<PAGE> 1
EXHIBIT 2.2
INDEMNIFICATION AND JOINDER AGREEMENT
THIS INDEMNIFICATION AND JOINDER AGREEMENT (this "Agreement") is made
and entered into as of July 28, 2000, by and among Immersion Corporation, a
Delaware corporation ("Parent"), and James F. Kramer ("Kramer") and Marc
Tremblay ("Tremblay"), each a shareholder of Virtual Technologies, Inc., a
California corporation (the "Company") (Kramer and Tremblay sometimes being
individually referred to as a "Principal Shareholder" and collectively referred
to as the "Principal Shareholders" in this Agreement), with reference to the
following facts:
A. Parent, Parent's wholly owned subsidiary, VT Acquisition, Inc.
("Merger Sub"), the Company, and Kramer, as the representative of the Company's
shareholders (the "Shareholder Representative"), are entering into an Agreement
and Plan of Merger (the "Merger Agreement") (in the form attached as ANNEX A to
this Agreement), pursuant to which, among other things, Merger Sub will be
merged (the "Merger") with and into the Company, which will be the surviving
corporation in the Merger, and the Company's shareholders will be entitled to
receive shares of common stock of Parent ("Parent Common Stock"), all in
accordance with the terms, and subject to the conditions, of the Merger
Agreement.
B. On this date the Principal Shareholders together own, and as of the
Effective Time (as defined in the Merger Agreement) the Principal Shareholders
will together own, more than 80% of the outstanding capital stock of the
Company.
C. As a material inducement to Parent and Merger Sub to enter into and
consummate the Merger Agreement, the Principal Shareholders wish to enter into
this Agreement and agree to all the terms and provisions hereof.
ACCORDINGLY, in consideration of the foregoing, and intending to be
legally bound hereby, each of the parties hereby agrees as follows:
ARTICLE I
INDEMNIFICATION, ESCROW AND ADDITIONAL AGREEMENTS
1.1 APPROVAL; JOINDER. By signing this Agreement, each Principal
Shareholder, on behalf of the Principal Shareholder and his spouse, heirs,
affiliates, legal representatives, successors and assigns, hereby (i) approves
and accepts all of the terms and conditions of the Merger Agreement and the
Escrow Agreement (as defined in Section 1.3) and agrees to be bound thereby as
if the Principal Shareholder were a party thereto; and (ii) agrees to promptly
comply with all of the terms of this Agreement (including the payment of any and
all amounts of cash that may become due and payable to any Parent Indemnitee by
the Principal Shareholder under the terms of this Agreement), the
<PAGE> 2
Merger Agreement (including the indemnification provisions of Article VIII of
the Merger Agreement and the payment of the Unanticipated Fees and Expenses (as
defined in the Merger Agreement)) and the Escrow Agreement.
1.2 INDEMNIFICATION.
(a) Each Principal Shareholder, on behalf of the Principal
Shareholder and his spouse, heirs, affiliates, legal representatives, successors
and assigns, hereby jointly and severally agrees to indemnify Parent Indemnitees
(as defined in the Merger Agreement), and hold them harmless against and in
respect of any and all Losses (as defined in the Merger Agreement) to the
extent, subject to and in accordance with all of the terms and provisions of
Article VIII of the Merger Agreement (which terms and provisions are
incorporated by reference in this Agreement as if fully set forth in this
Agreement).
(b) Each Principal Shareholder, on behalf of the Principal
Shareholder and his spouse, heirs, affiliates, legal representatives, successors
and assigns, hereby severally and not jointly also agrees to indemnify Parent
Indemnitees, and hold them harmless against and in respect of any and all
claims, losses, damages (including incidental and consequential damages),
expenses (including court costs, the costs of any investigation, expert
witnesses and preparation, and attorneys' fees), obligations and liabilities,
whether or not involving third party claims, which, directly or indirectly,
arise or result from or are incident or related to (i) the inaccuracy of any
representation or breach of any warranty of the Principal Shareholder under this
Agreement or any other agreements to be entered into by a Principal Shareholder
in connection with this Agreement or the Merger Agreement; or (ii) any default
or failure of the Principal Shareholder's commitments or obligations under this
Agreement or such other agreements; or (iii) any act or omission of the
Principal Shareholder which otherwise constitutes a breach of this Agreement or
such other agreements; or (iv) any and all Taxes (as defined in the Merger
Agreement) that may be imposed on any Parent Indemnitee pursuant to a
determination that the Principal Shareholder, at any time on or after the
Effective Time, recognized any income in connection with the Merger, any
transaction related to the Merger or any provision of the Merger Agreement, this
Agreement or any other document referenced in the Merger Agreement. The
indemnification obligations contained in this Section 1.2(b) will be determined
without regard to the limitations contained in Sections 8.1 and 8.4 of the
Merger Agreement.
1.3 THE ESCROW AGREEMENT. It is a condition to the obligations of the
parties to the Merger Agreement to consummate the Merger that Parent and the
Shareholder Representative enter into an Escrow Agreement (in the form attached
as EXHIBIT A to the Merger Agreement) (the "Escrow Agreement") with U.S. Trust
Company, N.A., as Escrow Agent ("Escrow Agent"). Under the Escrow Agreement,
Escrow Agent will hold in escrow 60,000 shares of the Parent Common Stock to be
issued in the Merger (the
2
<PAGE> 3
"Escrowed Shares"), all in accordance with the terms and conditions of the
Escrow Agreement. At the Effective Time, the Company's shareholders will be
deemed to have received and deposited with Escrow Agent the Escrowed Shares,
without any act of the Company's shareholders.
1.4 CERTAIN ADDITIONAL AGREEMENTS OF KRAMER.
(a) PAYMENT OBLIGATION. In the event of any Termination (as
defined below) of Kramer's employment on or before the second anniversary of the
date of the Effective Time, Kramer agrees to pay to the Company, as liquidated
damages for such breach and not as a penalty, a cash amount equal to $250,000.
Kramer will pay such amount to the Company within ten days following such
Termination. Kramer and Parent agree that, because there can be no exact measure
of the damage that would occur to the Company as a result of the Termination,
the payment provided pursuant to this Section 1.4 is an attempt to reasonably
estimate such damages and will be deemed to constitute liquidated damages and
not a penalty. Kramer hereby also acknowledges and agrees that his employment
with the Company, Parent or any of their affiliates will at all times be an "at
will" employment.
(b) CERTAIN DEFINITIONS. For purposes of this Section 1.4:
(i) "Termination" means (A) Kramer voluntarily ceases
to be employed by the Company, Parent or any of their affiliates, for any reason
other than Good Reason (as defined below), his death or Disability (as defined
below), or (B) the Company, Parent or any of their affiliates terminates
Kramer's employment for Cause (as defined below).
(ii) "Good Reason" means (A) Kramer's annual base
salary is reduced to an amount less than $130,000; (B) Kramer does not receive
an annual performance review, at which his compensation is discussed, within 13
months of the date of the Effective Time; or (C) Kramer is asked to relocate for
more than 90 days to an office that is more than 30 miles away from the
Company's current office.
(iii) "Disability" means a determination by Parent's
Board of Directors, in its good faith reasonable discretion, that Kramer has
become so physically or mentally disabled as to be incapable of substantially
performing his duties to the Company, Parent or any of their affiliates for a
period of at least 90 consecutive days.
(iv) "Cause" means (A) Kramer refuses in bad faith to
perform the duties required of him with the intent of provoking his firing; (B)
Kramer commits acts of material dishonesty, fraud or misrepresentation
perpetrated against the Company, Parent or any of their affiliates, or giving
rise to liability of the Company, Parent or any of their affiliates for the acts
of Kramer; (C) Kramer willfully breaches his obligations to
3
<PAGE> 4
treat trade secrets and confidential data confidentially or not to compete with
the Company, Parent or any of their affiliates during the term of his
employment; (D) Kramer is convicted of a crime involving the Company, Parent or
any of their affiliates or any of their customers, where the act or omission
occurred after the date of the execution of this Agreement; or (E) Kramer is
conviction for a felony or for fraud, embezzlement or any other act of moral
turpitude.
ARTICLE II
APPOINTMENT OF THE SHAREHOLDER REPRESENTATIVE
2.1 APPOINTMENT OF THE SHAREHOLDER REPRESENTATIVE.
(a) By signing this Agreement, each Principal Shareholder
hereby designates and appoints James F. Kramer as the agent and representative
(the "Shareholder Representative") of all of the Company's shareholders, for
purposes of this Agreement, the Merger Agreement and the Escrow Agreement, and
through whom all actions on behalf of the Company's shareholders relating to
this Agreement, the Merger Agreement and the Escrow Agreement (including those
actions as are required, authorized or contemplated by Article I with respect to
indemnification and escrow) will be made or directed, and hereby acknowledges
that the Shareholder Representative will be the only person authorized to take
any action so required on behalf of the Company's shareholders. The Company's
shareholders will be bound by any and all actions taken on their behalf by the
Shareholder Representative.
(b) By signing this Agreement, James F. Kramer hereby also
accepts and acknowledges his appointment as the "Shareholder Representative" and
agrees to perform the duties required of the Shareholder Representative under
this Agreement, the Merger Agreement and the Escrow Agreement.
2.2 REPLACEMENT OF SHAREHOLDER REPRESENTATIVE. The appointment of the
Shareholder Representative is irrevocable by the Company's shareholders, except
that a successor to the Shareholder Representative may be appointed by a written
instrument signed by a majority in percentage interest of the Company's
shareholders as of immediately prior to the Effective Time. Upon such
appointment of any such successor, such successor will immediately give written
notice of his or her appointment to Parent and the Escrow Agent (along with a
certified copy of the written instrument showing such successor's appointment)
and thereafter (i) such successor will be deemed to be the Shareholder
Representative for purposes of this Agreement, the Merger Agreement and the
Escrow Agreement, and (ii) all of the terms, provisions and obligations of this
Agreement, the Merger Agreement and the Escrow Agreement will automatically
(without any action on the part of such successor or further notice to any
party) be binding upon and inure to the benefit of such successor. The choice of
a successor Shareholder Representa-
4
<PAGE> 5
tive appointed in any manner permitted above is final and binding upon all of
the Company's shareholders.
2.3 COMMUNICATIONS; NOTICES. Parent and the Escrow Agent are entitled
to rely upon any communication or writings given or executed by the Shareholder
Representative as binding all of the Company's shareholders and their
successors, assigns, heirs, legal representatives, affiliates and spouses and
will not be bound or put on notice by any communications from any Company
shareholder or other person (other than the Shareholder Representative acting as
such). All notices to be sent to the Company's shareholders or the Principal
Shareholders pursuant to this Agreement, the Merger Agreement or the Escrow
Agreement will be addressed to the Shareholder Representative. Any notice so
sent will be deemed notice to all of the Company's shareholders or the Principal
Shareholders, as the case may be. The Shareholders hereby consent and agree that
the Shareholder Representative is authorized to accept notice on behalf of the
Company's shareholders and the Principal Shareholders pursuant hereto.
2.4 AGENT FOR SERVICE OF PROCESS. Each Principal Shareholder hereby
irrevocably appoints the Shareholder Representative as the lawful agent of such
Principal Shareholder and his successors, assigns, heirs, legal representatives,
affiliates and spouse to receive and forward on their behalf service of all
necessary processes in any action, suit, or proceeding arising under or in any
way relating to this Agreement, the Merger Agreement, the Escrow Agreement or
any related document, any of the transactions contemplated hereby or thereby or
any of the subject matter hereof and that may be brought against any Principal
Shareholder or his successors, assigns, heirs, legal representatives, affiliates
or spouse in any court. Such service of process or notice received by the
Shareholder Representative will have the same force and effect as if served upon
the Principal Shareholders or their respective successors, assigns, heirs, legal
representative, affiliates or spouses.
2.5 POWER OF ATTORNEY. Each Principal Shareholder hereby appoints and
constitutes the Shareholder Representative the true and lawful attorney-in-fact
of such Principal Shareholder and his successors, assigns, heirs, legal
representatives, affiliates or spouse, with full power in such Principal
Shareholder's (or successors', assigns', heirs', legal representatives',
affiliates' or spouse's) name and on the Principal Shareholder's (or the
successors', assigns', heirs', legal representatives', affiliates' or spouse's)
behalf to act according to the terms of this Agreement, the Merger Agreement and
the Escrow Agreement in the absolute discretion of the Shareholder
Representative, and in general to do all things and to perform all acts,
including executing and delivering the Escrow Agreement and all other
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement, the
Merger Agreement or the Escrow Agreement. This power of attorney and all
authority hereby conferred is granted subject to the interest of the other
Principal Shareholder hereunder and in consideration of the mutual covenants and
agreements made herein, and
5
<PAGE> 6
is irrevocable and will not be terminated by any act of any Principal
Shareholder or by operation of law, whether by death or any other event.
2.6 LIMITATION ON THE SHAREHOLDER REPRESENTATIVE'S LIABILITY. The
Shareholder Representative will not be liable to the Principal Shareholders for
any action taken, suffered or omitted by the Shareholder Representative in good
faith and reasonably believed by the Shareholder Representative to be authorized
or within the discretion of the rights or powers conferred upon the Shareholder
Representative by this Agreement, the Merger Agreement or the Escrow Agreement,
except to the extent of the Shareholder Representative's own gross negligence,
recklessness or willful misconduct. The Shareholder Representative may consult
with competent and responsible legal counsel selected by him, and he will not be
liable for any action taken or omitted by him in good faith in accordance with
the advice of such counsel.
2.7 COSTS AND EXPENSES OF THE SHAREHOLDER REPRESENTATIVE. The Principal
Shareholders will bear all expenses incurred by the Shareholder Representative
in connection with his duties hereunder and will indemnify him against and save
him harmless from any and all claims, liabilities, costs, payments and expenses,
including fees of counsel (who may be selected by the Shareholder
Representative), for anything done by him in the performance of this Agreement,
the Merger Agreement or the Escrow Agreement, except as a result of his own
gross negligence, recklessness or willful misconduct.
ARTICLE III
MISCELLANEOUS
3.1 TAX CONSEQUENCES TO THE PRINCIPAL SHAREHOLDERS, ETC. Each Principal
Shareholder hereby acknowledges and agrees that Parent, Merger Sub and the
Company have not given the Principal Shareholder any tax advice in connection
with the Merger or otherwise, and have no responsibility for any tax
consequences to the Principal Shareholder arising from or related to the Merger
or otherwise. Each Principal Shareholder further acknowledges and agrees that he
has had an opportunity to consult with his personal tax advisors as to the
actual tax consequences to him arising from or related to the Merger or
otherwise.
3.2 SURVIVAL. The representations, warranties, covenants and agreements
of the parties contained in or made pursuant to this Agreement will survive the
consummation of the transactions contemplated by this Agreement and will in no
way be affected by any investigation of the subject matter thereof made by or on
behalf of the parties.
3.3 NOTICES. Any notices, consents, waivers or other communications
required or permitted under this Agreement will be given in writing and will be
deemed to have been duly given when delivered personally, or if delivered in
another manner, the earlier of when it is actually received by the party to whom
it is directed, or when the following
6
<PAGE> 7
period expires (whether or not it is actually received): (i) if transmitted by
telecopier, 24 hours following transmission to the party's telecopier number set
forth below, with the party's name and address clearly shown on the first page
and confirmation of transmission produced by the transmitting party's equipment,
(ii) if deposited in the mail, postage prepaid, and addressed to the party to
receive it as set forth below, 72 hours following such deposit, or (iii) if
accepted by Federal Express, or similar delivery service in general usage, for
delivery to the address of the party to receive it as set forth below, 24 hours
following the delivery time promised by the delivery service; provided that, if
any such transmission, mailing or express delivery is made on a day immediately
preceding a Saturday, Sunday or national holiday, then the subject transmission,
mailing or express delivery, as the case may be, will be deemed to be made at
the beginning of the next succeeding day that is not a Saturday, Sunday or
national holiday:
If to the Principal Shareholders,
the Shareholder Representative or Kramer:
Confidential
James F. Kramer, Shareholder Representative
c/o Virtual Technologies, Inc.
2175 Park Boulevard
Palo Alto, California 94306
Telecopier no.: (650) 321-4912
With a copy to:
Lloyd A. Schmidt, Esq.
Hopkins & Carley
70 South First Street
San Jose, California 95113
Telecopier no.: (408) 998-4790
If to Parent or Parent Indemnitees:
Immersion Corporation
801 Fox Lane
San Jose, California 95131
Attention: Louis Rosenberg, Chief Executive Officer
Telecopier no.: (408) 467-1901
With a copy to:
Sarah A. O'Dowd, Esq.
Heller Ehrman White & McAuliffe LLP
525 University Avenue
Palo Alto, California 94301
Telecopier no.: (650) 324-0638
7
<PAGE> 8
or to such other address or telecopier number as the party to whom notice is to
be given has furnished to the other party in the manner provided above, provided
that notice of such change has actually been received by the party to whom it is
directed.
3.4 AMENDMENT. This Agreement may not be amended, modified,
supplemented, cancelled or discharged except in a writing signed by Parent and a
majority in percentage interest of the Principal Shareholders as of immediately
prior to the Effective Time.
3.5 HEADINGS. The Article, Section and subsection headings contained in
this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement.
3.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, Parent and the Shareholder
Representative will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
3.7 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of California applicable to
contracts executed and fully performed within the State of California, without
regard to any principles of conflicts or choice of laws.
3.8 INTERPRETATION; RULES OF CONSTRUCTION. This Agreement has been
negotiated and is to be interpreted according to its fair meaning and not
strictly for or against any party. The parties waive any rule of law or judicial
precedent that provides that contractual ambiguities are to be construed against
the party who drafted the contractual provision in question. All references in
this Agreement to "parties" refer to the parties to this Agreement unless
expressly indicated otherwise. References in this Agreement to Sections or
subsections are to Sections and subsections of this Agreement unless expressly
indicated otherwise. At each place in this Agreement where the context so
requires, the masculine, feminine or neuter gender includes the others and the
singular or plural number includes the other. "Including" means "including
without limitation" and "or" is used in the inclusive sense of "and/or."
3.9 ENTIRE AGREEMENT. This Agreement, and the Merger Agreement and the
Escrow Agreement, which are hereby incorporated into this Agreement by this
reference
8
<PAGE> 9
and are made a part hereof, together with all other agreements and documents
executed and delivered concurrently herewith or therewith, constitute the entire
understanding and agreement between the parties with regard to the subject
matter hereof, and supersede all prior agreements, understandings, negotiations,
representations and discussions, whether written or oral, pertaining to that
subject matter, which will continue in full force and effect.
3.10 WAIVER. Either Parent or the Shareholder Representative (on his
behalf and behalf of the Principal Shareholders) may extend the time for the
performance of any of the obligations or other acts of the other party or waive
compliance with any of the agreements of the other party. No waiver of any
breach or default hereunder will be considered valid unless in writing and
signed by the party (either Parent or the Shareholder Representative) giving
such waiver, and no such waiver will be deemed a waiver of any subsequent breach
or default of the same or similar nature.
3.11 PARTIES IN INTEREST. Except for the Parent Indemnitees, who are
third party beneficiaries of this Agreement, nothing in this Agreement,
expressed or implied, is intended to confer upon any person or entity other than
the parties any rights or remedies under or by reason of this Agreement.
3.12 SUCCESSORS AND ASSIGNS. This Agreement inures to the benefit of
and is binding upon the successors and assigns of the parties. Notwithstanding
the foregoing, except as set forth in Section 2.2, neither this Agreement nor
any rights or obligations hereunder may be assigned, pledged, hypothecated or
otherwise transferred by the Shareholder Representative or the Principal
Shareholders without the prior written consent of Parent, which consent may be
withheld in the sole discretion of Parent.
3.13 ENFORCEMENT. Each Principal Shareholder acknowledges that, in view
of the uniqueness of the subject matter of this Agreement, Parent may not have
an adequate remedy at law for money damages if this Agreement is not performed
in accordance with its terms. Accordingly, each Principal Shareholder agrees
that, in addition to any other right or remedy to which Parent may be entitled,
at law or in equity, it will be entitled to enforce this Agreement by a decree
of specific performance against the Principal Shareholder and to temporary,
preliminary and permanent injunctive relief to prevent breaches or threatened
breaches of this Agreement, without posting any bond or other undertaking.
3.14 ATTORNEYS' FEES. The prevailing party will be entitled to recover
all costs and expenses, including reasonable attorneys' fees, expert witness
fees, court costs and all other costs and expenses incurred in any action or
proceeding arising out of this Agreement or as to any matters related to but not
covered by this Agreement. "Prevailing party" for purposes of this Section 3.14
includes a party who agrees to dismiss an action or proceeding upon the other's
payment of the sums allegedly due or for performance of
9
<PAGE> 10
the covenants, undertakings or agreements allegedly breached, or who obtains
substantially the relief it sought.
3.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. The exchange of copies of
this Agreement and of signature pages by telecopier transmission will constitute
effective execution and delivery of this Agreement as to the parties and may be
used in lieu of the original for all purposes. Signatures of the parties
transmitted by telecopier will be deemed to be their original signatures for any
purpose whatsoever.
3.16 CONSENT TO JURISDICTION. Each of the parties hereto (i) consents
to submit himself, herself or itself to the personal jurisdiction of the United
States District Court for the Northern District of California or the courts of
the State of California located in the County of Santa Clara with respect to any
and all disputes arising out of (A) this Agreement, the Merger Agreement or the
Escrow Agreement, including the validity construction and interpretation hereof
and thereof and the rights and remedies of the parties hereunder and thereunder;
(B) any of the transactions contemplated by this Agreement, the Merger Agreement
and the Escrow Agreement; and (C) any matters related to but not covered hereby
or thereby, in each case to the extent such court would have subject matter
jurisdiction with respect to such dispute; (ii) agrees that he, she or it will
not attempt to deny or defeat such personal jurisdiction or venue by motion or
other request for leave from any such court; and (iii) agrees that nothing
herein will affect the right to effect service of process in any manner
permitted by law.
3.17 SPOUSAL CONSENTS. Each Principal Shareholder who is married is
delivering to Parent, concurrently with the Principal Shareholder's execution
and delivery of this Agreement, a duly executed and delivered Spousal Consent in
the form attached as ANNEX C to this Agreement.
3.18 NO RIGHT TO CONTINUED EMPLOYMENT, ETC. Nothing in this Agreement
or otherwise will confer upon the Principal Shareholders any right to continued
employment by the Company, Parent or any of their affiliates, nor shall it
interfere in any way with the right of the Company, Parent or such affiliate to
terminate or change the terms of the Principal Shareholder's employment
arrangement, or to change the compensation of the Principal Shareholders, at any
time for any reason whatsoever, with or without cause.
3.19 HOLIDAYS. If any date on which action is to be taken under this
Agreement occurs, or if any period during which action is to be taken under this
Agreement ends, on a Saturday, Sunday or national holiday, the date or period
will be extended to the next succeeding day which is not a Saturday, Sunday or
national holiday.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Indemnification and
Joinder Agreement to be duly executed as of the date first above written.
IMMERSION CORPORATION
By /s/ Louis Rosenberg
--------------------------------------
Its: President
-------------------------------
/s/ James F. Kramer
-----------------------------------------
James F. Kramer, individually and
as the Shareholder Representative
/s/ Marc Tremblay
-----------------------------------------
Marc Tremblay
11
