualification ..................................... 35
3.2 Authority Relative to this Agreement ............................... 35
3.3 Issuance of Broadcom Common Stock .................................. 35
3.4 SEC Documents; Broadcom Financial Statements ....................... 36
3.5 No Conflicts ....................................................... 36
3.6 Information to be Supplied by Broadcom ............................. 37
3.7 Investment Advisors ................................................ 37
3.8 Tax-Free Reorganization ............................................ 37
3.9 Capitalization ..................................................... 37
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME ............................. 38
4.1 Conduct of Business of the Company ................................. 38
4.2 No Solicitation .................................................... 40
ARTICLE 5 ADDITIONAL AGREEMENTS ........................................... 41
5.1 Information Statement; Permit Application .......................... 41
5.2 Shareholder Approval ............................................... 43
5.3 Access to Information .............................................. 43
5.4 Confidentiality .................................................... 44
5.5 Expenses ........................................................... 44
5.6 Public Disclosure .................................................. 44
5.7 Approvals .......................................................... 44
5.8 Notification of Certain Matters .................................... 45
5.9 Company Affiliate Agreements ....................................... 45
5.10 Additional Documents and Further Assurances; Cooperation ........... 45
5.11 Indemnification .................................................... 45
5.12 Form S-8 ........................................................... 46
5.13 Company's Auditors ................................................. 46
5.14 Termination of 401(k) Plans ........................................ 46
5.15 Listing of Additional Shares ....................................... 46
5.16 Takeover Statutes .................................................. 46
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5.17 Additional Affiliate Agreements .................................... 46
5.18 Treatment as Reorganization ........................................ 47
5.19 Company Repurchases ................................................ 47
5.20 Information Technology Access ...................................... 47
5.21 Change of Merger Form .............................................. 48
5.22 Intellectual Property .............................................. 48
5.23 Employee Benefits .................................................. 49
5.24 Delivery of Stock Ledger and Minute Book of the Company ............ 49
ARTICLE 6 CONDITIONS TO THE MERGER ........................................ 49
6.1 Conditions to Obligations of Each Party to Effect the Merger ....... 49
6.2 Additional Conditions to Obligations of the Company ................ 50
6.3 Additional Conditions to the Obligations of Broadcom ............... 51
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS ...................................... 54
7.1 Survival of Representations, Warranties, Covenants and
Agreements ......................................................... 54
7.2 Escrow Provisions .................................................. 54
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER ............................... 61
8.1 Termination ........................................................ 61
8.2 Effect of Termination .............................................. 63
8.3 Amendment .......................................................... 63
8.4 Extension; Waiver .................................................. 63
ARTICLE 9 MISCELLANEOUS PROVISIONS ........................................ 63
9.1 Notices ............................................................ 63
9.2 Entire Agreement ................................................... 65
9.3 Further Assurances; Post-Closing Cooperation ....................... 65
9.4 Waiver ............................................................. 65
9.5 Third Party Beneficiaries .......................................... 65
9.6 No Assignment; Binding Effect ...................................... 65
9.7 Headings ........................................................... 66
9.8 Invalid Provisions ................................................. 66
9.9 Governing Law ...................................................... 66
9.10 Dispute Resolution ................................................. 66
9.11 Construction ....................................................... 66
9.12 Counterparts ....................................................... 67
9.13 Specific Performance ............................................... 67
ARTICLE 10 DEFINITIONS AND CONSTRUCTION .................................... 67
10.1 Definitions ........................................................ 67
10.2 Construction ....................................................... 79
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
MERGER AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 9, 2000,
by and among Broadcom Corporation, a California corporation ("Broadcom"),
NewPort Communications, Inc., a California corporation (the "Company") and, with
respect to Article 7 and Article 9 only, Armond Hairapetian as Shareholder Agent
and U.S. Stock Transfer Corporation, as Depositary Agent. Capitalized terms used
and not otherwise defined herein have the meanings set forth in Article 10.
RECITALS
A. The Boards of Directors of each of Broadcom and the Company believe it
is in the best interests of Broadcom and the Company (as applicable) and their
respective shareholders that Broadcom acquire the Company through the merger of
the Company with and into Broadcom (the "Merger") and, in furtherance thereof,
have approved the Merger, this Agreement and the transactions contemplated
hereby.
B. Prior to the Effective Time, all outstanding shares of Company
Preferred Stock will be converted into outstanding shares of Company Common
Stock.
C. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the shares of Company Common Stock
which are issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted into the right to receive shares of Class A common
stock, par value $0.0001 per share, of Broadcom ("Broadcom Common Stock"), and
(ii) all Company Options, Company Warrants and Company Stock Purchase Rights
then outstanding (whether vested or unvested) will become exercisable for
Broadcom Common Stock, on the terms and subject to the conditions set forth
herein.
D. As a condition and an inducement to the willingness of Broadcom to
enter into this Agreement, certain shareholders of the Company have concurrently
herewith entered into (i) Support Agreements with Broadcom in substantially the
form attached hereto as Exhibit A ("Support Agreements") pursuant to which,
among other things, such shareholders have agreed to vote the shares of Company
Capital Stock owned by them in favor of the Merger and to convert, prior to the
Effective Time, the shares of Company Preferred Stock owned by them, if any,
into shares of Company Common Stock and (ii) Company Affiliate Agreements in
substantially the form attached hereto as Exhibit B (the "Company Affiliate
Agreements").
E. As a condition and a further inducement to Broadcom to enter into this
Agreement, certain employees of the Company have entered into employment
agreements substantially in the form attached hereto as Exhibit C (the
"Employment Agreements"), each of which shall become effective at the Effective
Time.
F. As a condition and a further inducement to Broadcom to enter into this
Agreement, certain shareholders of the Company have entered into Non-Competition
Agreements substantially in the form attached hereto as Exhibit D (the
"Non-Competition Agreements"), each of which shall become effective at the
Effective Time.
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G. Broadcom and the Company intend that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, and in furtherance thereof intend that this Agreement shall be a plan of
reorganization within the meaning of Sections 354(a) and 361(a) of the Internal
Revenue Code.
H. The Company and Broadcom desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
I. A portion of the shares of Broadcom Common Stock otherwise issuable or
reserved for issuance by Broadcom in connection with the Merger shall be placed
in escrow by Broadcom, the release of which amount shall be contingent upon
certain events and conditions, all as set forth in Article 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and upon the terms and subject to
the conditions of this Agreement and the applicable provisions of the California
Code, the Company shall be merged with and into Broadcom, the separate corporate
existence of the Company shall cease, and Broadcom shall continue as the
surviving corporation. Broadcom is sometimes referred to herein as the
"Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) Business Days following
satisfaction or waiver of the conditions set forth in Article 6, at the offices
of Brobeck, Phleger & Harrison LLP, 38 Technology Drive, Irvine, California,
unless another place or time is agreed to by Broadcom and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing a California Agreement of Merger (or like instrument), in
substantially the form attached hereto as Exhibit E (the "Agreement of Merger"),
with the Secretary of State of the State of California, in accordance with the
relevant provisions of applicable law (the time of acceptance by the Secretary
of State of the State of California of such filing or such later time as may be
agreed to by the parties and set forth in the Agreement of Merger being referred
to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the California Code. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Broadcom and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Broadcom and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
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1.4 Articles of Incorporation and By-Laws of Surviving Corporation.
(a) At the Effective Time, the articles of incorporation of
Broadcom, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided by law and such articles of incorporation and bylaws of the
Surviving Corporation.
(b) The bylaws of Broadcom, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the articles of incorporation and
applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Broadcom immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation. The officers of Broadcom
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, each to hold office in accordance with the bylaws of the Surviving
Corporation.
1.6 Maximum Number of Shares of Broadcom Common Stock to be Issued; Effect
on Outstanding Securities of the Company. The maximum number of shares of
Broadcom Common Stock to be issued (including Broadcom Common Stock to be
reserved for issuance upon exercise of any of the Company Options, Company
Warrants or Company Stock Purchase Rights to be assumed by Broadcom as provided
herein) in exchange for the acquisition by Broadcom of all shares of Company
Capital Stock which are issued and outstanding immediately prior to the
Effective Time and all vested and unvested Company Options, Company Warrants and
Company Stock Purchase Rights which are then outstanding (other than Company
Warrants which by their terms expire without payment, conversion, adjustment or
other consideration at the Effective Time) shall not exceed the Aggregate Share
Number. Except as expressly provided in Section 1.8 and Section 10.1, no
adjustment shall be made in the number of shares of Broadcom Common Stock issued
in the Merger as a result of any consideration (in any form whatsoever) received
by the Company from the date hereof to the Effective Time as a result of any
exercise, conversion or exchange of Company Options, Company Warrants or Company
Stock Purchase Rights. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Broadcom, the Company or the holder of any shares of the Company
Capital Stock or Company Options, Company Warrants or Company Stock Purchase
Rights, the following shall occur:
(a) Conversion of Company Capital Stock.
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock to be cancelled pursuant to Section 1.6(b) and any Dissenting Shares (as
provided in Section 1.10)) shall be converted automatically into the right to
receive, following the expiration or early termination of any waiting period
under the HSR Act which is applicable to the holder of such share, that number
of shares of Broadcom Common Stock equal to the Exchange Ratio.
(ii) Each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as provided in Section 1.10)) shall be converted automatically into the
right to receive, following the expiration or early termination of any waiting
period under the HSR Act which is applicable to the holder of such share, that
number of shares of Broadcom Common Stock equal to the product of (A) that
number of shares of Company Common Stock into which such share of Company
Preferred Stock is convertible immediately prior to the Effective Time
multiplied by (B) the Exchange ratio.
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(b) Cancellation of Broadcom-Owned and Company-Owned Stock. Each
share of Company Common Stock owned by Broadcom or the Company or any Subsidiary
of Broadcom or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Broadcom or the Company.
(c) Capital Stock of Broadcom. Each share of Broadcom Common Stock
and Class B Common Stock, par value $.0001 per share, of Broadcom which is
issued and outstanding immediately prior to the Effective Time shall be
converted into and remain outstanding as one validly issued, fully paid and
nonassessable share of the Surviving Corporation, with identical rights and
privileges. From and after the Effective Time, each share certificate of
Broadcom theretofore evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
(d) Company Options and Company Stock Plan. All unexpired and
unexercised Company Options and Company Stock Purchase Rights, then outstanding,
whether vested or unvested, together with the Company Stock Plan, shall be
assumed by Broadcom in accordance with provisions set forth below.
(i) Each unexpired and unexercised Company Option, and Company
Stock Purchase Right then outstanding, whether vested or unvested, shall be, in
connection with the Merger, assumed by Broadcom, together with the Company Stock
Plan. Each Company Option and Company Stock Purchase Right so assumed by
Broadcom under this Agreement shall, except as provided in Section 1.6(d)(iii),
continue to have, and be subject to, the same terms and conditions as were
applicable to such Company Option or Company Stock Purchase Right immediately
prior to the Effective Time (including any repurchase rights or vesting
provisions), provided that (A) such Company Option or Company Stock Purchase
Right, as the case may be, shall be exercisable for that number of whole shares
of Broadcom Common Stock equal to the product of the number of shares of Company
Capital Stock that were issuable upon exercise of such Company Option, or
Company Stock Purchase Right immediately prior to the Effective Time multiplied
by the Exchange Ratio (rounded down to the nearest whole number of shares of
Broadcom Common Stock) and (B) the per share exercise price for the shares of
Broadcom Common Stock issuable upon exercise of such assumed Company Option or
Company Stock Purchase Right, as the case may be, shall be equal to the quotient
determined by dividing the exercise price per share of Company Capital Stock at
which such Company Option or Company Stock Purchase Right was exercisable
immediately prior to the Effective Time by the Exchange Ratio (rounded up to the
nearest whole cent). It is the intention of the parties that the Company Options
assumed by Broadcom shall qualify, following the Effective Time, as incentive
stock options as defined in Section 422 of the Internal Revenue Code to the same
extent the Company Options qualified as incentive stock options immediately
prior to the Effective Time and the provisions of this Section 1.6(d) shall be
applied consistent with this intent.
(ii) Broadcom shall assume the Company's obligations, and
shall be assigned the Company's repurchase rights and purchase options, under
any Stock Purchase Agreements entered into pursuant to the 1998 Stock
Option/Stock Issuance Plan (the "Company Stock Plan") and the other stock
purchase agreements listed on Section 1.6(d)(ii) of the
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Company Disclosure Schedule, true and correct copies of which have been made
available by the Company to Broadcom. Except as provided in Section 1.6(d)(iii),
any and all restrictions on the Company Restricted Stock issued pursuant to the
Company Stock Plan or such other agreements which do not lapse in accordance
with their terms (as in effect on August 9, 2000) shall continue in full force
and effect until such restrictions lapse pursuant to the terms of such
agreements, and any repurchase rights or repurchase options which the Company
has with respect to the Company Restricted Stock shall also continue in full
force and effect.
(iii) The Company agrees to take all actions necessary or
advisable to cause all Company Options, Company Stock Purchase Rights and
Company Restricted Stock to remain unchanged except (A) for the conversion into
options, warrants or rights to purchase shares of Broadcom Common Stock as
provided for in this Section 1.6(d) and (B) that any acceleration of vesting,
continuation of vesting after termination of employment or other special vesting
(whether with the passage of time, upon the occurrence of certain events or
otherwise) that might occur, result from or be related to the transactions
contemplated by this Agreement and the Ancillary Agreements shall be prevented
from occurring through the modification, in a manner acceptable to Broadcom, of
the applicable Company Option, Company Stock Purchase Right or Company
Restricted Stock (and any employment agreement or other agreement providing for
such acceleration) prior to the Closing, provided that the foregoing provisions
in clause (B) of this Section 1.6(d)(iii) shall not apply to Company Options,
Company Stock Purchase Rights or Company Restricted Stock or such portions of
such Company Options, Company Stock Purchase Rights or Company Restricted Stock,
to the extent set forth in Section 1.6(d)(iii) of the Company Disclosure
Schedule, or to any consultant, advisor or member of the Company's Board of
Directors, who is not an employee of the Company, or to the extent otherwise
provided in the Employment Agreements.
(iv) If any Company Warrant shall remain unexpired and
unexercised at the Effective Time, it shall continue to have, and be subject to,
the same terms and conditions as were applicable to such Company Warrant
immediately prior to the Effective Time (including any repurchase rights or
vesting provisions); provided that (A) such Company Warrant shall be exercisable
for that number of whole shares of Broadcom Common Stock equal to the product of
the (I) the number of shares of Company Common Stock that were issuable upon
exercise of such Company Warrant (or, in the case of Company Warrants
exercisable for Company Preferred Stock, upon exercise of such Company Warrant
and conversion of the resulting Company Preferred Stock into Company Common
Stock) immediately prior to the Effective Time multiplied by (II) the Exchange
Ratio (with such product rounded down to the nearest whole number of shares of
Broadcom Common Stock) and (B) the per share exercise price for the shares of
Broadcom Common Stock issuable upon exercise of such Company Warrant shall be
equal to the quotient determined by dividing (I) the exercise price per share of
Company Capital Stock at which such Company Warrant was exercisable immediately
prior to the Effective Time (or, in the case of Company Warrants exercisable for
Company Preferred Stock, the exercise price per share of Company Preferred Stock
at which such Company Warrant was exercisable immediately prior to the Effective
Time multiplied by the quotient of (y) the number of shares of Company Preferred
Stock issuable upon the exercise of such Company Warrant divided by (z) that
number of shares of Company Common Stock into which such shares of Company
Preferred Stock are convertible immediately prior to the Effective Time) by (II)
the Exchange Ratio applicable to the series of Company Capital Stock subject to
such Company Warrant (rounded up to the nearest whole cent).
1.7 Reservation of Shares. Broadcom will reserve sufficient shares of
Broadcom Common Stock for issuance pursuant to Section 1.6(d).
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1.8 Adjustments to Exchange Ratio. The Exchange Ratio shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Broadcom Common Stock or Company Capital Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Broadcom Common Stock or Company Capital Stock the effective date of
which occurs after the date hereof and prior to the Effective Time.
1.9 Fractional Shares. No fraction of a share of Broadcom Common Stock
will be issued in the Merger, but in lieu thereof, each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Broadcom Common Stock (after aggregating all fractional shares of Broadcom
Common Stock to be received by such holder) shall be entitled to receive from
Broadcom an amount of cash (rounded to the nearest whole cent) equal to the
product of (a) such fraction, multiplied by (b) the Closing Price.
1.10 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with the California
Code and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal or dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive Broadcom Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by the California Code.
(b) Notwithstanding the provisions of Section 1.10(a), if any holder
of shares of Company Capital Stock who demands appraisal of such shares under
the California Code shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of (i) the
Effective Time or (ii) the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Broadcom
Common Stock as provided in Section 1.6, without interest thereon, upon
surrender to the Company of the certificate representing such shares in
accordance with Section 1.11.
(c) The Company shall give Broadcom (i) prompt notice of its receipt
of any written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the California Code and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under the California Code. The Company shall not, except
with the prior written consent of Broadcom or as may be required under
applicable law, voluntarily make any payment with respect to any demands for
appraisal of Company Capital Stock or offer to settle or settle any such
demands.
1.11 Exchange Procedures.
(a) Broadcom Common Stock. On the Closing Date, Broadcom shall
deposit with the Exchange Agent for exchange in accordance with this Article 1,
the aggregate number of shares of Broadcom Common Stock issuable in exchange for
outstanding shares of Company Capital Stock, and cash in an amount sufficient to
permit the payment of cash in lieu of fractional
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shares pursuant to Section 1.9; provided, however, that, on behalf of the
holders of Company Capital Stock, Broadcom shall deposit into an escrow account
a number of shares of Broadcom Common Stock equal to the Escrow Amount. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of
Broadcom Common Stock which such holder would otherwise be entitled to receive
by virtue of ownership of outstanding shares of Company Capital Stock or right
to acquire shares of Company Capital Stock, as the case may be.
(b) Exchange Procedures. Within five (5) Business Days after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock (the
"Certificates") and which shares were converted into the right to receive shares
of Broadcom Common Stock pursuant to Section 1.6, (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates, shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Broadcom may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Broadcom Common Stock and cash in lieu of fractional
shares. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Broadcom, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing the number of whole
shares of Broadcom Common Stock (less the number of shares of Broadcom Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article 7), to which such holder is entitled pursuant to Section 1.6 and cash in
lieu of fractional shares to which such holder is entitled pursuant to Section
1.9, and the Certificate so surrendered shall be canceled. Broadcom shall cause
payments to be made to each shareholder of the Company within five (5) Business
Days after the later of (i) confirmation of filing of the Agreement of Merger
from the California Secretary of State and (ii) the Exchange Agent's receipt of
such shareholder's Certificate(s). As soon as practicable after the Effective
Time, and subject to and in accordance with the provisions of Article 7,
Broadcom shall cause to be distributed to the Depositary Agent a certificate or
certificates (in such denominations as may be requested by the Depositary Agent)
representing that number of shares of Broadcom Common Stock equal to the Escrow
Amount, which certificate shall be registered in the name of the Depositary
Agent. Such shares shall be beneficially owned by the holders on whose behalf
such shares were deposited in the Escrow Fund and shall be available to
compensate Broadcom as provided in Article 7. Until surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares of
Company Capital Stock, will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Broadcom Common Stock into which such
shares of Company Capital Stock, shall have been so converted (subject only to,
if applicable, the expiration or early termination of any waiting period under
the HSR Act which is applicable to the holder of such shares) and cash in lieu
of fractional shares.
(c) Distributions With Respect to Unexchanged Shares of Company
Capital Stock. No dividends or other distributions with respect to Broadcom
Common Stock declared or made after the Effective Time and with a record date
after the Effective Time will be paid to the
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holder of any unsurrendered Certificate with respect to the shares of Broadcom
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Broadcom Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 1.11(c)) with
respect to such whole shares of Broadcom Common Stock.
(d) Transfers of Ownership. If any certificate for shares of
Broadcom Common Stock is to be issued pursuant to this Agreement in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Broadcom
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a certificate for shares of Broadcom Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Broadcom or any agent designated by it that
such tax has been paid or is not payable.
1.12 No Further Ownership Rights in Company Capital Stock. All shares of
Broadcom Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Company of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 1.
1.13 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue certificates representing such shares
of Broadcom Common Stock and cash in lieu of fractional shares in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof; provided, however, that Broadcom or the
Exchange Agent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity or deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Broadcom or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.14 Exemption From Registration; California Permit. The shares of
Broadcom Common Stock to be issued pursuant to Section 1.6 in connection with
the Merger will be issued in a transaction exempt from registration under the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder, the "Securities Act"), by reason of Section 3(a)(10)
thereof. Subject to the provisions of Section 5.1(c), Broadcom and the Company
intend that the shares of Broadcom Common Stock to be issued in the Merger and
the assumption by Broadcom of all Company Options, Company Warrants and Company
Stock
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Purchase Rights required by this Agreement to be assumed by Broadcom will
be qualified under the California Code, pursuant to Section 25121 thereof, after
a fairness hearing has been held by the Commissioner of Corporations of the
State of California pursuant to the authority granted by Section 25142 of such
law (the "Fairness Hearing"). Broadcom, with the full cooperation of the
Company, shall use commercially reasonable efforts (i) to file within ten (10)
Business Days following the execution and delivery of this Agreement an
application for issuance of a permit pursuant to Section 25121 of the California
Code to qualify the shares of Broadcom to be issued in the Merger and the
assumption of the Company Options, Company Warrants and Company Stock Purchase
Rights required by this Agreement to be assumed by Broadcom (the "California
Permit") and (ii) to obtain the California Permit as soon as practicable
thereafter.
1.15 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, or to effect the assignment to the Surviving
Corporation of any and all Company Intellectual Property created by a founder,
employee or consultant of the Company (including any related Intellectual
Property created by any of the Company's founders prior to the creation of the
Company), or to complete and prosecute all domestic and foreign patent filings
related to such Company Intellectual Property, the officers and directors of the
Surviving Corporation are fully authorized to take, and will take, all such
lawful and necessary action, so long as such action is not inconsistent with
this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Broadcom that the statements
contained in this Article 2 are true and correct, except as set forth in the
disclosure schedule delivered by the Company to Broadcom on or before the date
of this Agreement (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article 2 and shall qualify only the
corresponding paragraph in this Article 2 and any other section hereof where it
is reasonably clear, upon a reading of such disclosure without any independent
knowledge on the part of the reader regarding the matter disclosed, that the
disclosure is intended to apply to such section.
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has full corporate power and authority to conduct its
business as now conducted and as currently proposed to be conducted and to own,
use, license and lease its Assets and Properties. The Company is duly qualified,
licensed or admitted to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership, use, licensing or
leasing of its Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for such
failures to be so duly qualified, licensed or admitted and in good standing that
could not reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. Section 2.1 of the Company Disclosure
Schedule sets forth each jurisdiction where the Company is so qualified,
licensed or admitted to
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do business and separately lists each other jurisdiction in which the Company
owns, licenses or leases its Assets and Properties or has employees or engages
independent contractors.
2.2 Authority Relative to this Agreement. Subject only to the requisite
approval of the Merger and this Agreement by the shareholders of the Company,
the Company has full corporate power and authority to execute and deliver this
Agreement and the other agreements which are attached (or forms of which are
attached) as exhibits hereto (the "Ancillary Agreements") to which the Company
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The Company's board
of directors has approved this Agreement and declared its advisability. The
execution and delivery by the Company of this Agreement and the other agreements
attached to this Agreement to which the Company is a party and the consummation
by the Company of the transactions contemplated hereby and thereby, and the
performance by the Company of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary action by the board of
directors of the Company, and no other action on the part of the board of
directors of the Company is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which the Company
is a party and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which the
Company is a party have been or will be, as applicable, duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof and thereof by Broadcom, each constitutes or will
constitute, as applicable, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
2.3 Capital Stock.
(a) The authorized capital stock of the Company consists only of
50,000,000 shares of Common Stock, no par value (the "Company Common Stock"), of
which that number of shares of Common Stock set forth on Section 2.3 of the
Company Disclosure Schedule are issued and outstanding as of the date hereof,
and 13,577,115 shares of Preferred Stock, no par value (the "Company Preferred
Stock"), of which 11,542,175 shares of Preferred Stock are issued and
outstanding as of the date hereof. The designation and status of the Company
Preferred Stock is as follows: (i) 6,184,616 shares are designated as Series A
Preferred Stock (the "Company Series A Preferred Stock"), all of which are
issued and outstanding as of the date hereof, and (ii) 5,392,499 shares are
designated as Series B Preferred Stock (the "Company Series B Preferred Stock"),
5,357,559 of which are issued and outstanding as of the date hereof. All of the
issued and outstanding shares of Company Common Stock and Company Preferred
Stock are validly issued, fully paid and nonassessable, and have been issued in
compliance with all applicable federal and state securities Laws. Except as set
forth in Section 2.3(a) of the Company Disclosure Schedule, no shares of Company
Common Stock or Company Preferred Stock are held in treasury or are reserved for
issuance.
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(b) Section 2.3(b) of the Company Disclosure Schedule lists the name
and last known state of residence of each holder of Company Common Stock and
Company Preferred Stock provided to the Company by the holder.
(c) With respect to any Company Common Stock or Company Preferred
Stock that has been issued subject to a repurchase option on the part of the
Company, Section 2.3(c) of the Company Disclosure Schedule sets forth the holder
thereof, the number and type of securities covered thereby, and the vesting
schedule thereof (including a description of the circumstances under which such
vesting schedule can or will be accelerated).
(d) Except as set forth on Section 2.3(d) of the Company Disclosure
Schedule, there are no outstanding Company Options, Company Warrants, Company
Stock Purchase Rights, Restricted Stock Purchase Agreements or shares of Company
Restricted Stock or agreements, arrangements or understandings to which the
Company is a party (written or oral) to issue any Options with respect to the
Company. With respect to each Company Option, Company Warrant, Company Stock
Purchase Right, Restricted Stock Purchase Agreement or share of Company
Restricted Stock or agreements, arrangements or understandings to which the
Company is a party (written or oral) to issue any Options or any other equity
securities with respect to the Company, Section 2.3(d) of the Company Disclosure
Schedule sets forth the holder thereof, the number and type of securities
issuable thereunder, and, if applicable, the exercise price therefor, the
exercise period and vesting schedule thereof (including a description of the
circumstances under which such vesting schedule can or will be accelerated). All
of the Company Options, Company Warrants and Company Stock Purchase Rights were
issued in compliance with all applicable federal and state securities Laws.
(e) There are no preemptive rights and no agreements, arrangements
or understandings to issue preemptive rights with respect to the issuance or
sale of Company Capital Stock created by statute, the Articles of Incorporation
or Bylaws of the Company, or any agreement or other arrangement to which the
Company is a party (written or oral) or to which it or its Assets or Properties
is bound and there are no agreements, arrangements or understandings to which
the Company is a party (written or oral) pursuant to which the Company has the
right to elect to satisfy any Liability by issuing Company Common Stock or
Equity Equivalents.
(f) The terms of each Company Stock Plan and the applicable stock
option agreements related to the outstanding Company Options permit the
assumption or substitution of options to purchase Broadcom Common Stock as
provided in this Agreement, without the consent or approval of the holders of
such securities, Company Shareholder Action or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for those
options. True and complete copies of all agreements and instruments relating to
or issued under the Company Stock Plan have been made available to Broadcom and
such agreements and instruments have not been amended, modified or supplemented,
and there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form provided to Broadcom. Except for the
Support Agreements, the Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend rights or
transferability of shares with
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respect to Company Capital Stock, including, any voting trust agreement or
proxy. No debt securities of the Company are issued and outstanding.
2.4 No Subsidiaries. The Company has no (and prior to the Closing will
have no) Subsidiaries and does not (and prior to the Closing will not) otherwise
hold any equity, membership, partnership, joint venture or other ownership
interest in any Person.
2.5 Directors and Officers. The name of each director and officer of the
Company on the date hereof, and his or her position with the Company, are listed
in Section 2.5 of the Company Disclosure Schedule.
2.6 No Conflicts. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is a party does not,
and the performance by the Company of its obligations under this Agreement and
the Ancillary Agreements to which the Company is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or bylaws of
the Company;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices contemplated by Section 2.6(c) of this
Agreement, conflict with or result in a violation or breach of any Law or Order
applicable to the Company or any of its Assets and Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute a default (or an event that, with or without notice or lapse of time
or both, would constitute a default) under, (iii) require the Company to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of (except for (A) the filing of the
Agreement of Merger, together with the required officer's certificate; (B) such
consents approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state or federal securities laws;
and (C) such filings as may be required under the HSR Act), (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon the Company
or any of its Assets and Properties under or (vii) result in the loss of any
material benefit under, any of the terms, conditions or provisions of any
Contract or material License to which the Company is a party or by which any of
the Company's Assets and Properties is bound except in the cases of clauses (v),
(vi) and (vii) for such rights, entitlements, Liens or losses of benefits, as
are not material, either individually or in the aggregate, in nature or amount.
2.7 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of the Company have been provided
or made available to Broadcom or its counsel prior to the execution of this
Agreement, are complete and correct in all respects. Such minute books contain a
true and complete record of all actions taken at all meetings and by all written
consents in lieu of meetings of the directors, shareholders and
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committees of the board of directors of the Company from the date of the
Company's incorporation through the date hereof. The Company has prior to the
execution of this Agreement delivered to Broadcom true and complete copies of
its articles of incorporation and bylaws, both as amended through the date
hereof. The Company is not in violation of any provisions of its articles of
incorporation or bylaws, both as amended through the date hereof.
2.8 Company Financial Statements. Section 2.8 of the Company Disclosure
Schedule sets forth the Company Financials. The Company Financials delivered to
Broadcom are correct and complete in all material respects and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto as delivered to Broadcom prior to the date hereof, and, in the
case of the Interim Financial Statements, subject to normal year-end
adjustments, which adjustments will not be material in amount or significance).
The Company Financials present fairly and accurately in all material respects
the financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject, in the case of the Interim
Financial Statements, to normal year-end adjustments, which adjustments will not
be material in amount or significance and except that the Interim Financial
Statements may not contain footnotes. Except as set forth in the Company
Financials, since January 1, 2000, there has been no change in any accounting
policies, principles, methods or practices, including any change with respect to
reserves or allowances (whether for bad debts, impairment, contingent
liabilities or otherwise), of the Company.
2.9 Absence of Changes. Since the Audited Financial Statement Date, there
has not been any material adverse change in the Business or Condition of the
Company or any occurrence or event which, individually or in the aggregate,
could be reasonably expected to have any material adverse effect on the Business
or Condition of the Company. In addition, without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement, since the Audited
Financial Statement Date:
(a) the Company has not entered into any Contract, commitment or
transaction or incurred any Liabilities (i) outside of the ordinary course of
business consistent with past practice and (ii) in an amount exceeding two
hundred fifty thousand dollars ($250,000);
(b) the Company has not entered into any Contract in connection with
any transaction involving a Business Combination;
(c) the Company has not altered or entered into any Contract or
other commitment to alter, its equity interest in any corporation, association,
joint venture, partnership or business entity in which the Company, directly or
indirectly, holds any interest on the date hereof;
(d) the Company has not entered into any strategic alliance, joint
development or joint marketing Contract;
(e) there has not been any material amendment or other material
modification (or agreement to do so) or, to the knowledge of the Company any
material violation of the terms of,
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any of the Contracts set forth or described in the Company Disclosure Schedule
except as described therein.
(f) the Company has not entered into any transaction with any
officer, director, shareholder, Affiliate or Associate of the Company, other
than pursuant to any Contract in effect on the Audited Financial Statement Date
and disclosed to Broadcom pursuant to this Section 2.9(f), Section 2.18(a) or
Section 2.20 other than pursuant to any contract of employment contemplated by
Section 2.18(a);
(g) the Company has not entered into or amended in any material
respect any Contract pursuant to which any other Person is granted
manufacturing, marketing, distribution, licensing or similar rights of any type
or scope with respect to any products of the Company or Company Intellectual
Property, other than as contemplated by the Company's Contracts or Licenses
disclosed in the Company Disclosure Schedule;
(h) no Action or Proceeding has been commenced or, to the knowledge
of the Company, threatened by or, to the knowledge of the Company, threatened
against the Company;
(i) the Company has not declared or set aside or paid any dividends
on or made any other distributions (whether in cash, stock or property) in
respect of any Company Capital Stock or Equity Equivalents, or effected or
approved any split, combination or reclassification of any Company Capital Stock
or Equity Equivalents or issued or authorized the issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company
Capital Stock or Equity Equivalents, or repurchased, redeemed or otherwise
acquired, directly or indirectly, any shares of Company Capital Stock or Equity
Equivalents, except repurchases of Company Capital Stock pursuant to agreements
with Company employees, officers, directors and consultants relating to
repurchases at cost upon termination of service with the Company;
(j) except for (i) the amendments contemplated by Section
1.6(d)(iii), (ii) the issuance of shares of Company Capital Stock upon exercise
or conversion of then-outstanding Company Options, Company Warrants, Company
Stock Purchase Rights or Company Preferred Stock, or (iii) Permitted Grants, or
(iv) grants disclosed in Section 2.3(d) of the Company Disclosure Schedule (A)
the Company has not issued, granted, delivered, sold or authorized or proposed
to issue, grant, deliver or sell, or purchased or proposed to purchase, any
shares of Company Capital Stock or Equity Equivalents, (B) the Company has not
modified or amended the rights of any holder of any outstanding shares of
Company Capital Stock or Equity Equivalents (including to reduce or alter the
consideration to be paid to the Company upon the exercise of any outstanding
Company Options, Company Warrants, Company Stock Purchase Rights or other Equity
Equivalents), (C) there have not been any agreements, arrangements, plans or
understandings with respect to any such modification or amendment, and (D) the
Company has not granted any Options with an exercise price of less than the fair
market value of Company Common Stock on the date the Option was granted (as
determined in good faith by the Company's board of directors);
(k) there has not been any amendment to the Company's articles of
incorporation or bylaws;
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(l) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any Company Intellectual Property;
(m) the Company has not made or agreed to make any disposition or
sale of, waiver of rights to, license or lease of, or incurrence of any Lien in
an amount exceeding one hundred thousand dollars ($100,000) individually or two
hundred fifty thousand dollars ($250,000) in the aggregate on, any Assets and
Properties of the Company, other than dispositions of inventory, or nonexclusive
licenses of products to Persons to whom the Company had granted licenses of its
products at the Audited Financial Statement Date, in the ordinary course of
business of the Company consistent with past practice;
(n) the Company has not made or agreed to make any purchase of any
Assets and Properties of any Person other than (i) acquisitions of inventory, or
licenses of products, in the ordinary course of business of the Company
consistent with past practice and (ii) other acquisitions in an amount not
exceeding one hundred thousand dollars ($100,000) in the case of any individual
item or two hundred fifty thousand dollars ($250,000) in the aggregate;
(o) the Company has not made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of the
Company constituting capital assets individually or in the aggregate in an
amount exceeding one hundred thousand dollars ($100,000);
(p) the Company has not made or agreed to make any write-off or
write-down any determination to write off or write-down, or revalue, any of the
Assets and Properties of the Company, or change any reserves or liabilities
associated therewith, individually or in the aggregate in an amount exceeding
one hundred thousand dollars ($100,000);
(q) the Company has not made or agreed to make payment, discharge or
satisfaction, in an amount in excess of one hundred thousand dollars ($100,000),
in any one case, or two hundred fifty thousand dollars ($250,000) in the
aggregate, of any claim, Liability or obligation (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities
reflected or reserved against in the Company Financials;
(r) the Company has not failed to pay or otherwise satisfy any
Liabilities presently due and payable of the Company consistent with past
practices, except such Liabilities which are being contested in good faith by
appropriate means or procedures and which, individually or in the aggregate, are
immaterial to the Business or Condition of the Company;
(s) the Company has not incurred any Indebtedness or guaranteed any
such Indebtedness in an aggregate amount exceeding one hundred thousand dollars
($100,000) or issued or sold any debt securities of the Company or guaranteed
any debt securities of others;
(t) the Company has not granted any severance or termination pay to
any director, officer employee or consultant, except payments made pursuant to
written Contracts outstanding on the date hereof, copies of which have been made
available to Broadcom and the terms of which are disclosed in Section 2.9(t) of
the Company Disclosure Schedule;
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(u) the Company has not granted or approved any increase of greater
than five percent (5%) in salary, rate of commissions, rate of consulting fees
or any other compensation of any current or former officer, director,
shareholder, employee, independent contractor or consultant of the Company,
other than such increases which were pursuant to a Contract disclosed to
Broadcom pursuant to Section 2.9(f) of the Company Disclosure Schedule;
(v) the Company has not paid or approved the payment of any
consideration of any nature whatsoever (other than salary, commissions, expense
reimbursements or consulting fees and customary benefits paid to any current or
former officer, director, shareholder, employee or consultant of the Company) to
any current or former officer, director, shareholder, employee, independent
contractor or consultant of the Company;
(w) the Company has not established or modified any (i) targets,
goals, pools or similar provisions under any Plan, employment Contract or other
employee compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines or similar
provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement;
(x) the Company has not adopted, entered into, amended, modified or
terminated (partially or completely) any Plan;
(y) the Company has not paid, or agreed or made any commitment to
pay, any discretionary or stay bonus;
(z) to the knowledge of the Company the Company has not taken or
approved any action could jeopardize the status of the Merger as a tax-free
reorganization;
(aa) the Company has not made or changed any material election in
respect of Taxes, adopted or changed any accounting method in respect of Taxes,
entered into any tax allocation agreement, tax sharing agreement, tax indemnity
agreement or closing agreement, settlement or compromise of any claim or
assessment in respect of Taxes, or consented to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes with
any Taxing Authority or otherwise;
(bb) the Company has not made any change in accounting policies,
principles, methods, practices or procedures (including for bad debts,
contingent liabilities or otherwise, respecting capitalization or expense of
research and development expenditures, depreciation or amortization rates or
timing of recognition of income and expense);
(cc) other than in the ordinary course of business, the Company has
not made any representation or proposal to, or engaged in substantive
discussions with, any of the holders (or their representatives) of any
Indebtedness, or to or with any party which has issued a letter of credit which
benefits the Company;
(dd) the Company has not commenced or terminated, or made any change
in, any line of business in any material respect;
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(ee) the Company has not failed to renew any insurance policy; no
insurance policy of the Company has been cancelled or materially amended; and
the Company has given all notices and presented all claims (if any) under all
such policies in a timely fashion;
(ff) the Company has taken all action required to maintain, renew,
or extend any Company Registered Intellectual Property, including submission of
required documents or fees during the prosecution of patent, trademark or other
applications for Registered Intellectual Property rights;
(gg) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of the Company individually or in the aggregate
in an amount exceeding two hundred fifty thousand ($250,000).
(hh) the Company has not repurchased, cancelled or modified the
terms of any Company Capital Stock, Equity Equivalents, Company Options, Company
Warrants, Company Stock Purchase Rights or other financial instrument that
derives value from its convertibility into Company Capital Stock or Equity
Equivalents, other than transactions entered into in the ordinary course of
business and pursuant to either (i) contractual provisions or (ii) the Company
Stock Plan, in each case as in effect at the time of execution and delivery of
this Agreement;
(ii) the Company has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in or cause or having the effect of any of the
foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the Company Financials (including the notes thereto) there are no Liabilities
of, relating to or affecting the Company or any of its Assets and Properties,
other than Liabilities (i) incurred in the ordinary course of business
consistent with past practice since the Audited Financial Statement Date, and in
accordance with the provisions of this Agreement which, individually and in the
aggregate, are not material to the Business or Condition of the Company, and are
not for tort or for breach of contract, (ii) that would not be required to be
reflected or reserved against in the balance sheet of Company (including the
notes thereto) prepared in accordance with GAAP or (iii) Third Party Expenses.
2.11 Taxes. All Tax Returns required to have been filed by or with respect
to the Company or any affiliated, consolidated, combined, unitary or similar
group of which the Company is or was a member (a "Relevant Group") have been
duly and timely filed (including any extensions), and each such Tax Return
correctly and completely reflects Tax liability and all other information
required to be reported thereon. All such Tax Returns are true, complete and
correct in all material respects. All Taxes due and payable by the Company or
any member of a Relevant Group, whether or not shown on any Tax Return, or
claimed to be due by any Tax Authority, for periods (or portions of periods)
covered by the Company Financials, have been paid or accrued on the balance
sheet included in the Company Financials.
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(a) The Company has incurred no material liability for Taxes in the
period after the date of the Company Financials other than in the ordinary
course of business. The unpaid Taxes of the Company, (i) as of the date of the
Company Financials, did not exceed by any material amount the sum of the
reserves for (A) liability for Income Tax (excluding the reserve for deferred
taxes established to reflect temporary differences between book and tax income),
and (B) liability for Other Tax as set forth on the balance sheet included in
the Company Financials and (ii) will not exceed by any material amount such
reserve as adjusted for Income Taxes and Other Taxes incurred in the ordinary
course of business through the Closing Date.
(b) The Company is not a party to any agreement extending the time
within which to file any Tax Return. No claim has ever been made by a Taxing
Authority of any jurisdiction in which the Company or any member of any Relevant
Group does not file Tax Returns that the Company or such member is or may be
subject to taxation by that jurisdiction.
(c) The Company and each member of any Relevant Group has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor or independent contractor.
(d) The Company does not have knowledge of any actions by any Taxing
Authority in connection with assessing additional Taxes against or in respect of
it or any Relevant Group for any past period. There is no dispute or claim
concerning any Tax Liability of the Company either (i) threatened, claimed or
raised by any Taxing Authority or (ii) of which the Company is otherwise aware.
There are no Liens for Taxes upon the Assets and Properties of the Company other
than Liens for Taxes not yet due. Section 2.11(d) of the Company Disclosure
Schedule indicates those Tax Returns, if any, of the Company and each member of
any Relevant Group that have been audited or examined by Taxing Authorities, and
indicates those Tax Returns of the Company and each member of any Relevant Group
that currently are the subject of audit or examination. The Company has made
available to Broadcom complete and correct copies of all federal, state, local
and foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company and
each member of any Relevant Group since the fiscal year ended December 31, 1997.
(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or with
respect to any Tax assessment or deficiency affecting the Company or any
Relevant Group.
(f) The Company has not received any written ruling related to Taxes
or entered into any agreement with a Taxing Authority relating to Taxes.
(g) The Company has no liability for the Taxes of any Person other
than the Company (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(h) The Company (i) has neither agreed to make nor is required to
make any adjustment under Section 481 of the Internal Revenue Code by reason of
a change in accounting
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method and (ii) is not a "consenting corporation" within the meaning of Section
341(f)(1) of the Internal Revenue Code.
(i) The Company is not a party to or bound by any obligations under
any tax sharing, tax allocation, tax indemnity or similar agreement or
arrangement.
(j) The Company is not involved in, subject to, or a party to any
joint venture, partnership, Contract or other arrangement that is treated as a
partnership for federal, state, local or foreign Income Tax purposes.
(k) The Company was not included and is not includible in the Tax
Return of any Relevant Group with any corporation other than such a return of
which the Company is the common parent corporation.
(l) The Company has not made any payments, is not obligated to make
any payments, nor is a party to any contract, agreement or arrangement covering
any current or former employee or consultant of the Company that under certain
circumstances could require it to make or give rise to any payments that are not
deductible as a result of the provisions set forth in Section 280G of the
Internal Revenue Code or the treasury regulations thereunder or would result in
an excise tax to the recipient of any such payment under Section 4999 of the
Internal Revenue Code.
(m) No material election has been made with respect to Taxes of the
Company in any Tax Returns that have not been made available to Broadcom.
(n) The Company is not nor has it ever been a United States real
property holding corporation within the meaning of Section 897(c)(1)(A)(ii) of
the Internal Revenue Code.
2.12 Legal Proceedings.
(a) There are no Actions or Proceedings pending or, to the knowledge
of the Company, threatened against, relating to or affecting the Company or its
Assets and Properties;
(b) There are no facts or circumstances known to the Company that
could reasonably be expected to give rise to any Action or Proceeding against,
relating to or affecting the Company or any of its Assets or Properties and have
a material adverse effect on the Business or Condition of the Company;
(c) The Company has not received notice, and does not otherwise have
knowledge of any Orders outstanding against the Company; and the Company has not
received notice and does not otherwise have knowledge of any defects, dangerous
or substandard conditions in the products or materials sold, distributed, or
currently proposed to be sold or distributed by the Company that could
reasonably be expected to result in any claim, suit, demand for arbitration or
notice seeking damages for bodily injury, sickness, disease, death, or damage to
property, or loss of use of property.
(d) Prior to the execution of this Agreement, the Company has made
available to Broadcom all responses of counsel for the Company to auditor's
requests for information for the
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preceding three years (together with any updates provided by such counsel)
regarding Actions or Proceedings pending or threatened against, relating to or
affecting the Company. Section 2.12(b) of the Company Disclosure Schedule sets
forth all Actions or Proceedings relating to or affecting, or, to the knowledge
of the Company, threatened against, the Company or any of its Assets and
Properties during the three-year period prior to the date hereof.
2.13 Compliance with Laws and Orders. Neither the Company nor any of its
directors, officers, Affiliates, agents or employees, in their capacity as such,
has violated since the incorporation of the Company, or is currently in default
or violation under any Law or Order applicable to the Company or any of its
Assets and Properties, except for such violations or defaults that could not
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company.
2.14 Plans; ERISA.
(a) Existence of Plans. Neither the Company nor any of its ERISA
Affiliates maintains or sponsors (or ever maintained or sponsored), or makes or
is required to make contributions to, any Plans, (ii) none of the Plans is or
was a "multi-employer plan", as defined in Section 3(37) of ERISA, (iii) none of
the Plans is or was a "defined benefit pension plan" within the meaning of
Section 3(35) of ERISA, (iv) none of the Plans provides or provided
post-retirement medical or health benefits other than as required by COBRA, (v)
none of the Plans is or was a "welfare benefit fund," as defined in Section
419(e) of the Internal Revenue Code, or an organization described in Section
501(c)(9) or 501(c)(20) of the Internal Revenue Code, (vi) neither the Company,
nor any of its ERISA Affiliates is or was a party to any collective bargaining
agreement, and (vii) neither the Company, nor any of its ERISA Affiliates has
announced or otherwise made any commitment to create or amend any Plan.
Notwithstanding any statement or indication in this Agreement to the contrary,
there are no Plans (A) as to which the Surviving Corporation will be required to
make any contributions or with respect to which the Surviving Corporation shall
have any obligation or liability whatsoever other than any obligation or
liability relating to any claim based on events arising on or before the Closing
and any administrative expenses associated with terminating or maintaining any
such Plan, whether on behalf of any of the current employees of the Company or
on behalf of any other person, after the Closing, or (B) which the Surviving
Corporation will not be able to terminate immediately after the Closing in
accordance with their terms and ERISA. With respect to each of such Plans, at
the Closing there will be no unrecorded liabilities with respect to the
establishment, implementation, operation, administration or termination of any
such Plan, or the termination of the participation in any such Plan by the
Company, or any of its ERISA Affiliates. The Company has made available to
Broadcom true and complete copies of: (I) each of the Plans and any related
funding agreements thereto (including insurance contracts) including all
amendments, (II) the currently effective Summary Plan Description pertaining to
each of the Plans, (III) all annual reports for each of the Plans (including all
related schedules), (IV) the most recently filed PBGC Form 1 (if applicable),
(V) the most recent Internal Revenue Service determination letter, opinion,
notification or advisory letter (as the case may be) for each Plan which is
intended to constitute a qualified plan under Section 401 of the Internal
Revenue Code and each amendment to each of the foregoing documents, and (VI) for
each unfunded Plan, financial statements consisting of (a) the consolidated
statement of assets and liabilities of such Plan as of its most recent valuation
date, and (b) the statement of changes in fund balance and in
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financial position or the statement of changes in net assets available for
benefits under such Plan for the most recently-ended plan year, which such
financial statements shall fairly present the financial condition and the
results of operations of such Plan in accordance with GAAP, consistently
applied, as of such dates.
(b) Present Value of Benefits. The present value of all accrued
benefits under any Plan subject to Title IV of ERISA shall not, as of the
Closing Date, exceed the value of the assets of such Plans allocated to such
accrued benefits, based upon the applicable provisions of the Internal Revenue
Code and ERISA, and each such Plan shall be capable of being terminated as of
the Closing Date in a "standard termination" under Section 4041(b) of ERISA.
With respect to each Plan that is subject to Title IV of ERISA, (i) no amount is
due or owing from the Company, or any of its ERISA Affiliates to the PBGC or to
any "multi-employer Plan" as defined in Section 3(37) of ERISA on account of any
withdrawal therefrom and (ii) no such Plan has been terminated other than in
accordance with ERISA or at a time when the Plan was not sufficiently funded.
The transactions contemplated hereunder, including, the termination of any Plan
at or prior to the Closing, shall not result in any such withdrawal or other
liability under any applicable Laws.
(c) Penalties; Reportable Events. Neither the Company, nor any of
its ERISA Affiliates is subject to any material liability, tax or penalty
whatsoever to any person or agency whomsoever as a result of engaging in a
prohibited transaction under ERISA or the Internal Revenue Code, and neither the
Company, nor any of its ERISA Affiliates has any knowledge of any circumstances
which reasonably might result in any material liability, tax or penalty,
including, a penalty under Section 502 of ERISA, as a result of a breach of any
duty under ERISA or under other Laws. Each Plan which is required to comply with
the provisions of Sections 4980B and 4980C of the Internal Revenue Code, or with
the requirements referred to in Section 4980D of the Internal Revenue Code, has
complied in all material respects. No event has occurred which could subject any
Plan to tax under Section 511 of the Internal Revenue Code. None of the Plans
subject to Title IV of ERISA has, since September 2, 1974, been completely or
partially terminated nor has there been any "reportable event," as such term is
defined in Section 4043(b) of ERISA, with respect to any of the Plans since the
effective date of ERISA nor has any notice of intent to terminate been filed or
given with respect to any such Plan. There has been no (i) withdrawal by the
Company or any of its ERISA Affiliates that is a substantial employer from a
single-employer plan which is a Plan and which has two or more contributing
sponsors at least two of whom are not under common control, as referred to in
Section 4063(b) of ERISA, or (ii) cessation by the Company, or any of its ERISA
Affiliates of operations at a facility causing more than twenty percent of Plan
participants to be separated from employment, as referred to in Section 4062(f)
of ERISA. Neither the Company, nor any of its ERISA Affiliates, nor any other
organization of which any of them are a successor corporation, as defined in
Section 4069(b) of ERISA, have engaged in any transaction described in Section
4069(a) of ERISA.
(d) Deficiencies; Qualification. None of the Plans nor any trust
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in Section 412 of the Internal Revenue Code, whether or not
waived, since the effective date of said section, and no condition has occurred
or exists which by the passage of time could be expected to result in an
accumulated funding deficiency as of the last day of the current plan year of
any such Plan.
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Furthermore, neither the Company nor any of its ERISA Affiliates has any
unfunded liability under ERISA in respect of any of the Plans. Each of the Plans
which is intended to be a qualified plan under Section 401(a) of the Internal
Revenue Code has received a favorable determination letter, opinion,
notification or advisory letter from the Internal Revenue Service or has time
remaining to apply for a favorable determination letter, opinion, notification
or advisory letter from the Internal Revenue Service, and has been operated in
substantial compliance with and in accordance with its terms. All of the Plans
have been administered and maintained in substantial compliance with ERISA, the
Internal Revenue Code and all other applicable Laws. All contributions required
to be made to each of the Plans under the terms of that Plan, ERISA, the
Internal Revenue Code or any other applicable Laws have been timely made. Each
Plan intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of the Internal Revenue Code is in material compliance
with such requirements. There are no Liens against any Assets or Properties of
the Company or any of its ERISA Affiliates under Section 412(n) of the Internal
Revenue Code or Sections 302(f) or 4068 of ERISA. The Interim Financial
Statements properly reflect all amounts required to be accrued as liabilities to
date of such Financial Statements under each of the Plans.
(e) Acceleration. Neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or further acts or
events) will (i) result in any obligation or liability (with respect to accrued
benefits or otherwise) on the part of the Company, Broadcom, the Surviving
Corporation, or any of their respective Subsidiaries to the PBGC, to any Plan,
or to any present or former employee, director, officer, shareholder, contractor
or consultant of (or any of their dependents) Broadcom, the Surviving
Corporation, or any their respective Subsidiaries, (ii) be a trigger event under
any Plan that will result in any payment (whether of severance pay or otherwise)
becoming due to any such present or former employee, officer, director,
shareholder, contractor, or consultant or any of their dependents, or (iii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation theretofore or thereafter due or granted to any employee, officer,
director, shareholder, contractor, or consultant of the Company or any of their
dependents. With respect to any insurance policy which provides, or has
provided, funding for benefits under any Plan, (A) there is and will be no
liability of the Company, Broadcom, the Surviving Corporation or any of their
respective Subsidiaries in the nature of a retroactive or retrospective rate
adjustment, loss sharing arrangement, or actual or contingent liability as of
the Closing Date, nor would there be any such liability if such insurance policy
were terminated as of the Closing Date, and (B) no insurance company issuing any
such policy is in receivership, conservatorship, bankruptcy, liquidation, or
similar proceeding, and, to the knowledge of the Company, no such proceedings
with respect to any insurer are, to the knowledge of the Company, imminent.
(f) COBRA. With respect to each Plan which provides health care
coverage, the Company and each ERISA Affiliate have complied in all material
respects with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and the applicable COBRA regulations and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
and the regulations thereunder, and neither the Company nor any ERISA Affiliate
has incurred any liability under Section 4980B of the Internal Revenue Code.
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(g) Litigation. Other than routine claims for benefits under the
Plans, there are no pending, or, to the best knowledge of the Company,
threatened, Actions or Proceedings involving the Plans, or the fiduciaries,
administrators, or trustees of any of the Plans or the Company, or any of its
ERISA Affiliates as the employer or sponsor under any Plan, with any of the IRS,
the Department of Labor, the PBGC, any participant in or beneficiary of any Plan
or any other person whomsoever. The Company knows of no reasonable basis for any
such claim, lawsuit, dispute or Action or Proceeding.
2.15 Real Property.
(a) Section 2.15(a) of the Company Disclosure Schedule contains a
true and correct list of (i) each parcel of real property leased, utilized
and/or operated by the Company (as lessor or lessee or otherwise) (the "Leased
Real Property") and (ii) all Liens relating to or affecting any parcel of real
property referred to in clause (i) to which the Company is a party. The Company
owns no real property other than Company owned leasehold improvements, if any,
on the Leased Real Property.
(b) Subject to the terms of its respective leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment of the
Leased Real Properties for the full term of the leases (including renewal
periods) relating thereto. Each lease referred to in clause (i) of paragraph (a)
above is a legal, valid and binding agreement, enforceable in accordance with
its terms, of the Company and of each other Person that is a party thereto, and
the Company has not received notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. The Company does not owe brokerage commissions or finders fees with
respect to any such Leased Real Property, except to the extent that the Company
may renew the term of any such lease, in which case, any such commissions and
fees would be in amounts that are reasonable and customary for the spaces so
leased, given their intended use and terms.
(c) All improvements on the Leased Real Property (A) comply with and
are operated in accordance with applicable laws (including, without limitation,
Environmental Laws) and all applicable Liens, Approvals, Contracts, covenants
and restrictions except where such failure to comply will not have a material
adverse effect on the Business or Condition of the Company and (B) are in all
material respects in good operating condition and in a state of good maintenance
and repair, ordinary wear and tear excepted, and such improvements are in all
material respects adequate and suitable for the purposes for which they are
presently being used and there are no condemnation or appropriation proceedings
pending or, to the knowledge of the Company, threatened against any of such real
property or the improvements thereon.
(d) True and correct copies of the documents under which the Leased
Real Property is leased, subleased (to or by the Company or otherwise),
utilized, and/or operated (the "Lease Documents") have been made available to
Broadcom. The Lease Documents are unmodified and in full force and effect, and
there are no other Contracts between the Company and any third parties, or, to
the knowledge of the Company, by and among any third parties, claiming an
interest in the interest of the Company in the Leased Real Property or otherwise
relating to the use and occupancy of the Leased Real Property.
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2.16 Tangible Personal Property. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Company Financials and tangible personal property acquired since the Audited
Financial Statement Date, other than property disposed of since such date in the
ordinary course of business consistent with past practice. All such tangible
personal property (including plant, property and equipment) is free and clear of
all Liens and is adequate and suitable in all material respects for the conduct
by the Company of its business as presently conducted, and is in good working
order and condition in all material respects, ordinary wear and tear excepted,
and its use complies in all material respects with all applicable Laws.
2.17 Intellectual Property.
(a) Section 2.17(a) of the Company Disclosure Schedule lists all
Company Registered Intellectual Property (including all trademarks and service
marks that the Company has used with the intent of creating or benefiting from
any common law rights relating to such marks) and lists any proceedings or
actions pending as of the date hereof before any court or tribunal (including
the PTO or equivalent authority anywhere in the world) related to any of the
Company Registered Intellectual Property.
(b) The Company has all requisite right, title and interest in or
valid and enforceable rights under Contracts or Licenses to use all Company
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Company Intellectual Property, including all Company
Registered Intellectual Property listed in Section 2.17(a) of the Company
Disclosure Schedule, is owned exclusively by the Company (excluding Intellectual
Property licensed to the Company under any License) and is free and clear of any
Liens. The Company (i) owns exclusively all trademarks, service marks and trade
names used by the Company in connection with the operation or conduct of the
business of the Company, including the sale of any products or technology or the
provision of any services by the Company; provided, however, that the Company
may use trademarks, service marks and trade names of third parties which are
licensed to the Company or are in the public domain, and (ii) owns exclusively,
and has good title to, all copyrighted works that are Company products or other
works of authorship that the Company otherwise purports to own.
(c) To the extent that any Company Intellectual Property has been
developed or created by any Person other than the Company, the Company has a
written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or (ii) has obtained a License under or to such Intellectual Property.
(d) The Company has not transferred ownership of or granted any
License of or other right to use or authorized the retention of any rights to
use any Intellectual Property that is or was Company Intellectual Property, to
any other Person.
(e) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Company's
business as it currently is conducted or as reasonably contemplated to be
conducted, including, the design, development, distribution,
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marketing, manufacture, use, import, license, and sale of the products,
technology and services of the Company (including products, technology or
services currently under development).
(f) Section 2.17(f) of the Company Disclosure Schedule lists all
Contracts and Licenses (including all inbound Licenses) to which the Company is
a party with respect to any Intellectual Property. No Person other than the
Company has ownership rights to improvements made by the Company in Intellectual
Property which has been licensed to the Company.
(g) Section 2.17(g) of the Company Disclosure Schedule lists all
Contracts, Licenses and agreements between the Company and any other Person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other Person of
the Intellectual Property of any Person other than the Company.
(h) The operation of the business of the Company as currently
conducted or as presently proposed to be conducted, including the Company's
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services currently
under development) of the Company does not (i) infringe or misappropriate the
Intellectual Property of any Person, (ii) violate any term or provision of any
License or Contract concerning such Intellectual Property (including any
provision required by or imposed pursuant to 35 U.S.C. Sections 200-212 in any
License or Contract to which the Company is a party requiring that products be
manufactured substantially in the United States), (iii) violate the rights of
any Person (including rights to privacy or publicity), or (iv) constitute unfair
competition or an unfair trade practice under any Law, and the Company has not
received notice from any Person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property of any Person or constitutes unfair competition or trade
practices under any Law, including notice of third party patent or other
Intellectual Property rights from a potential licensor of such rights.
(i) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. The Company has registered the copyright with
the U.S. Copyright Office for the latest version of each product or technology
of the Company that constitutes or includes a copyrightable work. In each case
in which the Company has acquired ownership of any Intellectual Property rights
from any Person, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property
(including the right to seek past and future damages with respect to such
Intellectual Property) to the Company and, to the maximum extent provided for by
and required to protect the Company's ownership rights in and to such
Intellectual Property in accordance with applicable Laws, the Company has
recorded each such assignment of Registered Intellectual Property with the
relevant Governmental or Regulatory Authority, including the PTO, the U.S.
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Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company and any
other Person with respect to Company Intellectual Property under which there is
any dispute (or, to the Company's knowledge, facts that may reasonably lead to a
dispute) known to the Company regarding the scope of such Contract or License,
or performance under such Contract or License, including with respect to any
payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property.
(l) The Company has taken all commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other Person to the Company subject to a duty of
confidentiality. Without limiting the generality of the foregoing, the Company
has, and enforces, a policy requiring each employee, consultant and independent
contractor to execute proprietary information, confidentiality and invention and
copyright assignment agreements substantially in the form set forth in Section
2.17(l) of the Company Disclosure Schedule, and all current and former
employees, consultants and independent contractors of the Company have executed
such an agreement, and copies of all such agreements have been made available to
Broadcom for review and (ii) none of the agreements to which the Company is a
party substantially in the form of the "Confidentiality Agreement" attached as
Exhibit 2.18(a)(1) to the Company Disclosure Schedules supersedes, amends or
otherwise modifies any other agreement that (a) is more comprehensive on the
terms dealing with the Company's disclosure of any confidential information
and/or trade secrets to any third-party and/or (b) is more restrictive on a
third-party's use or disclosure of such information and/or trade secrets.
(m) No Company Intellectual Property or product, technology or
service of the Company is subject to any Order or Action or Proceeding or march
in rights that restricts, or that is reasonably expected to restrict in any
manner, the use, transfer or licensing of any Company Intellectual Property by
the Company or that may affect the validity, use or enforceability of such
Company Intellectual Property.
(n) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or otherwise violates any Law.
(o) The Company has taken all actions necessary and appropriate to
assure that there shall be no material adverse change to its business or
electronic systems or material interruptions in the delivery of the Company's
products and services by reason of the advent of the year 2000, including, that
all of its products (including products currently under development) will,
without interruption or manual intervention, continue to consistently,
predictably and accurately record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will consistently, predictably and accurately calculate any
information dependent on or relating to such dates in the
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same manner, and with the same functionality, data integrity and performance, as
such products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. Without limiting the generality of the foregoing, (i) the Company
has taken all actions necessary and appropriate to ensure that the IT systems
and non-IT systems used by the Company in its internal operations will function
properly beyond 1999 (and the Company has no knowledge of any material issues
that have arisen in connection therewith) and (ii) the Company has made
inquiries of the suppliers listed in Section 2.23 of the Company Disclosure
Schedule as to the status of their Year 2000 efforts and as a result thereof has
not uncovered any problems that could materially disrupt or harm the day-to-day
functioning of business and operations of the Company.
(p) Neither this Agreement nor any transactions contemplated by this
Agreement will result in Broadcom's granting any rights or licenses with respect
to the Intellectual Property of Broadcom to any Person pursuant to any Contract
to which the Company is a party or by which any of its Assets and Properties are
bound.
(q) Section 2.17(q) of the Company Disclosure Schedule sets forth a
list of (x) all software which the Company has licensed from any third party
which is used by the Company in its products or otherwise in its business (other
than standard off-the-shelf software) and (y) a list of all "freeware" and
"shareware" incorporated into any product now or heretofore shipped by the
Company. The Company has all rights necessary to the use of such software,
"freeware" and "shareware."
(r) The Company's products comply in all material respects with the
applicable standards and with the feature specifications and performance
standards set forth in Section 2.17(r) of the Company Disclosure Schedule. There
are no outstanding claims (or facts that may reasonably lead to a claim) for
breach of warranties by the Company in connection with the foregoing. All
product performance comparisons heretofore furnished by the Company to customers
or Broadcom are accurate in all material respects as of the dates so furnished
(except that, in the case of product performance comparisons made as of a
specified earlier date, such comparisons shall be accurate as of such specified
earlier date, and, in the case of product performance comparisons superseded by
a subsequent product performance comparison furnished to the customer before the
customer's acquisition of a license on the product covered by the superseded
comparison, the superseding comparison shall be accurate in all material
respects and the superseded comparison shall be disregarded).
(s) The Company has taken all necessary and appropriate steps to
protect and preserve ownership of Company Intellectual Property. The Company has
secured valid written assignments from all consultants and employees who
contributed to the creation or development of the Company Intellectual Property.
In the event that the consultant is concurrently employed by the Company and a
third party, the Company has taken additional steps to ensure that any Company
Intellectual Property developed by such a consultant does not belong to the
third party or conflict with the third party's employment agreement. Such steps
include ensuring that all research and development work performed by such a
consultant are performed only on the Company's facilities and only using the
Company's resources, except as set forth in Section 2.17(s) of the Company
Disclosure Schedule.
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2.18 Contracts.
(a) Section 2.18(a)(1) of the Company Disclosure Schedule contains a
true and complete list of each of the Contracts (true and complete copies or, if
none, reasonably complete and accurate written descriptions of which, together
with all amendments and supplements thereto and all waivers of any terms
thereof, have been made available to Broadcom prior to the execution of this
Agreement), to which the Company is a party or by which any of its Assets and
Properties is bound (other than employee offer letters). Section 2.18(a)(2) of
the Company Disclosure Schedule contains a true and complete list of each
Contract of the Company (i) not terminable by the Company upon thirty (30) days
(or less) notice by the Company without penalty or obligation to make payments
based on such termination or (ii) which provides for continuing design or other
engineering, research and development services by the Surviving Corporation
after the Closing Date.
(b) Each Contract required to be disclosed in Section 2.18(a) of the
Company Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, and to
the knowledge of the Company, each other party thereto; and, to the knowledge of
the Company, no other party to such Contract is, nor has received notice that it
is, in violation or breach of or default under any such Contract (or with notice
or lapse of time or both, would be in violation or breach of or default under
any such Contract).
(c) The Company is not a party to or bound by any Contract that has
been or could be substantially likely to be, individually or in the aggregate
with any other similar Contracts, materially adverse to the Business or
Condition of the Company or that has been or could be substantially likely to
result, individually or in the aggregate with any such other Contracts, in
Losses to the Company or be materially adverse to the Business or Condition of
the Company.
(d) The Company is not a party to or bound by any Contract that (i)
automatically terminates or allows termination by the other party thereto upon
consummation of the transactions contemplated by this Agreement or (ii) contains
any covenant or other provision which limits the Company's ability to compete
with any Person in any line of business or in any area or territory.
2.19 Insurance. (a) Section 2.19(a) of the Company Disclosure Schedule
contains a true and complete list (including the names and addresses of the
insurers, the expiration dates thereof, the annual premiums and payment terms
thereof, the period of time covered thereby and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or
affect or relate to the ownership, use or operation of any of the Assets and
Properties of the Company and that (A) have been issued to the Company or (B) to
the knowledge of the Company, have been issued to any Person (other than the
Company) for the benefit of the Company. The insurance coverage provided by the
policies set forth in Section 2.19(a) of the Company Disclosure Schedule will
not terminate or lapse by reason of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements. Each policy listed in Section
2.19(a) of the Company Disclosure
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Schedule is valid and binding and in full force and effect, all premiums due
thereunder have been paid when due and neither the Company or the Person to whom
such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder, and the
Company has no knowledge of any reason or state of facts that could reasonably
be expected to lead to the cancellation of such policies or of any threatened
termination of, or material premium increase with respect to, any of such
policies. The insurance policies listed in Section 2.19(a) of the Company
Disclosure Schedule, (i) in light of the business, operations and Assets and
Properties of the Company are in amounts and have coverages that are reasonable
and customary for Persons engaged in similar businesses and operations and
having similar Assets and Properties and (ii) are in amounts and have coverages
as required by any Contract to which the Company is a party or by which any of
its Assets and Properties is bound.
(b) Section 2.19(b) of the Company Disclosure Schedule contains a
list of all claims made under any insurance policies covering the Company in the
last two years. The Company has not received notice that any insurer under any
policy referred to in this Section is denying, disputing or questioning
liability with respect to a claim thereunder or defending under a reservation of
rights clause. The Company has, in the reasonable judgment of the Company, in
light of its business, location, operations and Assets and Properties,
maintained, at all times, without interruption, appropriate insurance, both in
scope and amount of coverages.
2.20 Affiliate Transactions.
(a) There are no Contracts or Liabilities between the Company, on
the one hand, and (A) any current or former officer, director, shareholder, or
to the Company's knowledge, any Affiliate or Associate of the Company or (B) any
Person who, to the Company's knowledge, is an Associate of any such officer,
director, shareholder or Affiliate, on the other hand, (i) the Company does not
provide or cause to be provided any assets, services or facilities to any such
current or former officer, director, shareholder, Affiliate or Associate, (ii)
neither the Company nor any such current or former officer, director,
shareholder, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company and (iii) the Company does not
beneficially own, directly or indirectly, any Investment Assets of any such
current or former officer, director, shareholder, Affiliate or Associate.
(b) Each of the Contracts and Liabilities listed in Section 2.20(a)
of the Company Disclosure Schedule were entered into or incurred, as the case
may be, on terms no less favorable to the Company (in the reasonable judgment of
the Company) than if such Contract or Liability was entered into or incurred on
an arm's-length basis on competitive terms. Any Contract to which the Company is
a party and in which any director of the Company has a financial interest in
such Contract was approved by a majority of the disinterested members of the
board of directors of the Company and/or shareholders of the Company.
2.21 Employees; Labor Relations.
(a) The Company is not a party to any collective bargaining
agreement and there is no unfair labor practice or labor arbitration proceedings
pending with respect to the Company, or, to the knowledge of the Company,
threatened, and there are no facts or circumstances known
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to the Company that could reasonably be expected to give rise to such complaint
or claim. To the knowledge of the Company, there are no organizational efforts
presently underway or threatened involving any employees of the Company or any
of the employees performing work for the Company but provided by an outside
employment agency, if any. There has been no work stoppage, strike or other
concerted action by employees of the Company.
(b) All employees of the Company are employed at will, and no
employees of the Company are represented by a union. All independent contractors
of the Company are properly classified as an independent contractor for purposes
of any employment related law or regulation or any law or regulation concerning
the status of independent contractors. Section 2.21(b) of the Company Disclosure
Schedule sets forth, individually and by category, the name of each officer,
employee, consultant and independent contractor, together with such person's
position or function, annual base salary or wage and any incentive, severance or
bonus arrangements with respect to such person. The completion of the
transactions contemplated by this Agreement will not result in any payment or
increased payment becoming due from the Company to any current or former
officer, director, or employee of, or consultant to, the Company, and to the
knowledge of the Company no employee of the Company has made any threat, or
otherwise revealed an intent, to terminate such employee's relationship with the
Company, for any reason, including because of the consummation of the
transactions contemplated by this Agreement. The Company is not a party to any
agreement for the provision of labor from any outside agency. To the knowledge
of the Company, since January 1, 1997, there have been no claims by employees of
such outside agencies, if any, with regard to employees assigned to work for the
Company, and no claims by any governmental agency with regard to such employees.
(c) Since January 1, 1997, there have been no filed federal or state
claims based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or by any of the employees performing work for
the Company but provided by an outside employment agency, and, to the knowledge
of the Company, there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to such complaint or claim. The
Company has materially complied with all laws related to the employment of
employees and since January 1, 1997, the Company has not received any notice of
any claim that it has not complied in any material respect with any Laws
relating to the employment of employees, including, any provisions thereof
relating to wages, hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment discrimination, the
WARN Act, employee safety, or that it is liable for any arrearages of wages or
any taxes or penalties for failure to comply with any of the foregoing.
(d) The Company has no written policies and/or employee handbooks or
manuals.
(e) To the knowledge of the Company, no officer, employee or
consultant of the Company is obligated under any Contract or other agreement or
subject to any Order or Law that would interfere with the Company's business as
currently conducted. Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business as presently conducted nor any
activity of such officers, employees or consultants in connection with the
carrying on of the Company's business as presently conducted, will conflict with
or result in a breach of the terms, conditions or provisions of, constitute a
default under, or trigger a condition
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precedent to any rights under any Contract or other agreement under which any of
such officer's, employees or consultants is now bound.
2.22 Environmental Matters. To the knowledge of the Company, (i) all
Hazardous Materials and wastes have been disposed of in accordance with all
Environmental Laws; (ii) the Company has received no notice (verbal or written)
of any noncompliance of any Site with Environmental Laws; (iii) no notices,
administrative actions or suits are pending or, to the knowledge of the Company,
threatened against the Company relating to a violation of any Environmental
Laws; (iv) the Company has not been notified that it is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) or state analog, arising out of events
occurring prior to the Closing Date; and (v) there have not been in the past,
and are not now, any Hazardous Materials on, under or migrating to or from any
Site, the presence of which could, individually or in the aggregate, be
reasonably expected to have a material effect on the Business or Condition of
the Company.
2.23 Substantial Suppliers. Section 2.23 of the Company Disclosure
Schedule lists the fifteen largest suppliers of the Company on the basis of cost
of goods or services purchased for the most recent fiscal year. No such supplier
has ceased or materially reduced its sales or provision of services to the
Company since December 31, 1999 or, to the knowledge of the Company, has
threatened to cease or materially reduce such sales or provision of services
after the date hereof including, after consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements. To the knowledge of
the Company, no such supplier is threatened with bankruptcy or insolvency.
2.24 Accounts Receivable. The accounts and notes receivable of the Company
reflected on the Company Financials, and all accounts and notes receivable
arising subsequent to the Unaudited Financial Statement Date, (a) are legal,
valid and binding obligations of the respective debtors enforceable in
accordance with their respective terms, (b) are not subject to any valid set-off
or counterclaim and (c) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement.
2.25 Other Negotiations; Brokers; Third Party Expenses. Neither the
Company nor any of its officers, directors, employees, agents (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company or any such Affiliate) (a)
has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving the Company
which could result in Broadcom, the Company or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of such
Persons being subject to any claim for liability to said Person as a result of
entering into this Agreement or consummating the transactions contemplated
hereby. No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or similar fee or
commission in connection with this Agreement and the transactions contemplated
hereby based on arrangements made by or on behalf of the Company. Section 2.25
of the Company Disclosure Schedule sets forth a reasonable estimate of all Third
Party Expenses expected to be incurred by the Company in connection with the
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negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby ("Estimated Third Party Expenses").
2.26 Banks and Brokerage Accounts. Section 2.26 of the Company Disclosure
Schedule sets forth (a) a true and complete list of the names and locations of
all banks, trust companies, securities brokers and other financial institutions
at which the Company has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship, (b) a true and complete list
and description of each such account, box and relationship, indicating in each
case the account number and the names of the respective officers, employees,
agents or other similar representatives of the Company having signatory power
with respect thereto and (c) a list of each Investment Asset, the name of the
record and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.
2.27 Warranty Obligations.
(a) Section 2.27(a) of the Company Disclosure Schedule sets forth
(i) a list of all forms of written warranties, guarantees and written warranty
policies of the Company in respect of any of the Company's products and
services, which are currently in effect (the "Warranty Obligations"), and the
duration of each such Warranty Obligation and (ii) each of the Warranty
Obligations which is subject to any dispute or, to the knowledge of the Company,
threatened dispute. True and correct copies of the Warranty Obligations have
been made available to Broadcom prior to the execution of this Agreement.
(b) (i) there have not been any material deviations from the
Warranty Obligations, and salespersons, employees and agents of the Company are
not authorized to undertake obligations to any customer or other Person in
excess of such Warranty Obligations and (ii) the balance sheet included in the
Interim Financial Statements reflects adequate reserves for Warranty
Obligations. All products manufactured, designed, licensed, leased, rented or
sold by the Company (A) are and were free from material defects in construction
and design and (B) satisfy any and all Contract or other specifications related
thereto to the extent stated in writing in such Contracts or specifications, in
each case, in all material respects.
2.28 Foreign Corrupt Practices Act. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other similar unlawful payment.
2.29 Operating Plan. The Company has made available to Broadcom the
written budget or other written operating plan for the balance of 2000 (the
"Operating Plan"). The Company makes no representation or warranty regarding its
ability to successfully execute the Operating Plan, except that the Company
represents and warrants that the Operating Plan was
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prepared in good faith and is based on assumptions believed by it to be
reasonable as of the date of this Agreement.
2.30 Approvals.
(a) Section 2.30(a) of the Company Disclosure Schedule contains a
list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by the Company which are required to be given
to or obtained by the Company from any and all Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements (other than the filing of the
Agreement of Merger, together with the required officers' certificates, and such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under state or federal securities laws).
(b) Section 2.30(b) of the Company Disclosure Schedule contains a
list of all material Approvals which are required to be given to or obtained by
the Company from any and all third parties other than Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(c) The Company has obtained all material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by the Company in the manner as it is currently being conducted and
since January 1, 1997, there has been no written notice received by the Company
of any material violation or material non-compliance with any such Approvals.
All material Approvals from Governmental or Regulatory Authorities necessary to
conduct the business conducted by the Company as it is currently being conducted
are set forth in Section 2.30(c) of the Company Disclosure Schedule.
(d) The affirmative vote or consent of the holders of (i) a majority
of the shares of Company Common Stock outstanding as of the applicable record
date, (ii) a majority of the shares of Company Preferred Stock outstanding as of
the applicable record date, voting as a separate class, and (iii) a majority of
the shares of Company Series B Preferred Stock outstanding as of the applicable
record date, voting as a separate series, are the only votes of the holders of
any of Company Capital Stock necessary to approve this Agreement and the Merger
and the transactions contemplated hereby.
(e) The shares owned by the Major Shareholders of the Company who
have concurrently herewith entered into Support Agreements constitute (i) a
majority of the outstanding shares of Company Common Stock, (ii) a majority of
the outstanding shares of Company Series A Preferred Stock, (iii) a majority of
the outstanding shares of Company Series B Preferred Stock, (iv) a majority of
the outstanding shares of Company Preferred Stock and (v) a majority of the
outstanding shares of Company Capital Stock (on an "as converted to Company
Common Stock" basis).
2.31 Takeover Statutes. No Takeover Statute applicable to the Company is
applicable to the Merger or the transactions contemplated hereby.
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2.32 Permit Application; Information Statement. The information supplied
by the Company for inclusion in the application for issuance of a California
Permit pursuant to which the shares of Broadcom Common Stock to be issued in the
Merger and (if deemed necessary by Broadcom in its good faith judgment) the
Company Options to be assumed in the Merger will be qualified under the
California Code (the "Permit Application") shall not at the time the Fairness
Hearing is held pursuant to Section 25142 of the California Code and the time
the qualification of such securities is effective under Section 25122 of the
California Code contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the information statement to be sent to the shareholders of the Company in
connection with the Company shareholders' consideration of the Merger (the
"Company Shareholder Action") (such information statement as amended or
supplemented is referred to herein as the "Information Statement") shall not, on
the date the Information Statement is first mailed to the Company's
shareholders, at the time of the Company Shareholder Action and at the Effective
Time, contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies or written consents for the Company Shareholder
Action which has become false or misleading. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied by Broadcom which is contained in the Permit Application or
the Information Statement.
2.33 No Solicitation. Since August 9, 2000, the Company has not taken nor
has the Company permitted any of the Company's officers, directors, employees,
shareholders, attorneys, investment advisors, agents, representatives,
Affiliates or Associates (collectively, "Representatives") to (directly or
indirectly), take any of the actions proscribed to be taken on or after the date
of this Agreement by Section 4.2 with any Person other than Broadcom and its
designees.
2.34 Design-Wins. The Company has delivered to Broadcom a list of
statements from customers or potential customers that those customers or
potential customers are designing equipment which will incorporate components
manufactured by the Company.
2.35 Products. Section 2.35 of the Company Disclosure Schedule lists all
of the products developed or being developed by the Company, including the
development status for each such product.
2.36 Backlog. Section 2.36 of the Company Disclosure Schedule contains a
list of the Company's backlog as of August 9, 2000.
2.37 Disclosure. No representation or warranty made by Company contained
in this Agreement, and no statement contained in the Company Disclosure Schedule
or in any certificate, list or other writing furnished to Broadcom pursuant to
any provision of this Agreement (including the Company Financials and the notes
thereto) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the
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statements herein or therein, in the light of the circumstances under which they
were made, not misleading. The Company has provided Broadcom with all of the
Contracts and Licenses heretofore requested on behalf of Broadcom in writing,
and all other material information concerning the Company, in the possession,
custody or control of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BROADCOM
Broadcom hereby represents and warrants to the Company, subject to such
exceptions as are specifically disclosed with respect to specific numbered and
lettered sections and subsections of this Article 3 in the disclosure schedule
and schedule of exceptions (the "Broadcom Disclosure Schedule") delivered
herewith and dated as of the date hereof, and numbered with corresponding
numbered and lettered sections and subsections, as follows:
3.1 Organization and Qualification. Broadcom is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California. Broadcom has full corporate power and authority to conduct its
business as now conducted and as currently proposed to be conducted and to own,
use and lease its Assets and Properties. Broadcom is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use, licensing or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
material adverse effect on the Business or Condition of Broadcom.
3.2 Authority Relative to this Agreement. Broadcom has full corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by Broadcom of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Broadcom of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action by the board of directors of Broadcom, and no
other action on the part of the board of directors of Broadcom is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which it is a party and the consummation by Broadcom of
the transactions contemplated hereby and thereby. This Agreement and the
Ancillary Agreements to which Broadcom is a party have been or will be, as
applicable, duly and validly executed and delivered by Broadcom and, assuming
the due authorization, execution and delivery hereof by the Company and/or the
other parties thereto, constitutes or will constitute, as applicable, a legal,
valid and binding obligation of Broadcom enforceable against Broadcom in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
3.3 Issuance of Broadcom Common Stock. The shares of Broadcom Common Stock
to be issued pursuant to the Merger, when issued, will be duly authorized,
validly issued, fully paid,
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non-assessable and issued in compliance with applicable federal and state
securities laws subject to the truth and accuracy of the representations made by
the Company in Section 2.3.
3.4 SEC Documents; Broadcom Financial Statements. Broadcom has furnished
or made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since December 3, 1999, all in the form so filed. As of
their respective filing dates, such SEC Documents filed by Broadcom and all SEC
Documents filed after the date hereof but before the Closing complied or, if
filed after the date hereof, will comply in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, as the case may be, and none of the SEC
Documents contained or will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent such SEC Documents have been
corrected, updated or superseded by a document subsequently filed with the SEC.
The financial statements of Broadcom, including the notes thereto, included in
the SEC Documents (the "Broadcom Financial Statements") comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of Broadcom at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments), it being understood that such financial statements may be required
to be restated from time to time as may be required under applicable pooling of
interests accounting rules in connection with past, present or future
acquisitions. There has been no change in Broadcom's accounting policies except
as described in the notes to the Broadcom Financial Statements. Except as
reflected or reserved against in the Broadcom Financial Statements, Broadcom has
no material Liabilities, except for Liabilities and obligations (i) incurred in
the ordinary course of business or (ii) that would not be required to be
reflected or reserved against in the balance sheet of Broadcom prepared in
accordance with GAAP.
3.5 No Conflicts. The execution and delivery by Broadcom of this Agreement
and the Ancillary Agreements to which it is a party does not, and the
performance by Broadcom of its obligations under this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the articles of incorporation or bylaws of
Broadcom;
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Broadcom or its Assets or Properties; or
(c) except as would not have a material adverse effect on the
Business or Condition of Broadcom, (i) conflict with or result in a violation or
breach of, (ii) constitute a default (or an event that, with or without notice
or lapse of time or both, would constitute a default) under, (iii) require
Broadcom to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result of the terms of (except for (A) the
filing of the Agreement of Merger, together with the required officer's
certificate; (B) such consents
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approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state or federal securities laws; and (C) such
filings as may be required under the HSR Act), (iv) result in or give to any
Person any right of termination, cancellation, acceleration or modification in
or with respect to, (v) result in or give to any person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon Broadcom or any of its Assets or
Properties, or (vii) result in the loss of a material benefit under, any of the
terms, conditions or provisions of any Contract or License to which Broadcom is
a party or by which any of its Assets and Properties are bound.
3.6 Information to be Supplied by Broadcom. The information supplied by
Broadcom for inclusion in the Permit Application shall not either at the time
the Fairness Hearing is held pursuant to Section 25142 of the California Code or
the time the qualification of such securities is effective under Section 25122
of the California Code, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The information supplied by Broadcom for inclusion in
the Information Statement shall not, on the date the Information Statement is
first mailed to the Company's shareholders, at the time of the Company
Shareholder Action and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which it is made, not false or misleading; or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies or written
consents for the Company Shareholder Action which has become false or
misleading. Notwithstanding the foregoing, Broadcom makes no representation,
warranty or covenant with respect to any information supplied by the Company
which is contained in any of the foregoing documents.
3.7 Investment Advisors. No broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Broadcom.
3.8 Tax-Free Reorganization. To the knowledge of Broadcom after Good Faith
Consultation with Broadcom's independent accountants, neither Broadcom nor any
of its directors, officers or shareholders has taken any action which could
reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
3.9 Capitalization. The authorized capital stock of Broadcom consists of
800,000,000 shares of Class A Common Stock, $0.0001 par value per share,
400,000,000 shares of Class B Common Stock, $0.0001 par value per share, and
10,000,000 shares of Preferred Stock, $0.0001 par value per share, of which
125,893,529 shares of Class A Common Stock, 92,229,543 shares of Class B Common
Stock and no shares of Preferred Stock were issued and outstanding as of the
close of business on June 30, 2000. The shares of Broadcom Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid, and non-assessable.
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ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (unless the Company is
required to take such action pursuant to this Agreement or Broadcom shall give
its prior consent in writing which consent shall not be unreasonably withheld)
to carry on its business in the usual, regular and ordinary course consistent
with past practice and in any event consistent with the Company's Operating Plan
provided prior to the date of this Agreement to Broadcom, to pay its Liabilities
and Taxes consistent with the Company's past practices and to pay or perform
other obligations when due (other than Liabilities, Taxes and other obligations,
if any, contested in good faith), and, to the extent consistent with such
business, to use commercially reasonable efforts and institute all policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, independent
contractors and other Persons having business dealings with it, all with the
express purpose and intent of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Broadcom,
knowingly, and, after review of this Agreement, take or agree in writing or
otherwise to take, any action that would result in the occurrence of any of the
changes described in Section 2.9 of this Agreement or knowingly, after review of
this Agreement, take, or agree in writing otherwise to take, any other action
that would make any of its representations or warranties contained in this
Agreement untrue or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder or knowingly cause any condition in Section 6.1 or Section 6.3 not to
be satisfied. Without limiting the generality of the foregoing, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, except as set forth in the
Company Disclosure Schedule or as required or expressly permitted by this
Agreement, the Company shall not do, cause or permit any of the following,
without the prior written consent of Broadcom:
(a) Charter Documents: cause or permit any amendments to its
articles of incorporation or bylaws;
(b) Dividends; Changes in Capital Stock: declare or pay any dividend
on or make any other distribution (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in connection
with any termination of service to it;
(c) Stock Option Plans: except as set forth on Section 1.6(d)(ii) of
the Company Disclosure Schedule, accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans; or grant any Option with an exercise
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price of less than the fair market value of the Company Common Stock on the date
the Option was granted (as determined in good faith by the Company's Board of
Directors following consultation with, and consistent with the advice provided
by, each of the Company's and Broadcom's independent public accountants);
(d) Contracts: enter into any Contract or commitment, or violate,
amend or otherwise modify or waive any of the terms of any of its Contracts,
other than Contracts in the ordinary course of business consistent with past
practice which involve total obligations of less than one hundred thousand
dollars ($100,000) and which are not otherwise material to the business of the
Company;
(e) Issuance of Securities: issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, any shares of Company Capital Stock
or securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than the issuance
of shares of its Common Stock pursuant to the conversion of outstanding shares
of Company Preferred Stock and the exercise of Company Options or Company
Warrants outstanding as of the date of this Agreement, and grants to employees
hired after the date of this Agreement;
(f) Intellectual Property: transfer to any person or entity any
rights to any Company Intellectual Property other than non-exclusive licenses in
connection with the sale of Company products in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights: enter into or amend any Contract pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of Company's products or technology;
(h) Dispositions: sell, lease, license or otherwise dispose of or
encumber any of Company's properties or assets, except for sales of products
(and related nonexclusive licenses) in the ordinary course of business
consistent with past practice;
(i) Indebtedness: incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Leases: enter into any operating lease;
(k) Payment of Obligations: pay, discharge or satisfy in an amount
in excess of one hundred thousand dollars ($100,000) in any one case or two
hundred fifty thousand dollars ($250,000) in the aggregate, any claim, liability
or obligation (absolute, accrued, asserted or otherwise) arising other than in
the ordinary course of business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in the Company
Financials and reasonable expenses incurred in connection with the transactions
contemplated by this Agreement;
(l) Capital Expenditures: make any capital expenditures, capital
additions or capital improvements other than in the ordinary course of business
or in an amount not
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exceeding one hundred thousand dollars ($100,000) in any one case or two hundred
fifty thousand dollars ($250,000) in the aggregate;
(m) Insurance: reduce the amount of any insurance coverage provided
by existing insurance policies;
(n) Termination or Waiver: terminate or waive any right of
substantial value;
(o) Employee Benefit Plans; New Hires; Pay Increases: adopt or amend
any employee benefit or stock purchase or option plan, or hire any new director
level or officer level, consultant, employee, pay any special bonus or special
remuneration to any employee, consultant or director or increase the salaries,
wage rates or compensation of any employee or consultant;
(p) Severance Arrangements: grant any severance or termination pay
(i) to any director, officer or consultant or (ii) to any other employee or
consultant except payments made pursuant to written agreements outstanding on
the date hereof;
(q) Lawsuits: commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Broadcom prior to the
filing of such a suit or (iii) for a breach of this Agreement;
(r) Acquisitions: acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(s) Taxes: make or change any election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any Tax Return or any
amendment to a Tax Return other than Company's corporate Tax Return for the year
ended December 31, 1999, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(t) Revaluation: revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable; or
(u) Other: take or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (t) above; or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the date
of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not take, nor will the Company permit any of the
Company's officers, directors, employees, shareholders, attorneys, investment
advisors, agents, representatives, Affiliates or Associates to (directly or
indirectly), take any of the following actions with any Person other than
Broadcom and its designees: (a) solicit, encourage, initiate, review or
participate in or conduct discussions with or engage in negotiations with, any
Person relating to any offer or proposal, oral, written or otherwise, formal or
informal (a "Competing Proposed Transaction"), with respect to any
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<PAGE> 45
possible Business Combination with the Company or any of its Subsidiaries
(whether such Subsidiaries are in existence on the date hereof or are hereafter
organized), (b) provide information with respect to the Company to any Person,
other than Broadcom, relating to (or which the Company believes would be used
for the purpose of formulating an offer or proposal with respect to), or
otherwise assist, cooperate with, facilitate or encourage any effort or attempt
by any such Person with regard to, any possible Business Combination with the
Company or any Subsidiary of the Company (whether such Subsidiaries are in
existence on the date hereof or are hereafter organized), (c) agree to, enter
into a Contract with any Person, other than Broadcom, providing for, or approve
a Business Combination with the Company or any Subsidiary (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(d) make or authorize any statement, recommendation, solicitation or endorsement
in support of any possible Business Combination with the Company or any
Subsidiary (whether such Subsidiary is in existence on the date hereof or are
hereafter organized) other than by Broadcom, or (e) authorize or permit any of
the Company's Representatives to take any such action. The Company shall
immediately cease and cause to be terminated any such contacts or negotiations
with any Person relating to any such transaction or Business Combination. It
shall not be a breach of this Section 4.2 if the Company or its Representatives
receive inquiries regarding any Business Combination; provided that the Company
complies with the notice provisions of this Section 4.2 and the Company and its
Representatives comply with the confidentiality obligations of the
Confidentiality Agreement and the Company and any of its Representatives respond
to such inquiries by refusing to discuss the matter further with such third
party or by indicating, consistent with their obligations under this Section 4.2
and the Confidentiality Agreement, that neither the Representative nor the
Company may discuss the matter. In addition to the foregoing, if the Company
receives prior to the Effective Time or the termination of this Agreement any
offer or proposal (formal or informal, oral, written or otherwise) relating to,
or any inquiry or contact from any Person with respect to, a Competing Proposed
Transaction, the Company shall immediately notify Broadcom thereof, such notice
to include the identity of the person proposing such Competing Proposal
Transaction and will keep Broadcom informed of the status of any such Competing
Proposed Transaction; provided, however, that this provision shall not in any
way be deemed to limit the obligations of the Company and its Representatives
set forth in the second preceding sentence. Each of the Company and Broadcom
acknowledge that this Section 4.2 was a significant inducement for Broadcom to
enter into this Agreement and the absence of such provision would have resulted
in either (i) a material reduction in the merger consideration to be paid to the
shareholders of the Company or (ii) a failure to induce Broadcom to enter into
this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Information Statement; Permit Application.
(a) As soon as practicable after the execution of this Agreement,
the Company shall prepare, with the full cooperation of Broadcom, the
Information Statement for the shareholders of the Company to approve this
Agreement, the Agreement of Merger and the transactions contemplated hereby.
Broadcom and the Company shall each use reasonable commercial efforts to cause
the Information Statement to comply with applicable federal and
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state securities laws requirements. Each of Broadcom and the Company agrees to
provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the
Information Statement, or in any amendments or supplements thereto, and to cause
its counsel and auditors to cooperate with the other's counsel and auditors in
the preparation of the Information Statement. The Company will promptly advise
Broadcom, and Broadcom will promptly advise the Company, in writing if at any
time prior to the Effective Time either the Company or Broadcom, as applicable,
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Information Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. The Information Statement shall contain the recommendation of
the board of directors of the Company (which was unanimous) that the Company's
shareholders approve the Merger and this Agreement and the conclusion of the
board of directors that the terms and conditions of the Merger are advisable and
fair and reasonable to, and in the best interests of, the shareholders of the
Company. Anything to the contrary contained herein notwithstanding, the Company
shall not include in the Information Statement any information with respect to
Broadcom or its affiliates or associates, the form and content of which
information shall not have been approved by Broadcom prior to such inclusion.
(b) As soon as practicable after the execution of this Agreement,
Broadcom shall prepare, with the full cooperation of the Company, and file, the
Permit Application, provided that Broadcom shall exercise commercially
reasonable efforts to so prepare and file such Permit Application within ten
(10) Business Days therefrom. Broadcom and the Company shall each use
commercially reasonable efforts to cause the Permit Application to comply with
the requirements of applicable federal and state laws. Each of Broadcom and the
Company agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Permit Application, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation and completion of the Permit Application. Broadcom,
with the full cooperation of the Company, will use commercially reasonable
efforts to respond to any comments from the California Department of
Corporations and use commercially reasonable efforts to have the California
Permit granted as soon as practicable after such filing, including, scheduling
the Fairness Hearing on the first practicable date after filing of the Permit
Application. The Company will promptly advise Broadcom, and Broadcom will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Broadcom, as applicable, shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Permit Application in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law. Anything to
the contrary contained herein notwithstanding, Broadcom shall not include in the
Permit Application any information with respect to the Company or its affiliates
or associates, the form and content of which information shall not have been
approved by the Company prior to such inclusion.
(c) If notwithstanding such exercise of commercially reasonable
efforts, the parties fail to obtain such California Permit within fifteen (15)
Business Days after the Fairness Hearing or such shorter or longer period as the
parties agree in writing (and, notwithstanding the
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foregoing, in any event by October 30, 2000, the parties agree that Broadcom,
with full cooperation of the Company, shall promptly prepare and file with the
SEC a Registration Statement on Form S-4 or successor form (the "Registration
Statement") related to the offer and sale of Broadcom Common Stock in connection
with the offer and sale of the Broadcom Common Stock in connection with the
Merger.
5.2 Shareholder Approval. As soon as practicable following the execution
and delivery of this Agreement, the Company shall give written notice of this
Agreement and the proposed Merger to all Company shareholders and shall use
commercially reasonable efforts to solicit and obtain from shareholders of the
Company written consents in favor of the Merger and this Agreement and take all
other action necessary in accordance with the California Code and its articles
of incorporation and bylaws to secure the written consent of its shareholders
required to effect the Merger and the other transactions contemplated by this
Agreement before October 30, 2000. The Company shall submit this Agreement to
its shareholders for adoption whether or not the Company's board of directors
determines at any time subsequent to declaring its advisability that this
Agreement is no longer advisable and recommends that its shareholders reject it.
The Company shall consult with Broadcom regarding the date of the Company
Shareholder Action and shall not postpone or adjourn (other than for the absence
of a quorum) any solicitation of written consents of the shareholders of the
Company without the consent of Broadcom, which consent shall not be unreasonably
withheld. The materials submitted to the shareholders of the Company in respect
of the Merger shall have been subject to prior review and comment by Broadcom
and shall include (a) information regarding the Company, the terms of the Merger
and this Agreement, (b) a statement to the effect that the board of directors of
the Company has unanimously recommended that the Company's shareholders approve
the Merger and this Agreement and the transactions contemplated hereby and
approve and execute such other documents as may be required to satisfy the
applicable requirements of the Securities Act in connection with the issuance
and sale of Broadcom Common Stock in connection with the Merger, (c) a statement
to the effect that the board of directors of the Company has concluded that the
terms and conditions of the Merger are advisable, fair and reasonable to, and in
the best interests of, the Company's shareholders and (d) such other documents
as may be required to satisfy the applicable requirements of the Securities Act
in connection with the issuance and sale of Broadcom Common Stock in connection
with the Merger.
5.3 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (a) give Broadcom and its officers,
employees, accountants, counsel, financing sources and other agents and
representatives reasonable access to all buildings, offices, and other
facilities and to all Books and Records of the Company, whether located on the
premises of the Company or at another location; (b) permit Broadcom to make such
inspections as they may reasonably require; (c) cause its officers to furnish
Broadcom such financial, operating, technical and product data and other
information with respect to the business and Assets and Properties of the
Company as Broadcom from time to time may reasonably request, including
financial statements and schedules; (d) allow Broadcom the opportunity to
interview such employees and other personnel and Affiliates of the Company with
the Company's prior written consent, which consent shall not be unreasonably
withheld or delayed; and (e) assist and cooperate with Broadcom in the
development of integration plans for implementation by Broadcom and the
Surviving Corporation following the Effective Time; provided, however, that no
investigation pursuant to
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this Section 5.3 shall affect or be deemed to modify any representation or
warranty made by the Company herein. Materials furnished to Broadcom pursuant to
this Section 5.3 may be used by Broadcom for strategic and integration planning
purposes relating to accomplishing the transactions contemplated hereby.
5.4 Confidentiality. The parties acknowledge that Broadcom and the Company
have previously executed an exclusivity and non-disclosure agreement dated June
2000 (the "Confidentiality Agreement") which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms. Without limiting
the foregoing, all information furnished to Broadcom and its officers,
employees, accountants and counsel by the Company, and all information furnished
to the Company by Broadcom and its officers, employees, accountants and counsel,
shall be covered by the Confidentiality Agreement, and Broadcom and the Company
shall be fully liable and responsible under the Confidentiality Agreement for
any breach of the terms and conditions thereof by their respective subsidiaries,
officers, employees, accountants and counsel.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
tax, financial advisory, consulting and all other fees and expenses of third
parties ("Third Party Expenses"), incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses. The Company shall not pay any Third
Party Expenses incurred by the Company in connection with the Merger without the
prior written approval of Broadcom, which approval will not be unreasonably
withheld.
5.6 Public Disclosure. Unless otherwise required by Law (including federal
and state securities laws) or, as to Broadcom, by the rules and regulations of
the NASD, prior to the Effective Time, no public disclosure (whether or not in
response to any inquiry) of the existence of any subject matter of, or the terms
and conditions of, this Agreement shall be made by any party hereto unless
approved by Broadcom and the Company prior to release; provided, however, that
such approval shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, (i) Broadcom and the Company shall be permitted to disclose the
existence of this Agreement to their customers, suppliers and sales
representatives with whom it has non-disclosure agreements that apply to such
disclosure (or the other party otherwise agrees to such disclosure) and, except
as prohibited by Section 4.2, for which there is a business reason for the
disclosure and (ii) pursuant to Section 4.2, the Company may, in general terms
only, in response to inquiries from third parties concerning any Competing
Proposed Transaction, inform such third parties that the Company is under a
contractual obligation not to discuss such matters.
5.7 Approvals. The Company shall use commercially reasonable efforts to
obtain all Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Merger (all of such Approvals are set forth in the Company Disclosure Schedule)
so as to preserve all rights of and benefits to the Company thereunder and
Broadcom shall provide the Company with such assistance and information as is
reasonably required to obtain such Approvals.
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5.8 Notification of Certain Matters. The Company shall give prompt notice
to Broadcom, and Broadcom shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or
Broadcom, respectively, contained in this Agreement to be untrue or inaccurate
at or prior to the Closing Date and (b) any failure of the Company or Broadcom,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.8 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
5.9 Company Affiliate Agreements. Section 5.9 of the Company Disclosure
Schedule sets forth those persons who, in the Company's reasonable judgment
following consultation with legal counsel and accounting advisors, are or may be
"affiliates" of the Company within the meaning of Rule 145 under the Securities
Act (the "Company Affiliates"). The Company shall provide Broadcom such
information and documents as Broadcom shall reasonably request for purposes of
reviewing such list. The Company shall use its commercially reasonable efforts
to deliver or cause to be delivered to Broadcom on or prior to the Closing from
each of the Company Affiliates, an executed Company Affiliate Agreement.
5.10 Additional Documents and Further Assurances; Cooperation. Each party
hereto, at the request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things (including all
action reasonably necessary to seek and obtain any and all consents, waivers and
approvals of any Governmental or Regulatory Authority or Person required in
connection with the Merger; provided, however, that Broadcom shall not be
obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such consent, waiver or
approval) as may be necessary or desirable for effecting completely, and
satisfying the conditions set forth in Article 6 to, the consummation of this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions set forth in Article 6
to be satisfied, where the satisfaction of such condition depends on action or
forbearance from action by such party.
5.11 Indemnification. Broadcom, the Company and the Surviving Corporation
agree that all rights to indemnification or exculpation now existing in favor of
the employees, agents, directors or officers of the Company (the "Company
Indemnified Parties") as provided in its articles of incorporation or bylaws or
indemnification agreements as in effect on the date of this Agreement shall
continue in full force and effect and be assumed by the Surviving Corporation
for a period of not less than three years from the Closing Date. Any
determination required to be made with respect to whether a Company Indemnified
Party's conduct complies with the standards set forth in the articles of
incorporation or bylaws or indemnification agreements of the Company in effect
immediately prior to the Closing, or otherwise shall be made by independent
counsel selected by the Surviving Corporation reasonably satisfactory to the
Company Indemnified Party (whose fees and expenses shall be paid by the
Surviving Corporation), which such determination shall be final and binding on
the parties thereto. The Company hereby represents and warrants to Broadcom that
except as set forth on Section 5.11 of the Company Disclosure Schedule, no claim
for indemnification has been made by any director or officer of
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the Company and, to the knowledge of the Company, no basis exists for any such
claim for indemnification.
5.12 Form S-8. Broadcom shall file a registration statement on Form S-8
for the shares of Broadcom Common Stock issuable with respect to assumed Company
Options promptly, but no later than fifteen Business Days, after the Effective
Time to the extent the shares of Broadcom Common Stock issuable upon exercise of
such Company Options qualify for registration on Form S-8.
5.13 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and its independent auditors, Deloitte & Touche,
to facilitate on a timely basis (a) the preparation of financial statements
(including pro forma financial statements if required) as required by Broadcom
to comply with applicable SEC regulations, (b) the review of any Company audit
or review work papers, including the examination of selected interim financial
statements and data and (c) the delivery of such representations from the
Company's independent accountants as may be reasonably requested by Broadcom or
its accountants.
5.14 Termination of 401(k) Plans. Unless Broadcom requests in writing at
least five (5) days prior to the Closing Date, the board of directors of the
Company shall adopt resolutions terminating, effective as of the day prior to
the Closing Date, any Plan which is intended to meet the requirements of Section
401(k) of the Internal Revenue Code, and which is sponsored, or contributed to,
by the Company (the "401(k) Plan"). At the Closing the Company shall provide
Broadcom (a) executed resolutions of the board of directors of the Company
authorizing such termination and (b) an executed amendment to the 401(k) Plan
sufficient to assure compliance with all applicable requirements of the Internal
Revenue Code and regulations thereunder so that the tax-qualified status of the
401(k) Plan will be maintained at the time of termination.
5.15 Listing of Additional Shares. Prior to the Effective Time, if
required by applicable Nasdaq rules, Broadcom shall file with the NNM a
Notification Form for Listing of Additional Shares with respect to the shares of
Buyer Common Stock issuable upon conversion of the Company Common Stock in the
Merger and upon exercise of the options under the Company Stock Plan assumed by
Broadcom to the effect that such shares may be traded immediately after the
Effective Time.
5.16 Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the board of directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated by this Agreement and the Ancillary
Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of any Takeover
Statute on any of the transactions contemplated hereby.
5.17 Additional Affiliate Agreements. If any Person would have been a
Company Affiliate had such Person been a shareholder, officer or director of the
Company as of the date of this Agreement, the Company shall cause such person to
execute and deliver to Broadcom a Company Affiliate Agreement promptly upon such
Person attaining such status.
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5.18 Treatment as Reorganization. Neither Broadcom nor the Company shall
take any action prior to or following the Closing that would cause the Merger to
fail to qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code.
5.19 Company Repurchases. The Company will exercise any rights that mature
between the date hereof and the Effective Time to repurchase any outstanding
shares of Company Capital Stock at the price at which such shares were issued.
5.20 Information Technology Access. In furtherance of the Company's
agreement in Section 5.3 and to facilitate prompt integration following the
Closing of the Company's information technology ("IT") inventory (e.g., voice
and data network services and software and hardware, licenses,
financial/accounting software, IT budgets, etc.) with Broadcom's, the Company
will provide Broadcom and its Representatives with access to the Company's IT
inventory, as well as the Company's personnel responsible for such IT inventory.
Because of the substantial lead time that may be required to order and install
new software and hardware to integrate the Company's IT systems with Broadcom's,
and the importance of a smooth integration of such IT systems promptly after the
Closing, the Company agrees that Broadcom may order in Broadcom's name, any new
IT services, hardware and software that Broadcom believes will be needed at the
Company's facilities in order to integrate Broadcom's and the Company's
respective operations following the Closing. The Company or Broadcom, under the
Company's direction, will install such IT systems, hardware and software prior
to and in anticipation of the Closing. For clarity, it is the parties' intent
not to connect any of the ordered services or systems prior to the Closing.
Broadcom and the Company agree to cooperate with each other to minimize any
potential disruption to the Company's business from the IT integration efforts;
provided, however, except as provided below, that Broadcom will not have any
liability to the Company for any such disruption or as may otherwise result from
the IT integration efforts, except as may be directly caused by Broadcom's gross
negligence or willful misconduct If the Closing does not occur, other than
because of the Company's breach of the Merger Agreement, Broadcom will reimburse
the Company for any reasonable and documented out-of-pocket costs incurred by it
in connection with the ordering and installation of IT services, hardware and
software, restoration of the Company's premises to its original condition prior
to such installation and any indirect, incidental, consequential, special or
speculative damages, including damages for loss of profits or use, business
interruption or loss of goodwill, irrespective of whether such damages arise
under contract, tort, statute or otherwise and whether or not the Company has
given Broadcom advance notice of the possibility of such damages. If the Closing
does not occur, other than because of Broadcom's breach of the Merger Agreement,
the Company will reimburse Broadcom for any reasonable and documented costs
incurred by Broadcom in connection with the retention by the Company of any IT
services, hardware or software installed by Broadcom or its agents after the
date of this Agreement. If Broadcom is so required to reimburse the Company,
Broadcom will own any such hardware and software and will pay for its removal
from Company premises. Broadcom and the Company will cooperate in the removal of
any such hardware or software so as to minimize any disruption to the Company's
business. In addition, if the Closing does not occur, the Company will cooperate
with Broadcom in canceling any orders for IT services, hardware or software and
will otherwise act to minimize the costs which might be incurred in connection
with the IT integration efforts.
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5.21 Change of Merger Form. The Company agrees that in the event Broadcom
requests that the transactions contemplated hereby be effected through a
different form of merger (including a reverse triangular or forward triangular
merger) than the form presently contemplated herein, and provided that the
alternative form of merger is in any event intended to qualify as a tax-free
reorganization, the Company shall cooperate with Broadcom in effecting the
alternative form of merger and will take all reasonably necessary action towards
such end, including the execution of any amendments to this Agreement (provided
that such amendments relate only to the alternative form of merger and any
related matters and do not include any other substantive changes not otherwise
agreed between the parties).
5.22 Intellectual Property.
(a) The Company shall give Broadcom prompt notice that any Person
shall have (i) commenced, or shall have notified the Company that it intends to
commence, an Action or Proceeding or (ii) provided the Company with notice, in
either case which allege(s) that any of the Intellectual Property, including the
Company Intellectual Property, presently embodied, or proposed to be embodied,
in the Company's products or utilized in Company-designed or modified
development tools (including standard cells) or design environments infringes or
otherwise violates the intellectual property rights of such Person, is available
for licensing from a potential licensor providing the notice or otherwise
alleges that the Company does not otherwise own or have the right to exploit
such Intellectual Property, including the Company Intellectual Property. The
Company shall cooperate with Broadcom in making arrangements, prior to the
Closing Date, satisfactory to Broadcom in its reasonable discretion to effect
the assignment to the Company of all Intellectual Property created by the
Company's founders, employees and consultants for and on behalf of the Company,
including Intellectual Property created by the Company's founders prior to the
Company's incorporation (except for Intellectual Property created for or on
behalf of any third parties prior to the Company's incorporation pursuant to
employment or consulting arrangements and to the extent such Intellectual
Property is (x) unrelated to the Company's business, (y) owned solely and
exclusively by the Company's founders, and (z) assignable by the founders), and
to obtain the cooperation of such Persons to complete all appropriate patent
filings related thereto. The Company shall take commercially reasonable actions
to maintain, perfect, preserve or renew the Company Registered Intellectual
Property, including the payment of any registration, maintenance, renewal fees,
annuity fees and taxes or the filing of any documents, applications or
certificates related thereto, and to promptly respond and prepare to respond to
all requests, related to the Company Registered Intellectual Property, received
from Governmental or Regulatory Authorities.
(b) At the Closing, the Company will cause its patent counsel to
notify Broadcom of all material actions which must be taken within the one
hundred eighty (180) days following the Closing Date and which are necessary to
maintain, perfect, preserve or renew the Company Registered Intellectual
Property, including the payment of any registration, maintenance, renewal fees,
annuity fees and taxes or the filing of any documents, applications or
certificates related thereto.
(c) The Company will use its best efforts to obtain consents to the
assignment (or waivers of any restrictions on assignment or transfer) of the
agreements identified in Section 5.22(c) of the Company Disclosure Schedule to
Broadcom at or prior to the Effective Time. The
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Company shall use commercially reasonable efforts to obtain such consents and
waivers on terms not requiring any payment or commercial concession to the party
giving such consent or waiver and shall not agree to make any payment to obtain
any such consent without the prior written consent of Broadcom.
5.23 Employee Benefits. On or as soon as practicable following the Closing
Date, as determined by Broadcom, continuing employees of Company ("Continuing
Employees") shall be eligible to participate in those benefit plans maintained
for similarly situated employees of Broadcom (or in substantially similar
programs), on the same terms applicable to similarly situated employees of
Broadcom. Each Continuing Employee shall be given credit, for purposes of any
service requirements for participation or vesting, for his or her period of
service with Company credited under a similar plan prior to the Closing Date,
subject to appropriate break in service rules. Each such employee shall, with
respect to any Broadcom plan which has co-payment, deductible or other
co-insurance features, receive credit for any amounts such individual has paid
to date in the plan year of the Closing Date under comparable plans or programs
maintained by Company prior to the Closing Date. Each Continuing Employee and
eligible dependent who, at the Closing Date, was participating in an employee
group health plan maintained by Company shall not be excluded from Broadcom's
employee group health plan or limited in coverage thereunder by reason of any
waiting period restriction or pre-existing condition limitation.
5.24 Delivery of Stock Ledger and Minute Book of the Company. The Company
shall deliver its stock ledger and minute book to Broadcom at the Closing.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained; and any
waiting period applicable to the consummation of the Merger under the HSR Act
(other than with respect to the receipt of Broadcom Common Stock by a
shareholder of the Company) shall have expired or been terminated.
(b) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Broadcom
were to agree to limitations on its business activities or operations.
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(c) Tax Opinions. Broadcom and the Company shall each have received
written opinions from their respective counsel, in form and substance reasonably
satisfactory to each of them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The parties to this Agreement agree to make such reasonable written
representations as requested by such counsel for the purpose of rendering such
opinions.
(d) Shareholder Approval. The Merger shall have been approved by the
requisite votes of the Company's shareholders in accordance with the California
Code.
(e) Fairness Hearing and California Permit; Registration Statement.
Either (i) the Fairness Hearing shall have been held by the Commissioner of
Corporations of the State of California and the California Permit shall have
been issued by the State of California or (ii) the Registration Statement
relating to the offer and sale of the shares of Broadcom Common Stock issuable
pursuant to Section 1.6 shall have become effective under the Securities Act and
stop order suspending the use thereof shall have been issued nor shall any
Action or Proceeding for that purpose be pending or, to the knowledge of
Broadcom and the Company, be threatened.
(f) Listing of Additional Shares. If required by applicable Nasdaq
rules, the shares of Broadcom Common Stock issuable to shareholders of the
Company pursuant to this Agreement and such other shares required to be reserved
for issuance in connection with the Merger shall have been authorized for
listing on the NNM upon official notice of issuance.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Broadcom contained in this Agreement shall be accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a material adverse change on the Business or
Condition of Broadcom; provided, however, that, for purposes of determining the
accuracy of such representations and warranties, all "material adverse change in
the Business or Condition of Broadcom" and "material adverse effect on the
Business or Condition of Broadcom" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded.
(b) Performance. Broadcom shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Broadcom at or before the
Closing.
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(c) Officers' Certificates. Broadcom shall have delivered to the
Company a certificate, dated the Closing Date and executed by its President and
Chief Executive Officer, substantially in the form set forth in Exhibit G-1
hereto, and a certificate, dated the Closing Date and executed by the Secretary
of Broadcom, substantially in the form set forth in Exhibit G-2 hereto.
(d) Legal Opinion. The Company shall have received a legal opinion
from Irell & Manella LLP, counsel to Broadcom, as to the matters set forth in
Exhibit H.
6.3 Additional Conditions to the Obligations of Broadcom. The obligations
of Broadcom to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by Broadcom:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a material adverse change on the Business or
Condition of the Company; provided, however, that, for purposes of determining
the accuracy of such representations and warranties, (i) all "material adverse
change in the Business or Condition of the Company" qualifications, "material
adverse effect on the Business or Condition of the Company" and other
materiality qualifications contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the Company
Disclosure Schedule made or purported to have been made after the date of this
Agreement (other than to reflect actions taken by the Company which are not in
violation of the covenants of this Agreement) shall be disregarded, and
provided, further, that none of the following, in and of themselves, either
alone or in combination, shall constitute a material adverse change: (x) changes
or effects which are primarily and directly caused by the execution and delivery
of this Agreement or the performance of the pre-closing covenants set forth in
this Agreement or (y) any material adverse change resulting from changes in
economic conditions in the economy generally or the semiconductor industry
generally; and provided further, that neither any Action or Proceeding brought
against the Company by any Person with whom the Company was previously engaged
in discussions regarding a business combination, nor any threatened Action or
Proceeding against the Company by any such Person, shall render any
representation or warranty contained in Article 2 hereof inaccurate as of the
Closing Date for purposes of this Section 6.3(a) only.
(b) Performance. The Company shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date, and shall have performed and complied with in all respects the
agreement and obligation set forth in Section 1.6(d)(iii)(B) of this Agreement.
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(c) Officers' Certificates. The Company shall have delivered to
Broadcom a certificate, dated the Closing Date and executed by the President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit I-1 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of the Company, substantially in the form set forth in Exhibit I-2
hereto.
(d) Third Party Consents and Waivers. Broadcom shall have been
furnished with evidence satisfactory to it that the consents, approvals and
waivers listed in Section 6.3(d) of the Company Disclosure Schedule have been
obtained and are in full force and effect. Broadcom shall also have been
furnished with evidence satisfactory to it that the Company has obtained such
further consents, approvals and waivers with respect to the agreements listed
(or required to be listed) in Section 2.6(c) of the Company Disclosure Schedule
and the Contracts listed (or required to be listed) in Section 2.18(d) of the
Company Disclosure Schedule where the absence of such consents, approvals and
waivers, in the aggregate, would reasonably be expected to have a material
adverse effect on the Business or Condition of the Company, and that all such
consents, approvals and waivers shall be in full force and effect.
(e) Legal Proceedings. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(f) Legal Opinion. Broadcom shall have received a legal opinion from
Brobeck, Phleger & Harrison LLP, legal counsel to the Company, as to the matters
set forth in Exhibit J.
(g) Non-Competition Agreements. Each of the persons listed on
Schedule 6.3(g) shall have executed and delivered to Broadcom a Non-Competition
Agreement and such Non-Competition Agreements shall be in full force and effect.
(h) Delivery of Agreements.
(i) Each Company Affiliate shall have executed and delivered
to Broadcom a Company Affiliate Agreement, and no breach of any Company
Affiliate Agreement or Broadcom Affiliate Agreement shall have occurred or be
continuing.
(ii) The Major Shareholders shall have executed and delivered
to Broadcom a Support Agreement, and no breach of any Support Agreement shall
have occurred or be continuing.
(i) Employees. The employees of the Company set forth on Schedule
6.3(i) shall continue to be employed by the Company at the Closing and shall not
have given any notice or other indication that they are not willing to be
employed by Broadcom or a Subsidiary of Broadcom (as Broadcom shall designate)
following the Merger or that they are not willing to execute and deliver to
Broadcom Broadcom's standard forms of Confidentiality and Invention Assignment
Agreement and associated schedules and statements without amendment or
modification thereto in any substantive respect. The number of employees of the
Company
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immediately prior to the Effective Time will not be less than ninety percent
(90%) of the number of employees the Company was employing on the date hereof.
(j) Limitation on Dissent. Holders of no more than five percent of
the outstanding shares of Company Capital Stock, on an "as if converted" basis,
shall have exercised, nor shall they have any continued right to exercise,
appraisal, dissenters' or similar rights under applicable law with respect to
their shares by virtue of the Merger.
(k) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of the Company since the
date hereof; provided, however, that none of the following, in and of
themselves, either alone or in combination, shall constitute a material adverse
change: (i) changes or effects which are primarily and directly caused by the
execution and delivery of this Agreement or the performance of the pre-closing
covenants set forth in this Agreement or (ii) any material adverse change
resulting from changes in economic conditions in the economy generally or the
semiconductor industry generally.
(l) Assignment of Intellectual Property. Arrangements satisfactory
to Broadcom in its reasonable discretion shall have been made to effect the
assignment to the Company of all related Intellectual Property created for the
Company by the Company's founders, employees and consultants, including certain
Intellectual Property created by the Company's founders prior to the Company's
incorporation (except for Intellectual Property created for or on behalf of any
third parties prior to the Company's incorporation pursuant to employment or
consulting arrangements and solely to the extent such Intellectual Property is
(i) unrelated to the Company's business, (ii) owned solely and exclusively by
the Company's founders and (iii) assignable by the founders), and to obtain the
cooperation of such Persons to complete all appropriate patent filings related
thereto.
(m) Shareholder Approval of Certain Payments. Any agreements or
arrangements that may result in the payment of any amount that would not be
deductible by reason of Section 280G of the Internal Revenue Code shall have
been approved by such number of shareholders of the Company as is required by
the terms of Section 280G(b)(5)(B) and shall be obtained in a manner that
satisfies all applicable requirements of such Section 280G(b)(5)(B) and the
proposed Treasury regulations thereunder, including Q-7 of Section 1.280G-1 of
such proposed regulations.
(n) Termination of 401(k) Plan. The Company shall have provided to
Broadcom (i) executed resolutions of the Board of Directors of the Company
authorizing the termination and (ii) an executed amendment to any 401(k) Plan
sufficient to assure compliance with all applicable requirements of the Internal
Revenue Code and regulations thereunder so that the tax-qualified status of any
401(k) Plan will be maintained at the time of termination if such Plan has been
adopted or is in existence.
(o) Conversion of Company Preferred Stock. All shares of Company
Preferred Stock shall have been converted into shares of Company Common Stock,
effective no later than immediately prior to the Effective Time.
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ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Broadcom or the Company (whether or not exercised)
to investigate the affairs of Broadcom or the Company (whether pursuant to
Section 5.3 or otherwise) or a waiver by Broadcom or the Company of any
condition to Closing set forth in Article 6, each party shall have the right to
rely fully upon the representations, warranties, covenants and agreements of the
other party contained in this Agreement or in any instrument delivered pursuant
to this Agreement. Except for (i) the covenant contained in Section 5.11 (which
shall survive for the period set forth therein) and (ii) this Article 7 (which
shall survive until termination of the escrow created thereby and the
satisfaction of any other obligations described therein), all of the
representations, warranties, covenants and agreements of the Company and
Broadcom contained in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Merger and continue until March 15, 2002 (the
"Expiration Date").
7.2 Escrow Provisions.
(a) Establishment of the Escrow Fund. As soon as practicable after
the Effective Time, the Escrow Amount, without any act of any shareholder, will
be deposited with the Depositary Agent (plus a proportionate share of any
additional shares of Broadcom Common Stock as may be issued upon any stock
splits, stock dividends or recapitalizations effected by Broadcom following the
Effective Time), such deposit to constitute the "Escrow Fund" to be governed by
the terms set forth herein. The portion of the Escrow Amount contributed on
behalf of each shareholder of the Company shall be in proportion to the
aggregate number of shares of Broadcom Common Stock which such holder would
otherwise be entitled under Section 1.6. Notwithstanding the references in this
Agreement to the "escrow" and the Escrow Fund, the parties acknowledge and agree
that the Depositary Agent is acting as a depository and not as an escrow agent
pursuant to this Article 7.
(b) Recourse to the Escrow Fund. The Escrow Fund shall be available
to compensate Broadcom and its officers, directors, employees, agents,
Affiliates and Associates (collectively, the "Broadcom Indemnitees") for any and
all Losses (whether or not involving a Third Party Claim) incurred or sustained
by Broadcom or any other Broadcom Indemnitee as a result of any inaccuracy in or
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or in the Ancillary Agreements or in any instrument
delivered pursuant to this Agreement; provided however, that Broadcom may not
make any claim against the Escrow Fund unless the claim involves a Loss of five
hundred thousand dollars ($500,000) or more and in no event may Broadcom make
any claims against the Escrow Fund unless and until it has incurred Losses
meeting the minimum claim threshold referred to above and the aggregate Losses
associated with such Losses exceed five million dollars ($5,000,000) (at which
time claims may be made only for the amount of Losses incurred or sustained in
excess of $5,000,000). The dollar thresholds set forth in the immediately
preceding proviso shall not apply to Losses resulting from any breach, violation
or inaccuracy in or omission from any of the
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representations and warranties of the Company set forth in Section 2.3 of this
Agreement or the related sections of the Company Disclosure Schedule, which
shall be recoverable without respect to any threshold amount. The shareholders
of the Company shall not have any liability under this Agreement of any sort
whatsoever in excess of the Escrow Fund, except in the event of fraud or an
intentional breach of a representation, warranty, covenant or agreement, but
excluding a negligent, grossly negligent or reckless breach by the Company of
any of its representations, warranties, agreements or covenants contained in
this Agreement, the Ancillary Agreements or in any other instrument or document
required to be delivered pursuant to this Agreement in connection herewith. In
the event of such a fraudulent breach, Broadcom shall have all remedies
available at law or in equity (including for tort) with respect to such breach;
provided, however, that, notwithstanding anything to the contrary contained in
this Agreement, in no event shall any shareholder of the Company have any
liability in excess of the Merger consideration received by such shareholder in
connection with the Merger or the proceeds, if any, received by such shareholder
in connection with the disposition of such Merger consideration.
(c) Escrow Period; Distribution of Escrow Fund upon Termination of
Escrow Period. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at
5:00 p.m., Pacific Time, on the Expiration Date (the period of time from the
Effective Time through and including the Expiration Date is referred to herein
as the "Escrow Period"); and all shares of Broadcom Common Stock remaining in
the Escrow Fund shall be distributed as set forth in the last sentence of this
Section 7.2(c); provided, however, that the Escrow Period shall not terminate
with respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Broadcom, subject to the objection of the Shareholder
Agent and the subsequent arbitration of the matter in the manner as provided in
Section 7.2(g) hereof, to satisfy any unsatisfied claims under this Section 7.2
concerning facts and circumstances existing prior to the termination of such
Escrow Period which claims are specified in any Officer's Certificate delivered
to the Depositary Agent prior to termination of such Escrow Period. As soon as
all such claims, if any, have been resolved, the Depositary Agent shall deliver
to the shareholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of shares of Broadcom Common Stock
remaining in the Escrow Fund to the shareholders of the Company pursuant to this
Section 7.2(c) shall be made ratably in proportion to their respective
contributions to the Escrow Fund. Each shareholder of the Company who would
otherwise be entitled to a fraction of a share of Broadcom Common Stock (after
aggregating all fractional shares of Broadcom Common Stock to be received by
such holder) shall be entitled to receive from Broadcom an amount of cash
(rounded to the nearest whole cent) equal to the product of (a) such fraction,
multiplied by (b) the Closing Price. Broadcom shall use its commercially
reasonable efforts to have such shares and cash delivered within five (5)
Business Days after such resolution.
(d) Protection of Escrow Fund.
(i) The Depositary Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Broadcom
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
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(ii) Any shares of Broadcom Common Stock or other Equity
Equivalents securities issued or distributed by Broadcom ("New Shares") in
respect of Broadcom Common Stock in the Escrow Fund which have not been released
from the Escrow Fund shall be added to the Escrow Fund. New Shares issued in
respect of shares of Broadcom Common Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund but shall be distributed to
the record holders thereof. Cash dividends on Broadcom Common Stock shall not be
added to the Escrow Fund but shall be distributed to the record holders of
Broadcom Common Stock on the record date set for any such dividend.
(iii) Each shareholder shall have voting rights with respect
to the shares of Broadcom Common Stock contributed to the Escrow Fund by such
shareholder (and on any voting securities added to the Escrow Fund in respect of
such shares of Broadcom Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Depositary Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Broadcom (an "Officer's Certificate"): (A) stating that Broadcom or another
Broadcom Indemnitee has paid or properly accrued or reasonably anticipates that
it will have to pay or accrue Losses, directly or indirectly, as a result of any
inaccuracy or breach or any inaccuracy or breach alleged by a third party of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement or in any of the Ancillary Agreements or in any instrument or
agreement delivered pursuant to this Agreement, and (B) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the date
each such item was paid or properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach of warranty,
agreement or covenant to which such item is related, the Depositary Agent shall,
subject to the provisions of Section 7.2(f) hereof, deliver to Broadcom out of
the Escrow Fund, as promptly as practicable, shares of Broadcom Common Stock
held in the Escrow Fund in an amount equal to such Losses. Where the basis for a
claim upon the Escrow Fund by Broadcom is that Broadcom reasonably anticipates
that it will pay or accrue a Loss, no payment will be made from the Escrow Fund
for such Loss unless and until such Loss is actually paid or accrued.
(ii) For the purposes of determining the number of shares of
Broadcom Common Stock to be delivered to Broadcom out of the Escrow Fund
pursuant to Section 7.2(e)(i) hereof, the shares of Broadcom Common Stock shall
be valued at the Closing Price.
(f) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Depositary Agent, a duplicate copy of such certificate shall
be delivered to the Shareholder Agent and for a period of thirty (30) days after
such delivery, the Depositary Agent shall make no delivery to Broadcom of any
Escrow Amounts pursuant to Section 7.2(e) hereof unless the Depositary Agent
shall have received written authorization from the Shareholder Agent to make
such delivery. After the expiration of such thirty (30) day period, the
Depositary Agent shall make delivery of shares of Broadcom Common Stock from the
Escrow Fund in accordance with Section 7.2(e) hereof, provided that no such
payment or delivery may be made if the Shareholder Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
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statement shall have been delivered to the Depositary Agent prior to the
expiration of such thirty (30) day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Agent shall object in writing to
any claim or claims made in any Officer's Certificate, the Shareholder Agent and
Broadcom shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Shareholder Agent and
Broadcom should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Depositary
Agent. The Depositary Agent shall be entitled to rely on any such memorandum and
distribute shares of Broadcom Common Stock from the Escrow Fund in accordance
with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Broadcom or the Shareholder Agent may demand arbitration of
the dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three arbitrators, one selected by Broadcom and one selected by the
Shareholder Agent, and the two arbitrators selected by Broadcom and the
Shareholder Agent shall select a third arbitrator. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery of information relating to any dispute while allowing the
parties an opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel, limit or allow discovery as they shall deem appropriate given the nature
and extent of the disputed claim. The arbitrators shall also have the authority
to impose sanctions, including attorneys' fees and other costs incurred by the
parties, to the same extent as a court of law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to by a party without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and notwithstanding anything
in Section 7.2(f), the Depositary Agent shall be entitled to act in accordance
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith. Such decision shall be written and shall be supported by
written findings of fact and conclusions regarding the dispute which shall set
forth the award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having competent jurisdiction. Any such arbitration
shall be held in the city and county of Los Angeles, California under the
commercial rules of arbitration then in effect of the American Arbitration
Association. For purposes of this Section 7.2(g), in any arbitration hereunder
in which any claim or the amount thereof stated in the Officer's Certificate is
at issue, Broadcom shall be deemed to be the Non-Prevailing Party in the event
that the arbitrators award Broadcom less than the sum of one-half of the
disputed amount of any Losses plus any amounts not in dispute; otherwise, the
shareholders of the Company as represented by the Shareholder Agent shall be
deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
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arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
(h) Shareholder Agent of the Shareholders; Power of Attorney.
(i) In the event that the Merger is approved by the
shareholders of the Company, effective upon such vote, and without further act
of any shareholder, Armond Hairapetian shall be appointed as agent and
attorney-in-fact (the "Shareholder Agent") for each shareholder of the Company
(except such shareholders, if any, as shall have perfected their appraisal or
dissenters' rights under the California Code), for and on behalf of shareholders
of the Company, to give and receive notices and communications, to authorize
delivery to Broadcom of shares of Broadcom Common Stock from the Escrow Fund in
satisfaction of claims by Broadcom, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the shareholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Broadcom; provided, however, that the
Shareholder Agent may not be removed unless holders of a two-thirds interest in
the Escrow Fund agree to such removal and to the identity of the substituted
shareholder agent. Any vacancy in the position of Shareholder Agent may be
filled by approval of the holders of a majority in interest of the Escrow Fund.
No bond shall be required of the Shareholder Agent, and the Shareholder Agent
shall not receive compensation for his services. Notices or communications to or
from the Shareholder Agent shall constitute notice to or from each of the
shareholders of the Company.
(ii) The Shareholder Agent shall not incur any liability with
respect to any action taken or suffered by him or omitted hereunder as
Shareholder Agent while acting in good faith and in the exercise of reasonable
judgment. The Shareholder Agent may, in all questions arising hereunder, rely on
the advice of counsel and for anything done, omitted or suffered in good faith
by the Shareholder Agent based on such advice, the Shareholder Agent shall not
be liable to anyone. The Shareholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Shareholder Agent.
(iii) The Shareholder Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Shareholder Agent shall treat confidentially
and not disclose any nonpublic information from or about the Company to anyone
(except on a need to know basis to individuals who agree in writing to treat
such information confidentially).
(i) Actions of the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent shall constitute a decision of all the
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such shareholders, and the Depositary Agent and Broadcom may rely upon
any such decision, act, consent or instruction of the Shareholder Agent
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as being the decision, act, consent or instruction of every such shareholder of
the Company. The Depositary Agent and Broadcom are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholder Agent.
(j) Third-Party Claims. In the event Broadcom becomes aware of a
third-party claim (a "Third Party Claim") which Broadcom reasonably expects may
result in a demand against the Escrow Fund, Broadcom shall notify the
Shareholder Agent of such claim, and the Shareholder Agent, as representative
for the shareholders of the Company, shall be entitled, at their expense, to
participate in any defense of such claim. Broadcom shall have the right in its
sole discretion to settle any Third Party Claim; provided, however, that if
Broadcom settles any Third Party Claim without the Shareholder Agent's consent
(which consent shall not be unreasonably withheld or delayed), Broadcom may not
make a claim against the Escrow Fund with respect to the amount of Losses
incurred by Broadcom in such settlement. In the event that the Shareholder Agent
has consented to any such settlement, the Shareholder Agent shall have no power
or authority to object under any provision of this Article 7 to the amount of
any claim by Broadcom against the Escrow Fund with respect to the amount of
Losses incurred by Broadcom in such settlement.
(k) Indemnification for Shareholder Agent. The shareholders of the
Company shall, severally and not jointly, on a pro rata basis based on their
proportionate ownership interests in the Company, indemnify, defend and hold the
Shareholder Agent harmless from and against any loss, damage, tax, liability and
expense that may be incurred by the Shareholder Agent arising out of or in
connection with the acceptance or administration of the Shareholder Agent's
duties, except as caused by the Shareholder Agent's gross negligence or willful
misconduct, including the legal costs and expenses of defending such Shareholder
Agent against any claim or liability in connection with the performance of the
Shareholder Agent's duties. The Shareholder Agent shall be entitled, but not
limited, to such indemnification from the Escrow prior to any distribution
thereof to the shareholders of the Company, but after any distributions
therefrom to Broadcom.
(l) Depositary Agent's Duties.
(i) Limitation on Duties of Depositary Agent. The Depositary
Agent shall be obligated only for the performance of such duties as are
specifically set forth herein, and as set forth in any additional written escrow
instructions which the Depositary Agent may receive after the date of this
Agreement which are signed by an officer of Broadcom and the Shareholder Agent,
and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Depositary Agent shall not be
liable for any act done or omitted hereunder as Depositary Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(ii) Compliance with Orders. The Depositary Agent is hereby
expressly authorized to comply with and obey Orders of any court of law or
Governmental or Regulatory Authority, notwithstanding any notices, warnings or
other communications from any
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party or any other person to the contrary. In case the Depositary Agent obeys or
complies with any such Order, the Depositary Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such Order being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction or proper
authority.
(iii) Limitations on Liability of Depositary Agent. The
Depositary Agent shall not be liable in any respect on account of (A) the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder; or (B) the expiration of any rights under any
statute of limitations with respect to this Agreement or any documents deposited
with the Depositary Agent.
(iv) Good Faith of Depositary Agent. In performing any duties
under the Agreement, the Depositary Agent shall not be liable to any party for
damages, losses, or expenses, except for gross negligence or willful misconduct
on the part of the Depositary Agent. The Depositary Agent shall not incur any
such liability for (A) any act or failure to act made or omitted in good faith,
or (B) any action taken or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Agreement that the
Depositary Agent shall in good faith believe to be genuine, nor will the
Depositary Agent be liable or responsible for forgeries, fraud, impersonations
or determining the scope of any representative authority. In addition, the
Depositary Agent may consult with legal counsel in connection with the
Depositary Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him, her or it in good faith in
accordance with the advice of counsel. The Depositary Agent is not responsible
for determining and verifying the authority of any person acting or purporting
to act on behalf of any party to this Agreement.
(v) Non-responsibility of Depositary Agent. If any controversy
arises between the parties to this Agreement, or with any other party,
concerning the subject matter of this Agreement, its terms or conditions, the
Depositary Agent will not be required to determine the controversy or to take
any action regarding it. The Depositary Agent may hold all documents and shares
of Broadcom Common Stock and may wait for settlement of any such controversy by
final appropriate legal proceedings or other means as, in the Depositary Agent's
discretion, the Depositary Agent may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Depositary Agent will not be
liable for any damages. Furthermore, the Depositary Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Depositary Agent is authorized to
deposit with the clerk of the court all documents and shares of Broadcom Common
Stock held in escrow, except all costs, expenses, charges and reasonable
attorney fees incurred by the Depositary Agent due to the interpleader action
and which the parties jointly and severally agree to pay. Upon initiating such
action, the Depositary Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vi) Indemnification of Depositary Agent. Broadcom and its
successors and assigns agrees to indemnify and hold the Depositary Agent
harmless against any and all Losses incurred by the Depositary Agent in
connection with the performance of the
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Depositary Agent's duties under this Agreement, including any litigation arising
from this Agreement or involving its subject matter.
(vii) Resignation of Depositary Agent. The Depositary Agent
may resign at any time upon giving at least thirty (30) days written notice to
the parties; provided, however, that no such resignation shall become effective
until the appointment of a successor depositary agent which shall be
accomplished as follows: the parties shall use their reasonable efforts to
mutually agree on a successor depositary agent within thirty (30) days after
receiving such notice. If the parties fail to agree upon a successor depositary
agent within such time, the Depositary Agent shall have the right to appoint a
successor depositary agent authorized to do business in the State of California.
The successor depositary agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor depositary
agent as if originally named as Depositary Agent. The Depositary Agent shall be
discharged from any further duties and liability under this Agreement.
(m) Fees. All fees of the Depositary Agent for performance of its
duties hereunder shall be paid by Broadcom. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Depositary Agent renders
any service not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Depositary Agent is made a party to, or intervenes in, any Action or Proceeding
pertaining to this escrow or its subject matter, the Depositary Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or Action or Proceeding. Broadcom agrees to pay these sums upon
demand.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company and Broadcom;
(b) by Broadcom or the Company, if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific Time) on November 30, 2000 and the California
Permit has been issued by the State of California at or prior to such time; (ii)
if the California Permit has not been issued by November 30, 2000 and the
Effective Time has not occurred before 5:00 p.m. (Pacific Time) on January 31,
2001 (provided, however, that the right to terminate this Agreement under this
Section 8.1(b)(i) or (ii) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date; and
provided, further, that the termination dates under this Section 8.1(b)(i) and
(ii) may, if applicable, be extended by the fifteen (15) day cure period
pursuant to Section 8.1(g)); (iii) there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the Merger; or
(iv) there shall be any statute, rule, regulation or
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order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental or Regulatory Authority that would make consummation of the Merger
illegal;
(c) by Broadcom, if there shall be any action taken, or any Law or
Order enacted, promulgated or issued or deemed applicable to the Merger, by any
Governmental or Regulatory Authority, which would: (i) prohibit Broadcom's
ownership or operation of all or any portion of the business of the Company or
(ii) compel Broadcom to dispose of or hold separate all or any portion of the
Assets and Properties of the Company as a result of the Merger;
(d) by Broadcom, if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company and (i) the Company is
not using its reasonable efforts to cure such breach, or has not cured such
breach within thirty (30) days, after notice of such breach to the Company
(provided, however, that, no cure period shall be required for a breach which by
its nature cannot be cured) and (ii) as a result of such breach any of the
conditions set forth in Section 6.1 or Section 6.3, as the case may be, would
not be satisfied in a material respect prior to the Closing Date;
(e) by the Company, if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Broadcom and (i) Broadcom is not
using its reasonable efforts to cure such breach, or has not cured such breach
within thirty (30) days, after notice of such breach to Broadcom (provided,
however, that no cure period shall be required for a breach which by its nature
cannot be cured), and (ii) as a result of such breach any of the conditions set
forth in Section 6.1 or Section 6.2, as the case may be, would not be satisfied
as of the Closing Date;
(f) by Broadcom, if at any time after five (5) days following the
meeting at which the Company's shareholders take the Company Shareholder Action,
holders of more than five percent (5.0%) of the outstanding shares of Company
Capital Stock shall have exercised, or have any continued right to exercise,
appraisal, dissenters' or similar rights under applicable law with respect to
their shares by virtue of the Merger;
(g) by Broadcom, if the Merger shall not have been approved by the
requisite votes of the Company's shareholders in accordance with the California
Code within twenty (20) days of each record date for determining the
shareholders of the Company entitled to consent to the Merger, pursuant to the
issuance of the California Permit or the effectiveness of the Registration
Statement as the case may be; provided, that, in the event of such lack of
approval within such twenty (20) day period, the Company shall have an
additional fifteen (15) day cure period to obtain such approval of such
requisite vote; or
(h) by Broadcom, if any of the individuals listed on Schedule 6.3(i)
cease to be employed by the Company, provided, however, that Broadcom may
exercise this termination right with respect to a particular individual named in
Schedule 6.3(i) only if Broadcom gives the Company written notice of termination
of the Agreement within thirty (30) days after receipt of written notice from
the Company that such individual has ceased to be employed by the Company.
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8.2 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Broadcom or the
Company, or their respective officers, directors or shareholders or Affiliates
or Associates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided, further,
that, the provisions of Sections 5.4, 5.5, 8.2, Article 9 (exclusive of Section
9.3) and the applicable definitions set forth in Article 10 of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after the
shareholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Broadcom
and the Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If to Broadcom to:
Broadcom Corporation
16215 Alton Parkway
Irvine, California 92619-7013
Facsimile No.: (949) 450-8715
Attn: President and Chief
Executive Officer and
Broadcom Corporation
16215 Alton Parkway
Irvine, California 92619-7013
Facsimile No.: (949) 450-0504
Attn: General Counsel
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with a copy (which shall not constitute notice) to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
Facsimile No.: (310) 203-7199
Attn: Andrew W. Gross
If to the Company to:
NewPort Communications, Inc.
16251 Laguna Canyon Road
Irvine, California 92618
Facsimile No.: (949) 450-1079
Attn: President and Chief
Executive Officer
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Facsimile No.: (949) 790-6301
Attn: Richard A. Fink
If to Shareholder Agent:
Armond Hairapetian
NewPort Communications, Inc.
16251 Laguna Canyon Road
Irvine, California 92618
Facsimile No.: (949) 450-1079
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Facsimile No.: (949) 790-6301
Attn: Richard A. Fink
If to the Depository Agent:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204-2991
Facsimile No.: (818) 502-0674
Attn: Richard C. Brown, Vice
President
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All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided in this
Section 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
9.1). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule and the Broadcom Disclosure
Schedule, constitute the entire Agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect and shall survive any termination of this Agreement or the
Closing in accordance with its terms. It is understood and agreed that the
Company has made no representations and warranties to Broadcom as to the
Business or Condition of the Company or any other matters relating to the
Company except as expressly provided herein.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from time
to time after the Closing, the parties shall execute and deliver to the other
party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Section 5.11 or Article 7.
9.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the
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preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by the parties hereto and their respective successors and
assigns.
9.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
9.10 Dispute Resolution. In the event of any pre-Closing dispute under
this Agreement which the parties are unable to resolve themselves, the matters,
regardless of nature, shall be submitted to binding arbitration and administered
by the American Arbitration Association ("AAA") in accordance with the then most
applicable rules of the AAA (except those rules requiring administration by the
AAA) conducted in the county of Santa Clara, California (if arbitration is first
requested by the Company) or Los Angeles, California (if arbitration is first
requested by Broadcom), by three arbitrators, one selected by Broadcom and one
selected by the Shareholder Agent, and the two arbitrators selected by Broadcom
and the Shareholder Agent shall mutually select a third arbitrator who shall be
a retired judge of the California Superior Court or California Court of Appeals
within ten (10) days of being selected by Broadcom and Shareholder Agent. If
such parties cannot agree, the arbitrator shall be selected, upon application of
either party, by the contract arbitration administrator of JAMS (Judicial
Arbitration and Mediation Services) at the JAMS office closest to the venue of
the arbitration. Each of the arbitrators selected by Broadcom and the Company
must be a corporate lawyer who is a partner at a nationally-recognized law firm
which has not provided and does not provide services to Broadcom, the
Shareholder Agent or the Company.
9.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
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9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. The Depositary Agent may
execute this Agreement following the date hereof and prior to the Closing, and
such later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto.
9.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
ARTICLE 10
DEFINITIONS AND CONSTRUCTION
10.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"401(k) Plan" has the meaning ascribed to it in Section 5.14.
"AAA" has the meaning ascribed to it in Section 9.10.
"Actions or Proceedings" means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental Regulatory
Authority.
"Affiliate" means, as applied to any Person, (a) any other Person directly
or indirectly controlling, controlled by or under common control with, that
Person, (b) any other Person that owns or controls (i) ten percent (10%) or more
of any class of equity securities of that Person or any of its Affiliates or
(ii) ten percent (10%) or more of any class of equity securities (including any
equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates, or (c) as to a corporation,
each director and officer thereof, and as to a partnership, each general partner
thereof, and as to a limited liability company, each managing member or
similarly authorized person thereof (including officers), and as to any other
entity, each Person exercising similar authority to those of a director or
officer of a corporation. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Aggregate Common Number" means the aggregate number of shares of Company
Common Stock which are (or would be) outstanding immediately prior to the
Effective Time
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(including all shares of Company Common Stock issued or issuable upon conversion
of all shares of Company Preferred Stock which participate with the Company
Common Stock in the Merger and upon exercise, conversion or exchange in full of
all unvested and vested Company Options, Company Warrants and Company Stock
Purchase Rights which remain outstanding and are not exercised, converted,
exchanged or expired as of the Effective Time); provided, that, solely for
purposes of calculating the Aggregate Common Number, it shall be assumed (i)
that all such Company Options, Company Warrants and Company Stock Purchase
Rights are exercised in full by means of a cash exercise and not by means of a
net exercise, whether or not such Company Options, Company Warrants and Company
Stock Purchase Rights are in fact so exercised, and (ii) the number of Company
Options outstanding as of the Effective Time shall equal (A) the number of
Company Options outstanding as of the date of this Agreement, (B) plus the
number of Company Options granted after the date of this Agreement (other than
Company Options granted after the date of this Agreement at the express written
request of Broadcom, which shall not be included in the calculation of the
Aggregate Common Number), (C) minus the number of Company Options cancelled
after the date of this Agreement in connection with bona fide terminations of
Company employees in good faith in the ordinary course of business (but only to
the extent that such cancellations are offset by grants of Company Options to
new hires after the date of this Agreement), and (D) minus the number of Company
Options exercised for shares of Common Stock (to the extent that the resulting
shares are issued and outstanding as of the Effective Time).
"Aggregate Share Number" means five million four hundred fifty seven
thousand five hundred (5,457,500) shares of Broadcom Common Stock, subject to
adjustment pursuant to Section 1.8.
"Agreement" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and the
Disclosure Schedules and the certificates and instruments delivered in
connection herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Agreement of Merger" has the meaning ascribed to it in Section 1.2.
"Ancillary Agreements" has the meaning ascribed to it in Section 2.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
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"Associate" means, with respect to any Person, any corporation or other
business organization of which such Person is an officer or partner or is the
beneficial owner, directly or indirectly, of ten percent or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means December 31, 1999.
"Audited Financial Statements" means the audited consolidated balance
sheet of the Company as of December 31, 1999, and the related audited
consolidated statement of operations, shareholders' equity and cash flows for
the fiscal year then ended, including the notes thereto and the unqualified
report of the Company's independent accountants with respect thereto.
"Books and Records" means all files, documents, instruments, papers, books
and records relating to the Business or Condition of the Company, including
financial statements, internal reports, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, stock transfer
ledgers, Contracts, Licenses, customer lists, computer files and programs
(including data processing files and records), retrieval programs, operating
data and plans and environmental studies and plans.
"Broadcom" has the meaning ascribed to it in the forepart of this
Agreement.
"Broadcom Common Stock" has the meaning ascribed to it in Recital C to
this Agreement.
"Broadcom Disclosure Schedule" has the meaning ascribed to it in the
forepart of Article 3.
"Broadcom Financial Statements" has the meaning ascribed to it in Section
3.4.
"Broadcom Indemnitees" has the meaning ascribed to it in Section 7.2(b).
"Business Combination" means, with respect to any Person, (a) any merger,
consolidation, share exchange reorganization or other business combination
transaction to which such Person is a party, (b) any sale, dividend, split or
other disposition of any capital stock or other equity interests of such Person
(except for issuances of common stock upon conversion of preferred stock
outstanding on the date hereof or the exercise of options or warrants
outstanding on the date hereof or issued in accordance with the covenants of
this Agreement), (c) any tender offer (including a self tender), exchange offer,
recapitalization, restructuring, liquidation, dissolution or similar or
extraordinary transaction, (d) any sale, dividend or other disposition of all or
a material or significant portion of the Assets and Properties of such Person
(including by way of exclusive license or joint venture formation) or (e) the
entering into of any agreement or understanding, the granting of any rights or
options, or the acquiescence of such Person, with respect to any of the
foregoing.
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"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of California are authorized or obligated to close.
"Business or Condition of Broadcom" means the business, condition
(financial or otherwise), results of operations, or Assets and Properties of
Broadcom and its Subsidiaries, in the aggregate, taking Broadcom and its
Subsidiaries together as a whole.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations or Assets and Properties of the
Company.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"California Permit" has the meaning ascribed to it in Section 1.14.
"Cause" means (a) conviction of the employee in a court of law of any
felony or of any crime involving dishonesty; (b) participation by the employee
in any fraud against the Company or the Surviving Corporation; (c) willful
violation of specific and lawful directions from the Company or the Surviving
Corporation or excessive absenteeism which continues after the Company or the
Surviving Corporation has provided employee with written notice of the violation
or absenteeism and given the employee a period of thirty (30) days following the
receipt of notice to correct the violation or absenteeism problem; (d) a breach
by the employee of the provisions of such employee's non-competition or
non-disclosure agreements with the Company or the Surviving Corporation; or (e)
unsatisfactory performance of job duties, which is not corrected or continues
after the Company or the Surviving Corporation has provided the employee with
written notice and given the employee a period of thirty (30) days following
receipt of the notice to correct the breach.
"Certificates" has the meaning ascribed to it in Section 1.11(b).
"Closing" means the closing of the transactions contemplated by Section
1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" means the average closing sales price of Broadcom Common
Stock as traded on the NNM and reported by The Wall Street Journal, for the
thirty consecutive market trading days commencing on the thirty second market
trading day prior to the Closing Date and ending on (inclusive) the third market
trading day prior to the Closing Date.
"COBRA" has the meaning ascribed to it in Section 2.14(f).
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Affiliates" has the meaning ascribed to it in Section 5.9.
"Company Affiliate Agreement" has the meaning ascribed to it in Recital D
to this Agreement.
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"Company Capital Stock" means the Company Common Stock and the Company
Preferred Stock.
"Company Common Stock" has the meaning ascribed to it in Section 2.3(a).
"Company Disclosure Schedule" means the schedules delivered to Broadcom by
or on behalf of the Company, containing all lists, descriptions, exceptions and
other information and materials as are required to be included therein in
connection with the representations and warranties made by the Company in
Article 2 of this Agreement or otherwise.
"Company Financials" means the Audited Financial Statements and the
Interim Financial Statements.
"Company Indemnified Parties" has the meaning ascribed to it in Section
5.11.
"Company Intellectual Property" shall mean any Intellectual Property that
(a) is owned by the Company; (b) is licensed to the Company; (c) was developed
or created by or for the Company or (d) is used in the conduct of the business
of the Company as presently conducted or as currently proposed to be conducted
in the Company's written budget or other written operating plan for the balance
of 2000, including any related Intellectual Property created by any of the
Company's founders, employees or consultants for an on behalf of the Company and
including any related Intellectual Property created by any of the Company's
founders prior to the creation of the Company (except for Intellectual Property
created for or on behalf of any third parties prior to the Company's
incorporation pursuant to employment or consulting arrangements and solely to
the extent such Intellectual Property is (i) unrelated to the Company's
business, (ii) owned solely and exclusively by the Company's founders, and (iii)
assignable by the founders).
"Company Option(s)" means any and all Options to purchase Company Capital
Stock, excluding the Company Preferred Stock and the Company Warrants.
"Company Preferred Stock" has the meaning ascribed to it in Section
2.3(a).
"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, filed in the name of, assigned to or applied for
by, the Company.
"Company Restricted Stock" means shares of Company Capital Stock purchased
pursuant to an exercise of a Company Stock Purchase Right which are subject to a
repurchase option by the Company.
"Company Series A Preferred Stock" has the meaning set forth in 2.3(a).
"Company Series B Preferred Stock" has the meaning set forth in 2.3(a).
"Company Stock Plan" has the meaning ascribed to it in Section 1.6(d)(ii).
"Company Stock Purchase Right" means a right to purchase Company
Restricted Stock granted pursuant to the Company Stock Plan or otherwise.
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"Company Shareholder Action" has the meaning ascribed to it in Section
2.31.
"Company Warrants" means any and all warrants to purchase Company Capital
Stock, including the warrants listed on Section 2.3 of the Company Disclosure
Schedule.
"Competing Proposed Transaction" has the meaning ascribed to it in Section
4.2.
"Confidentiality Agreement" has the meaning ascribed to it in Section 5.4.
"Continuing Employees" has the meaning ascribed to it in Section 5.23.
"Contract" means any contract, agreement or other business arrangement
(whether oral or written) including:
(i) any distributor, sales, advertising, agency or manufacturer's
representative contract;
(ii) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$100,000 over the life of the contract;
(iii) any contract that expires or may be renewed at the option of any
person other than the Company so as to expire more than one year after the date
of this Agreement;
(iv) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with generally accepted accounting principles;
(v) any contract for capital expenditures in excess of two hundred fifty
thousand ($250,000) in the aggregate;
(vi) any contract limiting the freedom of the Company to engage in any
line of business or to compete with any other Person or any confidentiality,
secrecy or non-disclosure contract;
(vii) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(viii) any contract with any person with whom the Company does not deal at
arm's-length;
(ix) any material contract that is not terminable by the Company upon
thirty (30) days (or less) notice by the Company without penalty or obligation
to make payments based on such termination or (ii) requires the Company to
provide services to any Person after the Closing;
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(x) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person; or
(xi) those customer purchase orders set forth in Section 10.1 of the
Company Disclosure Schedule.
"Depositary Agent" means U.S. Stock Transfer Corporation (or other
institution acceptable to Broadcom and the Shareholder Agent).
"Disclosure Schedules" means the Company Disclosure Schedule and the
Broadcom Disclosure Schedule.
"Dissenting Shares" has the meaning ascribed to it in Section 1.10(a).
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Employment Agreement" has the meaning ascribed to it in Recital E.
"Environment" means air, surface water, ground water, or land, including
land surface or subsurface, and any receptors such as persons, wildlife, fish,
biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any location at which there has been a
Release or threatened or suspected Release of a Hazardous Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
"Equity Equivalents" means securities (including Options to purchase any
shares of Company Capital Stock) which, by their terms, are or may be
exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"ERISA Affiliate" has the meaning ascribed to in the definition of Plan in
this Section 10.
"Escrow Amount" means the number of shares of Broadcom Common Stock
obtained by multiplying (a) the aggregate number of shares of Broadcom Common
Stock issuable by Broadcom at the Effective Time to holders of Company Capital
Stock in accordance with Section 1.6(a) by (b) 0.075. The shares deposited with
the Depositary Agent shall, to the extent possible, be shares that are not
subject to any repurchase rights.
"Escrow Fund" has the meaning ascribed to it in Section 7.2(a).
"Escrow Period" has the meaning ascribed to it in Section 7.2(c).
"Estimated Third Party Expenses" has the meaning ascribed to it in Section
2.25.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Exchange Ratio" means the quotient obtained by dividing (a) the Aggregate
Share Number by (b) the Aggregate Common Number.
"Expiration Date" has the meaning ascribed to it in Section 7.1.
"Fairness Hearing" has the meaning ascribed to it in Section 1.14.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Good Faith Consultation" means consultation with a Person's independent
accountants following disclosure in good faith to such accountants of all facts
requested by such accountants or which the specified Person otherwise had reason
to believe would be relevant to such accountants' assessment.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or waste
including, containing or constituting petroleum or petroleum products, solvents
(including chlorinated solvents), nuclear or radioactive materials, asbestos in
any form that is or could become friable, radon, lead-based paint, urea
formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemicals,
materials, substances or wastes which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; or
(c) any other chemical, material, substance or waste
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which is regulated by any Governmental or Regulatory Authority or which could
constitute a nuisance.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Income Tax" means (a) any income, alternative or add-on minimum tax,
gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (b) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. Section 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of a Relevant Group or any Contract.
"Indebtedness" of any Person means all obligations of such Person (a) for
borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Information Statement" has the meaning ascribed to it in Section 2.32.
"Intellectual Property" means all trademarks and trademark rights, trade
names and trade name rights, service marks and service mark rights, service
names and service name rights, patents and patent rights, utility models and
utility model rights, copyrights, mask work rights, brand names, trade dress,
product designs, product packaging, business and product names, logos, slogans,
rights of publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial models,
processes, designs, specifications, technology, methodologies, computer software
(including all source code and object code), firmware, development tools, flow
charts, annotations, all Web addresses, sites and domain names, all data bases
and data collections and all rights therein, any other confidential and
proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"Interim Financial Statements" means the unaudited balance sheet of the
Company as of June 30, 2000, and the related unaudited statement of operations
and statement of cash flows for the six-month period ended on such date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
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"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any successor
entity.
"IT" has the meaning ascribed to it in Section 5.20.
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Lease Documents" has the meaning ascribed to it in Section 2.15(d).
"Leased Real Property(ies)" has the meaning ascribed to it in Section
2.15(a).
"Liabilities" means all Indebtedness, obligations and other liabilities of
a Person, whether absolute, accrued, contingent (or based upon any contingency),
known or unknown, fixed or otherwise, or whether due or to become due.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to sue with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest, lease,
lien, easement, license, covenant, condition, restriction, adverse claim, levy,
charge, option, equity, adverse claim or restriction or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (including lost profits or diminution in value) and
expenses, including interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including
fees and expenses of attorneys, incurred in connection with (a) the
investigation or defense of any Third Party Claims or (b) asserting or disputing
any rights under this Agreement against any party hereto or otherwise), net of
any insurance proceeds actually received (without any adverse effect on the
premiums paid for such insurance) or proceeds received by virtue of third party
indemnification.
"Major Shareholders" means the Company shareholders listed on Section 10.1
of the Company Disclosure Schedule.
"Merger" has the meaning ascribed to it in Recital A to this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
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"New Shares" has the meaning ascribed to it in Section 7.2(d)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market referred to as
the Nasdaq National Market.
"Non-Competition Agreement" has the meaning ascribed to it in Recital F.
"Officer's Certificate" has the meaning ascribed to it in Section
7.2(e)(i).
"Operating Plan" has the meaning ascribed to it in Section 2.29.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than the Company Preferred Stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person, including any rights to participate in the
equity, income or election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.
"Permit" means any license, permit, franchise or authorization.
"Permit Application" has the meaning ascribed to it in Section 2.32.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" mean (a) each of the "employee benefit plans" (as such term is
defined in Section 3(3) of ERISA, of which any of the Company, any Subsidiary,
or any member of the same controlled group of businesses as the Company or any
Subsidiary within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") is or ever was a sponsor or participating employer or as to which
the Company or any Subsidiary or any of their ERISA Affiliates makes
contributions or is required to make contributions, and (b) any similar
employment, severance or other arrangement or policy of any of the Company any
Subsidiary or any of their ERISA Affiliates (whether written or oral) providing
for health, life, vision or dental insurance coverage
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(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits or retirement
benefits, fringe benefits, or for profit sharing, deferred compensation,
bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (a) patents and patent applications (including
provisional applications); (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are asserted; (c)
registered copyrights and applications for copyright registration; (d) any mask
work registrations and applications to register mask works; and (e) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"Registration Statement" has the meaning ascribed to it in Section 5.1(c).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11.
"Representatives" has the meaning ascribed to it in Section 2.33.
"Restricted Stock Purchase Agreement" means a Restricted Stock Purchase
Agreement in one of the forms attached to the Company Stock Plan pursuant to
which the Company has sold Company Restricted Stock or issued Company Stock
Purchase Rights or as may otherwise been entered into by the Company prior to
the date of this Agreement.
"SEC" means the Securities and Exchange Commission or any successor
entity.
"SEC Documents" means, with respect to any Person, each report, schedule,
form, statement or other document filed or required to be filed with the SEC by
such Person pursuant to Section 13(a) of the Exchange Act.
"Securities Act" has the meaning ascribed to it in Section 1.14.
"Shareholder Agent" has the meaning ascribed to it in Section 7.2(h)(i).
"Site" means any of the real properties currently or previously owned,
leased, occupied, used or operated by the Company, any predecessors of the
Company, or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater.
"Subsidiary" means any Person in which the Company or Broadcom, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least fifty
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percent of either the equity interest in, or the voting control of, such Person,
whether or not existing on the date hereof.
"Support Agreement" has the meaning ascribed to it in Recital D to this
Agreement.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
"Takeover Statute" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States.
"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the context
requires.
"Tax Laws" means the Internal Revenue Code, federal, state, county, local
or foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Tax Returns" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or other document issued by, a
Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2(j).
"Third Party Expenses" has the meaning ascribed to it in Section 5.5.
"Unaudited Financial Statement Date" means June 30, 2000.
"Warranty Obligations" has the meaning ascribed to it in Section 2.27(a).
10.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender and the neuter, (ii) words using
the singular or plural number also include the plural or singular number,
respectively, (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement as a whole and not to any
particular Article, Section or other subdivision, (iv) the terms "Article" or
"Section" or other subdivision refer to the specified Article, Section or other
subdivision of the body of this Agreement, (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company, (vi) the words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
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The term "party" or "parties" when used herein refer to Broadcom, on the one
hand, and the Company, on the other.
(b) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person, "known to" any Person or any similar
phrase, means, in the case of Broadcom, the actual knowledge of Henry T.
Nicholas III, Ph.D., Martin J. Colombatto, William J. Ruehle and David A. Dull,
and, in the case of the Company, the actual knowledge of Armond Hairapetian,
Lorenzo Longo, Joe Vithayathil and Kevin Kraus and, in each case, the knowledge
that such persons would have obtained of the matter represented after reasonable
inquiry thereof under the circumstances.
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IN WITNESS WHEREOF, Broadcom and the Company, and with respect to Article
7 and Article 9 only, the Shareholder Agent and the Depositary Agent, have
caused this Agreement to be signed by their duly authorized representatives, all
as of the date first written above.
NEWPORT COMMUNICATIONS, INC. BROADCOM CORPORATION
By: /s/ ARMOND HAIRAPETIAN By: /s/ MARTIN J.COLOMBATTO
------------------------------------- --------------------------------
Armond Hairapetian Martin J. Colombatto
President and Chief Executive Officer Vice President
U.S. STOCK TRANSFER CORPORATION,
AS DEPOSITARY AGENT SHAREHOLDER AGENT
By: /s/ RICHARD BROWN By: /s/ ARMOND HAIRAPETIAN
------------------------------------- --------------------------------
Richard Brown Armond Hairapetian
Vice President
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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
NEWPORT COMMUNICATIONS, INC.
AND
THE OTHER PARTIES SIGNATORY HERETO
DATED AS OF AUGUST 9, 2000
<TABLE>
<S> <C>
EXHIBIT A FORM OF SUPPORT AGREEMENTS
EXHIBIT B FORM OF COMPANY AFFILIATE AGREEMENTS
EXHIBIT C FORM OF EMPLOYMENT AGREEMENTS
EXHIBIT D FORM OF NON-COMPETITION AGREEMENTS
EXHIBIT E FORM OF AGREEMENT OF MERGER
EXHIBIT F FORM OF SHAREHOLDER'S CERTIFICATE
EXHIBIT G-1 FORM OF BROADCOM OFFICER'S CERTIFICATE
EXHIBIT G-2 FORM OF BROADCOM SECRETARY'S CERTIFICATE
EXHIBIT H FORM OF OPINION OF IRELL & MANELLA LLP
EXHIBIT I-1 FORM OF COMPANY OFFICER'S CERTIFICATE
EXHIBIT I-2 FORM OF COMPANY SECRETARY'S CERTIFICATE
EXHIBIT J FORM OF OPINION OF BROBECK, PHLEGER & HARRISON LLP
</TABLE>
Broadcom Corporation agrees to furnish supplementally a copy of any of the
foregoing exhibits to the SEC upon request.
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