<PAGE>
As filed with the Securities and Exchange Commission on April 3, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INTRINSIX CORP.
(Exact name of registrant as specified in its charter)
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Massachusetts 3674 04-2891898
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
33 Lyman Street
Westboro, Massachusetts 01581
(508) 836-4100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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James A. Gobes, Jr.
Chief Executive Officer
INTRINSIX CORP.
33 Lyman Street
Westboro, Massachusetts 01581
(508) 836-4100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
Peter B. Tarr, Esq. Timothy C. Maguire, Esq.
Hale and Dorr LLP Testa, Hurwitz & Thibeault, LLP
60 State Street 125 High Street
Boston, Massachusetts 02109 Boston, Massachusetts 02110
Telephone: (617) 526-6000 Telephone: (617) 248-7000
Telecopy: (617) 526-5000 Telecopy: (617) 248-7100
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date hereof.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Title of each Class of Securities to Aggregate Offering Amount of
be Registered Price(1) Registration Fee
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<S> <C> <C>
Common Stock, no par value per
share............................. $46,000,000 $12,144
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act
of 1933, as amended.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The Information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 3, 2000
[LOGO]
Shares
Common Stock
Intrinsix Corp. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We have applied for approval for quotation on the Nasdaq National Market under
the symbol "ITRX" for the shares we are offering. We anticipate that the
initial public offering price will be between $ and $ per share.
--------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 3.
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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discounts and Commissions......................... $ $
Proceeds to Intrinsix Corp..................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
Intrinsix Corp. has granted the underwriters a 30-day option to purchase up
to an additional shares of common stock to cover over-allotments.
--------------
Robertson Stephens
CIBC World Markets
Adams, Harkness & Hill, Inc.
The date of this Prospectus is , 2000.
<PAGE>
A map of the United States and Canada showing the location of our 19
design centers appears in the lower left corner of the page. The following
heading appears at the top of the page. "Electronic Design Services: The fusion
of advanced semiconductor technology with strategic outsourcing." In the
background, a silicon wafer is shown with the caption "System on Chip
Integration." Pictures of customer products, including a tester, cellular
phone, projector and storage system, appear under the caption. Logos of our
customers are shown at the bottom of the page beneath the heading "Intrinsix
Customers."
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "Intrinsix
Corp.," "we," "us" and "our" refer to Intrinsix Corp., together with its wholly
owned subsidiaries Intrinsix Canada Co. and Seva Technologies, Inc. unless the
context otherwise requires.
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This requirement is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
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TABLE OF CONTENTS
<TABLE>
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Page
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Summary.................................................................. 1
Risk Factors............................................................. 3
Special Note Regarding Forward-Looking Statements........................ 11
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
Capitalization........................................................... 13
Dilution................................................................. 14
Selected Consolidated Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Business................................................................. 21
Management............................................................... 27
Certain Transactions..................................................... 35
Principal Stockholders................................................... 36
Description of Capital Stock............................................. 37
Shares Eligible for Future Sale.......................................... 40
Underwriting............................................................. 42
Legal Matters............................................................ 45
Experts.................................................................. 45
Where You Can Find More Information...................................... 45
Index to Consolidated Financial Statements............................... F-1
Unaudited Pro Forma Condensed Consolidated Statement of Operations....... P-1
</TABLE>
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Intrinsix is a registered trademark owned by us. Prism, Prism Acoustics,
VHDL Technology Group, Designers' Introduction to VHDL, Dragster, Dragster-Pro,
Esprimo and Intrinsix microPlatform and some other forms of the name Intrinsix
are trademarks of Intrinsix. We have applied for trademark registrations for
microPlatform, uPlatform and UPlatform. All other trademarks and trade names
used in the prospectus are the property of their respective owners.
<PAGE>
SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including risk factors, regarding our company
and the common stock being sold in this offering.
Our Company
We are an independent provider of advanced electronic design services to
top-tier systems OEMs and semiconductor companies. We design semiconductor
devices, as well as the accompanying system-level hardware and software that
comprise advanced electronics products. We deliver these design services
through three engagement models: outsourcing, insourcing and real-time remote
collaboration using Internet technology, or E sourcing. We sell our services
primarily through our direct sales force. We were founded in 1985 and began
opening remote design centers in 1995. We currently operate 19 design centers
throughout the United States and Canada and have recently begun operations in
Europe. We have been profitable every year since 1991.
The market for electronic products is proliferating as new technologies
and applications are being introduced at rapid rates. The explosive growth of
Internet usage, the ubiquity of communications and the convergence of digital
media and communications technology have driven the increase of electronic
content in various types of products. Electronic content is increasingly
included in a wide range of products, from the traditional personal computer to
the communications infrastructure equipment that drives the Internet to
everyday devices such as home appliances, automobiles and hand-held wireless
devices. The increase in the number of semiconductor devices being designed,
coupled with the increasing acceptance of outsourcing within the electronics
industry, has created a new industry -- electronics design services. We are a
leader in this emerging industry.
The growth of the electronic design services industry can be largely
attributed to the emergence of system-on-chip, or SoC, technologies. SoC
designs integrate many technologies into a single chip thus lowering costs and
increasing performance. Traditionally, these technologies were integrated into
a system using many discrete devices. Systems OEMs and semiconductor companies
are increasingly relying on strategic design partners that understand the
complexity of these SoC designs. These customers need partners that can provide
high quality technical expertise on a where- and when-needed basis.
We design electronics for a broad range of products in applications such
as networking, telecommunications, wireless, broadband, digital media and
storage. We have worked on over 300 semiconductor and systems design projects
since our inception in 1985. We focus on providing design services rather than
selling or licensing products, allowing us to maintain our independence and
leverage our strong industry relationships. We maintain close relationships
with our customers by employing distributed engineering teams located
geographically near our customers. Our 19 design centers are interconnected
through our corporate intranet. These local design centers are supported by an
infrastructure that includes electronic design software tools, data management
and remote collaboration software. Using this infrastructure, we can rapidly
respond to changing or specialized customer needs, differentiating us from our
competitors.
Our goal is to become the leading independent provider of electronic
design services. We believe this requires a global presence with interconnected
design centers in every key geographic market. We plan to achieve this goal by
continuing to:
. target high growth markets;
. attract and retain highly qualified design engineers;
. invest in the training of our engineers to maintain a technological
advantage over our competitors;
. pursue strategic acquisitions;
. expand internationally;
. leverage our branded design methodologies;
. expand strategic relationships with leading technology suppliers; and
. expand our E-service offerings.
Our Address
Our principal executive offices are located at 33 Lyman Street, Westboro,
Massachusetts 01581 and our telephone number at that location is (508) 836-
4100. Our website is located at www.intrinsix.com. Information contained in our
website is not part of this prospectus.
1
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The Offering
<TABLE>
<S> <C>
Common stock offered.............. shares
Common stock to be outstanding shares
after the offering..............
Use of proceeds................... Repayment of indebtedness, expansion of our
business and operations, research and
development expenses, potential
acquisitions and other general corporate
purposes.
Proposed Nasdaq National Market ITRX
symbol..........................
</TABLE>
Common stock outstanding after the offering is based on the number of
shares outstanding as of December 31, 1999, and except as otherwise noted, all
information in this prospectus:
. excludes 3,683,489 shares issuable upon the exercise of outstanding
options with a weighted- average exercise price of $0.90 per share;
. excludes 2,000,000 shares available for issuance under our 2000 Stock
Incentive Plan;
. reflects a 3-for-2 stock split of all of our outstanding shares of
common stock, the increase of our authorized common stock to 70,000,000
shares and the authorization of 5,000,000 shares of preferred stock,
all to be effected before completion of this offering; and
. assumes no exercise of the underwriters' over-allotment option.
Summary Consolidated Financial Information
(dollars in thousands, except per share data)
The summary consolidated financial information below sets forth a summary
of the results of our operations and certain information about our assets,
liabilities and capital. You should read this information along with our
discussion in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and notes to
those statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................. $8,117 $11,814 $16,330 $23,475 $30,657
Gross profit............................. 2,300 3,349 5,692 9,298 12,156
Operating income......................... 851 960 856 1,001 1,613
Net income............................... 509 594 506 601 928
Net income per share:
Basic earnings per share............... $ 0.06 $ 0.07 $ 0.05 $ 0.06 $ 0.09
Diluted earnings per share............. $ 0.06 $ 0.07 $ 0.05 $ 0.06 $ 0.08
Shares for basic computation........... 8,854 8,986 9,502 9,668 9,925
Shares for diluted computation......... 8,854 8,986 9,531 10,307 12,365
</TABLE>
The following table presents a summary of our balance sheet at December
31, 1999:
. on an actual basis; and
. on an as adjusted basis to reflect the sale of shares of common
stock in this offering at an assumed initial public offering price of
$ per share after deducting the estimated underwriting discounts and
commissions and offering expenses and the application of the estimated
net proceeds from this offering.
<TABLE>
<CAPTION>
December 31, 1999
------------------
Actual As Adjusted
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<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............................. $ 231
Working capital........................................ 1,636
Total assets........................................... 7,633
Long-term obligation................................... 1,016
Stockholders' equity................................... 3,403
</TABLE>
2
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RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks that are not yet identified or that we currently think
are immaterial may also impair our business operations. Our business, operating
results and financial condition could be adversely affected by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you could lose all or part of your investment. You should
also refer to the other information set forth in this prospectus, including our
consolidated financial statements and the related notes.
Risks Related to Our Business
We Experience Fluctuations in Our Operating Results Due to a Number of
Frequently Changing Business Conditions, Which May Cause Our Stock Price to
Decline.
We experience fluctuations in our operating results due to a variety of
factors, including:
. the timing and size of engagements with our customers, including
cancellations and reschedulings;
. the gain or loss of significant customers, including as a result of
industry consolidation;
. the gain or loss of engineers or other significant employees;
. increases in personnel and other costs;
. the cyclical nature of some of our target markets;
. the seasonality in revenue generation due to employee and customer
vacations;
. unanticipated delays in our ability to complete customer engagements;
. changes in the mix of services we provide;
. changes in demand by the end users of our customers' products;
. market acceptance of our current and future services;
. variability of our customers' product life cycles;
. cancellations, changes or delays of deliveries to us by our
suppliers, including workstation manufacturers, software tool
providers, semiconductor manufacturers and intellectual property
providers; and
. general economic conditions.
As a result of the factors listed above and our dependence on relatively
few customers whose order cycles vary significantly, our operating results
could fluctuate significantly.
We cannot accurately forecast all of the above factors. As a result, we
believe that period-to-period comparisons of our financial results are not
indicative of our future performance. Our operating results in a future quarter
or quarters may fall below the expectations of public market analysts or
investors. If this were to occur, the price of our common stock could decline.
The Failure to Hire and Retain Additional Qualified Personnel Could Impair our
Ability to Develop and Market Our Services.
Competition for highly skilled engineering, sales and management
personnel in the electronic design services industry is intense, and we may not
succeed in attracting and retaining these personnel. We experience competition
from a wide variety of other technology companies. Many of these companies have
substantially greater ability, either through cash or equity, to attract,
retain and compensate qualified people. If we lose key
3
<PAGE>
personnel or are unable to attract key personnel we will not be able to
maintain our position in the market or expand our business.
The Loss of Key Management Could Affect Our Ability to Run Our Business.
Our success depends to a significant degree upon the continued
contributions of our key management, particularly James A. Gobes, Jr., our
Chief Executive Officer, and Mark A. Beal, our Chief Technical Officer. The
loss of any of our key management could adversely affect our business. We do
not have employment contracts with our key personnel.
Our Revenues and Profits May Decrease if We Lose Any of Our Significant
Customers.
Historically, a relatively small number of customers have accounted for a
significant portion of our revenues in any particular period. The loss of any
significant customer could cause our revenues or profits to decline. In the
years ended December 31, 1999, 1998 and 1997, our six largest customers
accounted for approximately 56.7%, 43.7% and 50.0% of our revenues,
respectively, of which Texas Instruments represented 24.0%, 18.2% and 16.9%,
respectively. We anticipate that sales of our services to relatively few
customers will continue to account for a significant portion of our revenues.
We do not have any long-term purchase commitments with our significant
customers. Therefore, these customers could cancel design services contracts
with limited notice and with little or no penalty.
Our dependence on a small number of customers increases the risks
associated with our potential loss of customers resulting from business
combinations or consolidations. If a customer or potential customer were
acquired or combined with another company, the resulting company could cancel
development efforts or purchase orders as part of the integration process.
Our Failure to Provide Services Incorporating Current Technologies Could Impair
Our Ability to Attract and Retain Customers.
The electronic design services industry is characterized by rapidly
changing technology, ongoing demands for greater speed and functionality,
evolving industry standards and changing customer needs. Therefore, to be
competitive, we must:
. identify emerging technological trends and industry standards in our
target markets;
. quickly and effectively incorporate leading edge technologies in our
services;
. develop new and innovative services and enhance our current services
in ways that differentiate our services from those of our
competitors;
. bring services to market on a timely basis at competitive prices;
. respond effectively to technological changes or new service offerings
by others; and
. market and sell our services.
We cannot assure you that we will be able to meet the development and
market introduction schedules for our new services or enhancements to our
existing services or that these services will achieve market acceptance.
We Face Intense Competition in the Market For Electronic Design Services.
Competition in the market for electronic design services is intense, and
we expect it to increase in the future. We face competition from:
. internal design service groups of electronic design automation, or
EDA, companies such as Avant!, Cadence, Mentor Graphics and Synopsys,
electronic manufacturing services, or EMS, companies
4
<PAGE>
such as Flextronics and Solectron, application specific integrated
circuit, or ASIC, companies such as Actel, LSI Logic and Philips, and
intellectual property and embedded software companies such as ARM,
Artisan, SiCAN and Wind River Systems; and
. independent design services companies such as Accent Design, Advanced
Digital Design, ASIC Alliance, ASIC International, EASIC, First Pass,
I2P and Qualis.
Furthermore, many of our existing and potential customers have the
resources and capability to internally perform electronic design services. If
these customers decided to expand and focus on the development of their
internal electronic design services, we would lose sales opportunities.
Many of the companies with internal design services groups, as well as
potential new competitors, may have longer operating histories, greater brand
recognition, larger customer bases or greater financial and marketing
resources than we do. They may therefore be able to respond more quickly than
we can to new or emerging technologies and changes in customer requirements.
They may also be able to devote greater resources than we can to developing
and promoting their technologies and services. In addition, we may face
competition from low-cost design services groups internationally.
Our Failure to Protect Our Proprietary Rights, or the Costs of Protecting
These Rights, May Harm Our Ability to Compete.
We depend upon a combination of trademark laws, license agreements, non-
disclosure and other contractual provisions to protect proprietary rights in
our methodologies and other confidential information. Our failure to
adequately protect those rights could result in others offering similar
capabilities, potentially resulting in the loss of a competitive advantage and
decreased revenues. In addition, we attempt to protect our proprietary
information through confidentiality and license agreements with our employees
and others. However, we may not have an adequate remedy in the event these
agreements are breached, or any remedy, if our trade secrets are independently
developed by others. Despite our efforts to protect our proprietary rights,
existing intellectual property laws afford only limited protection. In
addition, the laws of some foreign countries provide only limited proprietary
rights protection.
Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others. This litigation could result in
substantial costs and diversion of resources.
We Could Be Subject to Claims of Infringement of Third-Party Intellectual
Property, Which Could Result in Significant Expense and Loss of Intellectual
Property Rights.
The electronic design services industry is characterized by uncertain
and conflicting intellectual property claims and frequent intellectual
property litigation, especially regarding patent rights. From time to time,
third parties assert patent, copyright, trademark and other intellectual
property rights to technologies that are important to our business. We may
receive notices of claims that the solutions we have developed infringe or may
infringe the rights of third parties. Any litigation to determine the validity
of these claims, including claims arising through our contractual
indemnification of our customers, regardless of their merit or resolution,
would likely be costly and divert the efforts and attention of our management
and technical personnel. We cannot assure you that we would prevail in this
litigation given the complex technical issues and inherent uncertainties in
intellectual property litigation. If this litigation resulted in an adverse
ruling, we could be required to:
. pay substantial damages to our customers or third parties;
. cease the use or sale of infringing services;
. discontinue the use of certain technology; or
5
<PAGE>
. obtain a license under the intellectual property rights of the third
party claiming infringement, which license may not be available on
reasonable terms, or at all.
In addition, our business often involves the development of software
applications, hardware components and methodologies for specific client
engagements. We generally retain the right to use any intellectual property
that is developed during a client engagement that is of general applicability
and is not specific to the client's project. We also develop software
applications for our own internal use and we retain ownership of these
applications. There can be no assurance that clients will not demand assignment
of ownership or restrictions on our use of the work that we produce for clients
in the future. Issues relating to the ownership of rights to use software can
be complicated and there can be no assurance that disputes will not arise that
affect our ability to reuse this software which could harm our business
results.
If We Fail to Satisfy the Expectations of Our Customers, Our Business
Reputation Will Be Harmed, and We May Incur Significant Unexpected Expenses and
Lose Sales Opportunities.
Our services may prove to be inadequate or ineffective, or be based upon
design imperfections or flawed methodologies. If this happens, we may
experience:
. injury to our reputation;
. project cancellations and loss of sales;
. diversion of engineering, management and financial resources; or
. increased project costs.
In addition, because our services relate to critical products, systems
and services, we may be subject to significant liability claims. Our customer
engagements restrict our ability to disclose or use proprietary information of
our customers. If we violate these restrictions, we could be subject to
significant liability claims. Our agreements with customers typically contain
provisions intended to limit our exposure to liability claims. These
limitations may not, however, preclude all potential claims from being made.
Although we have liability insurance, this coverage may not be sufficient to
cover claims sought against us. Liability claims could require us to spend
significant time and money in litigation or to pay significant damages. As a
result, any of these claims, whether or not successful, could seriously damage
our reputation and our business.
Our Lengthy Sales Cycle Makes it Difficult For Us to Predict If or When a Sale
Will Be Made.
The timing of our sales may be difficult to predict because of the length
of the sales cycle and the variability of the duration of the engagements for
our services. While potential customers are evaluating our services and before
they commit a project to us, we may incur sales and marketing expenses and
expend significant management effort. Often customers can cancel an ongoing
engagement on short notice without penalty. The cancellation or reduction of
our services could cause our revenues or profits to decline.
If We Fail to Establish and Maintain Our Relationships with Key Participants in
Our Target Markets, We May Have Difficulty Marketing Our Services.
It is important to our success to establish and maintain relationships
with companies that are key technology suppliers to our customers. We believe
that we need to work closely with these suppliers to gain valuable insights
into market demands for new services and to identify and gain access to the
latest semiconductor technologies, the most advanced software tools and
methodologies and advanced intellectual property offerings. We do not have
written agreements ensuring the continued existence of these relationships. If
we fail to establish and maintain these relationships, it would become more
difficult for us to develop and market services required by our customers.
6
<PAGE>
Our Rapid Growth Has Strained Our Resources, and We May Not Be Able to Manage
Future Growth.
We have experienced a period of rapid growth and expansion, which has
placed, and continues to place, a significant strain on our resources. This
growth has required us to increase the number of our employees from 87 as of
December 31, 1997 to 187 as of December 31, 1999 and the number of our design
centers from six as of December 31, 1997 to 19 as of December 31, 1999. This
expansion has resulted in increased responsibilities for our management and the
need to implement additional controls over our operations, some of which are
still in the process of being implemented. If we continue to expand our
operations, we may significantly strain our management, financial, information
systems and other resources. Moreover, we cannot be certain that our systems,
procedures, controls and existing physical facilities will be adequate to
support our operations.
As We Establish International Operations, We Will Face New Business Risks That
We Have Not Encountered Previously.
Historically, we have not derived a significant portion of our revenues
from sales to customers outside the United States. We have one design center in
Canada. Over the next several years, we plan to establish design centers and
operations in Europe and Asia, including India and Japan. This expansion will
require additional resources and management attention and will subject us to
new regulatory, economic and political risks. Given our limited experience in
international markets, we cannot be sure that our international expansion will
be successful. In addition, we will face new risks in doing business
internationally. These risks could reduce demand for our services, lower the
prices at which we can sell our services, or otherwise have an adverse effect
on our operating results. Among the risks we believe are most likely to affect
us are:
. longer payment cycles and problems in collecting accounts receivable;
. adverse changes in trade and tax regulations;
. the absence or significant lack of legal protection for intellectual
property rights;
. the adoption of data privacy laws or regulations;
. increase in seasonality of revenues;
. political and economic instability; and
. foreign currency exchange rate fluctuations.
We May Engage in Acquisitions That May Harm Our Operating Results, Dilute Our
Stockholders and Cause Us to Incur Debt or Assume Contingent Liabilities.
As part of our business strategy, we may make investments in
complementary companies, services or technologies that we believe would be
advantageous to the development of our business. If we acquire a company, we
could have difficulty in assimilating that company's personnel and operations.
In addition, the key personnel of the acquired company may decide not to become
our employees. If we make other types of acquisitions, we could have difficulty
in assimilating the acquired services and technologies into our operations.
These difficulties could disrupt our ongoing business, distract our management
and employees and increase our expenses. Furthermore, we may issue equity
securities to pay for any future acquisitions, which could be dilutive to our
existing stockholders. We may also incur debt or assume contingent liabilities
in connection with acquisitions, which could harm our operating results.
If We Fail to Integrate Our Recently Completed Acquisitions Effectively, It
Could Adversely Affect Our Operating Expenses and Could Cause Us to Fail to
Achieve the Benefits We Expected.
In 1999, we merged with Seva Technologies of Fremont, California and
acquired the assets of the Design Division of Telexis Corporation of Kanata,
Ontario. The integration of these entities may be disruptive, divert management
time and attention and result in a failure to realize the expected benefits of
these
7
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acquisitions. The problems may be accentuated since both of these entities are
located far from our headquarters and since one company is a foreign entity. If
we do not integrate these acquisitions effectively, we could fail to achieve
the benefits we expected and our business may be adversely affected.
Risks Related to Our Industry
The Cyclicality of the Semiconductor Industry May Impact Our Operating Results.
Our industry is highly dependent on the growth and performance of the
semiconductor industry which is highly cyclical and subject to rapid
technological change. From time to time, the semiconductor industry has
experienced significant economic downturns, characterized by diminished product
demand, rapid price drops and excess production capacity. This likely would
affect customers' demands for our services. Accordingly, our operating results
may vary significantly as a result of general conditions in the semiconductor
industry.
Our Success Depends on the Continued Growth of the Global Communications
Infrastructure, including the Internet.
We derive a significant portion of our revenues by providing electronic
design services to electronics and semiconductor companies whose primary
markets are in telecommunications, data communications and the Internet. We
depend on the continued growth of these markets, which largely dictates the
demand for the electronic components, devices and subsystems to which our
services relate. The continued growth of this global communications
infrastructure depends on various factors, nearly all of which are outside our
control. Related risks include that:
. this infrastructure may not be able to support the demands placed on
it;
. the performance and reliability of the networks in this infrastructure
may decline as usage grows; and
. privacy, security and authentication concerns with respect to the
transmission of confidential information over the Internet may result
in decreased usage.
Although our target markets have experienced significant growth in recent
years, they may not continue to grow as rapidly or at all. If they fail to
grow, grow more slowly than expected or decline, our operating results could be
harmed.
In addition, we rely on the Internet to deliver services to many of our
customers. If the ability of our engineers to communicate and collaborate with
our customers using Internet technology diminishes, our operating results could
suffer.
Risks Related to this Offering
Our Stock Price May Be Volatile, and You May Not Be Able to Resell Your Shares
At or Above the Offering Price.
The market for the securities of companies in the technology and emerging
growth sectors has been highly volatile. The price of our common stock may
fluctuate widely in the future. Factors that could affect the trading price of
our common stock include:
. quarterly variations in our operating results;
. changes in the general conditions of the electronic design services,
semiconductor or related markets;
. changes in financial estimates or recommendations by stock market
analysts regarding us or our competitors;
8
<PAGE>
. our sales of common stock or other securities in the future;
. the hiring or departure of our key personnel;
. announcements by us or our competitors of significant contracts, new
services or enhancements to existing solutions, acquisitions,
partnering relationships or joint ventures; and
. changes in market valuations of other electronic design services
companies.
We Could Be Subject to Class Action Litigation Due to Stock Price Volatility,
Which, If It Occurs, Will Distract Our Management and Could Result in
Substantial Costs or Large Judgments Against Us.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future.
Securities litigation could result in substantial costs and divert our
management's attention and resources, which could cause serious harm to our
business, operating results and financial condition or dilution to our
stockholders.
Purchasers of Common Stock in This Offering Will Suffer Immediate and
Substantial Dilution.
The initial public offering price is substantially higher than the book
value per share of our common stock. As a result, you will experience immediate
and substantial dilution in the pro forma net tangible book value per share.
This dilution is in large part because our earlier investors paid substantially
less than the initial public offering price in this offering when they
purchased their shares of common stock. You will experience additional dilution
upon exercise of outstanding stock options.
Management Has Broad Discretion on How to Use the Proceeds From This Offering
and May Not Apply the Proceeds in a Manner That Increases the Value of Your
Investment.
Management will have broad discretion with respect to the expenditure of
the net proceeds from this offering. The proceeds have not been allocated for
specific purposes. You will be entrusting your funds to our management, upon
whose judgment you must depend, with limited information concerning the
specific working capital requirements and general corporate purposes to which
the funds will ultimately be applied. We may not be able to yield a significant
return on any investment of the proceeds.
Provisions of Our Amended and Restated Articles of Organization and Amended and
Restated Bylaws or Massachusetts Law May Delay or Prevent a Change of Control
Transaction and, Therefore, Depress the Market Price of Our Stock.
Massachusetts corporate law and our Amended and Restated Articles of
Organization and Amended and Restated Bylaws contain provisions that could
delay, defer or prevent a change in control of our company on terms which you
may deem advantageous. These provisions could limit the price that investors
might be willing to pay in the future for shares of our common stock. These
provisions:
. authorize the issuance of "blank check" preferred stock, which is
preferred stock that our board of directors can create and issue
without prior stockholder approval, with rights senior to those of
common stock;
. provide for a board of directors with staggered terms; and
. prohibit stockholder action by written consent.
9
<PAGE>
A Limited Number of Stockholders Will Have the Ability to Influence the Outcome
of Director Elections and Other Matters Requiring Stockholder Approval.
After completion of this offering, our officers and directors and parties
affiliated with or related to these persons or to us will own approximately
% of the outstanding shares of our common stock. Accordingly, these
stockholders will likely determine the outcome of director elections and other
matters submitted to our stockholders for approval, including potential mergers
or acquisitions and amendments to our Restated Articles of Organization.
Stockholders other than these principal stockholders are therefore likely to
have little or no influence on decisions regarding these matters.
The Price of Our Stock Could Decrease as a Result of Shares Being Sold in the
Market After the Offering.
Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. The number of shares of common stock available for sale in the
public market is limited by restrictions under federal securities law and under
lockup agreements that our stockholders have entered into with the
underwriters, and with us. Those lockup agreements restrict our stockholders
from selling, pledging or otherwise disposing of their shares for a period of
180 days after the date of this prospectus without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson Stephens
Inc. may, in its sole discretion, release all or any portion of the common
stock from the restrictions of the lockup agreements. The following table
indicates approximately when the 10,041,805 shares of our common stock that are
not being sold in the offering, but which were outstanding as of December 31,
1999, will be eligible for sale into the public market:
<TABLE>
<CAPTION>
Eligibility of Restricted Shares
for Sale in Public Market
--------------------------------
<S> <C>
On the date of this prospectus...............
90 days after the date of this prospectus....
180 days after the date of this prospectus...
180 days after the date of this prospectus,
subject to volume limitations..............
More than 180 days after the date of this
prospectus.................................
</TABLE>
Additionally, of the 3,683,489 shares issuable upon exercise of
outstanding options to purchase our common stock outstanding as of December 31,
1999, approximately shares will be vested and eligible for sale 180 days
after the date of this prospectus. For a further description of the eligibility
of shares for sale into the public market following the offering, see "Shares
Eligible for Future Sale."
In addition, as soon as practicable after the date of this prospectus, we
intend to file a registration statement on Form S-8 with the Securities and
Exchange Commission covering the 2,000,000 shares of common stock reserved for
issuance under our 2000 Stock Incentive Plan, 1,000,000 shares of common stock
reserved for issuance under our 2000 Employee Stock Purchase Plan, 200,000
shares of common stock reserved for issuance under our 2000 Outside Director
Stock Option Plan, and for shares of common stock issued under our other stock
options.
10
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute forward-
looking statements. In some cases, you can identify forward-looking statements
by terms such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential," or "continue," or the negative
of such terms or other comparable terminology. The forward-looking statements
contained in this prospectus involve known and unknown risks, uncertainties and
other factors that may cause our or our industry's actual results, level of
activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by these statements. These factors include those listed under "Risk
Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. You should not place undue reliance
on these forward-looking statements, which apply only as of the date of this
prospectus.
11
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of shares of common
stock we are offering will be approximately $ million, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters exercise their over-allotment option in full, we
estimate that our net proceeds will be approximately $ million. The primary
purposes of this offering are to obtain additional equity capital, create a
public market for our common stock and facilitate future access to public
markets.
We intend to use a portion of the net proceeds we receive from this
offering for repayment of bank debt which totaled approximately $1.2 million as
of March 31, 2000, repayment of a promissory note payable to a director of
ours, which had an outstanding balance of $95,000 as of March 31, 2000 and the
remaining payments owed to a director of ours under a noncompete agreement,
which payments totaled $22,000 as of March 31, 2000. For a description of the
terms of the bank debt and the promissory note, respectively, see note 5 to our
financial statements and "Certain Transactions." We will use our remaining net
proceeds for expansion of our business and operations, including the opening of
new design centers, research and development expenses, potential acquisitions
and other general corporate purposes. The amounts that we expend for these
purposes will depend on a number of factors, including future revenue growth,
if any, and the amount of cash we generate from operations. As a result, we
will retain broad discretion in the allocation of the net proceeds of this
offering. We have no agreements with respect to any acquisition. Pending these
uses, we intend to invest the net proceeds of this offering in investment
grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared nor paid any cash dividends on our capital stock.
We currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will depend
on our financial condition, results of operations, capital requirements,
general business condition and other factors as our board of directors may deem
relevant. In addition, our bank line of credit prohibits the payment of cash
dividends.
12
<PAGE>
CAPITALIZATION
The following table describes our capitalization as of December 31, 1999:
. on an actual basis, without any adjustments to reflect subsequent
events or anticipated events; and
. on an as adjusted basis to reflect the sale of the shares of common
stock offered by us in this offering and our receipt of the estimated
net proceeds, after deducting underwriting discounts and commissions
and the estimated offering expenses that we expect to pay in
connection with this offering.
The capitalization information set forth in the table below is qualified
by the more detailed Consolidated Financial Statements and Notes thereto
included elsewhere in this prospectus and should be read in conjunction with
the Consolidated Financial Statements and Notes.
<TABLE>
<CAPTION>
December 31, 1999
-------------------
Actual As Adjusted
------ -----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents.................................. $ 231 $
====== ====
Current portion of long-term debt.......................... 359 --
------ ----
Long-term debt--less current portion....................... 1,016 --
------ ----
Stockholders' equity(1):
Preferred stock, $.01 par value; no shares authorized,
actual; 5,000,000 shares authorized as adjusted; no
shares issued and outstanding, actual and as
adjusted............................................... -- --
Common stock, no par value; 12,000,000 shares
authorized, actual; 70,000,000 shares authorized, as
adjusted; 11,755,253 shares issued actual; shares
issued and outstanding, as adjusted.................... 273
Retained earnings........................................ 3,324
Treasury stock, 1,713,448 shares at cost................. (194)
------ ----
Total stockholders' equity............................ 3,403
------ ----
Total capitalization.................................. $4,778 $
====== ====
</TABLE>
- --------
(1) Excludes 3,683,489 shares of common stock issuable upon the exercise of
stock options at a weighted-average exercise price of $0.90 per share
outstanding as of December 31, 1999.
13
<PAGE>
DILUTION
The net tangible book value of our common stock as of December 31, 1999
was $2.0 million, or $0.20 per share. After giving effect to the issuance and
sale of shares of common stock offered by this prospectus at an assumed
initial public offering price of $ per share, after deducting estimated
underwriting discounts and offering expenses, our net tangible book value at
December 31, 1999 would have been $ or $ per share.
Net tangible book value per share before the offering has been determined
by dividing net tangible book value (total tangible assets less total
liabilities) by the number of shares of common stock outstanding, net of
treasury stock, as of December 31, 1999. This offering will result in an
increase in net tangible book value per share of $ to existing stockholders
and dilution in net tangible book value per share of $ to new investors who
purchase shares in this offering. The following table illustrates this
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Net tangible book value per share at December 31, 1999............... $0.20
Increase attributable to sale of common stock in this offering.......
-----
Net tangible book value per share after this offering................
Dilution per share to new investors................................... $
===
</TABLE>
If the underwriters exercise their option to purchase additional shares
in this offering, the net tangible book value per share after the offering
would be $ per share, the increase in net tangible book value per share to
existing stockholders would be $ per share and the dilution to persons who
purchase shares in the offering would be $ per share.
The following table summarizes, as of December 31, 1999, the differences
between the consideration paid, both cash and non-cash in the aggregate, and
the average price per share paid by the existing stockholders and the new
investors purchasing shares of common stock in this offering before deducting
estimated underwriting discounts and commissions and offering expenses payable
by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ----------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders, net
of treasury stock....... 10,041,805 % $ 212,342 % $0.02
Shares purchased in this
offering................
---------- --- ------------ ------- -----
Total................... 100% 100%
========== === ============ =======
</TABLE>
These tables assume no exercise of stock options outstanding as of
December 31, 1999. At December 31, 1999, there were 3,683,489 shares of common
stock issuable upon exercise of outstanding stock options at a weighted-average
exercise price of $0.90 per share. To the extent that outstanding options are
exercised in the future, there will be further dilution to new investors.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of December
31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999 have
been derived from our audited consolidated financial statements, included
elsewhere in this prospectus. Selected consolidated financial data as of
December 31, 1995, 1996 and 1997 and for the years ended December 31, 1995 and
1996 have been derived from our unaudited consolidated financial statements,
which are not included in this prospectus. In the opinion of management, the
unaudited consolidated financial statements include all adjustments necessary
for a fair presentation of such information in accordance with generally
accepted accounting principles. The information set forth below should be read
along with our "Management's Discussions and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(dollars
in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues........................... $8,117 $11,814 $16,330 $23,475 $30,657
Cost of revenues................... 5,817 8,465 10,638 14,177 18,501
------ ------- ------- ------- -------
Gross profit....................... 2,300 3,349 5,692 9,298 12,156
Research and development expenses.. -- -- 284 723 979
Selling, general and administrative
expenses......................... 1,449 2,389 4,552 7,574 9,564
------ ------- ------- ------- -------
Operating income................... 851 960 856 1,001 1,613
Other income (expense)............. (19) (14) 50 (17) (16)
------ ------- ------- ------- -------
Income before income tax
provision........................ 832 946 906 984 1,597
Income tax provision............... 323 352 400 383 669
------ ------- ------- ------- -------
Net income......................... 509 594 506 601 928
====== ======= ======= ======= =======
Net income per share:
Basic earnings per share......... $ 0.06 $ 0.07 $ 0.05 $ 0.06 $ 0.09
Diluted earnings per share....... $ 0.06 $ 0.07 $ 0.05 $ 0.06 $ 0.08
Shares for basic computation..... 8,854 8,986 9,502 9,668 9,925
Shares for diluted computation... 8,854 8,986 9,531 10,307 12,365
<CAPTION>
December 31,
-----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.......... $ 633 $ 466 $ 431 $ 236 $ 231
Working capital.................... 748 1,129 991 1,209 1,636
Total assets....................... 1,761 2,445 3,708 4,379 7,633
Long-term obligation............... 327 225 222 182 1,016
Stockholders' equity............... 622 1,296 1,693 2,387 3,403
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
consolidated financial statements, the related notes and the other financial
information appearing elsewhere in this prospectus. In addition to historical
information, the following discussion and other parts of this prospectus
contain forward-looking information that involves risks and uncertainties. Our
actual results could differ materially from those anticipated by such forward-
looking information due to competitive factors, risks associated with our
expansion plans and other factors discussed under "Risk Factors" and elsewhere
in this prospectus.
Overview
We are an independent provider of advanced electronic design services to
top-tier systems OEMs and semiconductor companies. We design semiconductor
devices, as well as the accompanying system-level hardware and software that
comprise advanced electronics products. We deliver these design services
through three engagement models. In our outsourcing model, employees perform
services at our design centers, with limited interaction or collaboration with
our customers. In our insourcing model, employees perform services at our
customers' facilities, with daily interaction with our customers. In our E
sourcing model, we use Internet technology to allow our design engineers to
collaborate with our customers remotely from our design centers. We sell our
services primarily through our direct sales force. We were founded in 1985 and
began opening remote design centers in 1995. We currently operate 19 design
centers throughout the United States and Canada and have recently begun
operations in Europe. Our growth has been driven principally by increasing
personnel at existing design centers and opening new design centers. As of
March 31, 2000, we employed over 175 highly skilled design engineers. We have
been profitable every year since 1991.
In May 1998, we acquired substantially all of the assets of Prism
Acoustics, Inc. d/b/a The VHDL Technology Group of Bethlehem, Pennsylvania. In
June 1999, we completed our merger with Seva Technologies, Inc. of Fremont,
California. The merger has been accounted for as a pooling of interests.
Accordingly, our financial statements for prior periods have been restated to
include the operating results and financial position of Seva for all periods
presented. In December 1999, we acquired the assets of the Design Division of
Telexis Corporation of Kanata, Ontario.
We generate revenues principally from providing electronic design
services which are typically billed on a time and materials basis and, in
limited instances, on a milestone-based fixed price basis. Revenues are
recognized upon provision of the services under time and materials contracts.
Revenues under long-term fixed- price contracts are recognized using the
percentage-of-completion method. Our cost of revenues is primarily comprised of
compensation paid to our design engineers. Other components of our cost of
revenues include engineering management compensation, software design tools,
technical training, and compensation paid to a limited number of contract
design engineers.
16
<PAGE>
Results of Operations
The following table sets forth our operating results as a percentage of
revenue for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues............................................. 100.0% 100.0% 100.0%
Cost of revenues..................................... 65.1 60.4 60.3
------- ------- -------
Gross profit......................................... 34.9 39.6 39.7
Research and development expenses.................... 1.7 3.1 3.2
Selling, general and administrative expenses......... 27.9 32.3 31.2
------- ------- -------
Operating income..................................... 5.2 4.3 5.3
Other income (expense)............................... 0.3 -- --
------- ------- -------
Income before income tax provision................... 5.6 4.2 5.2
Income tax provision................................. (2.5) (1.6) (2.2)
------- ------- -------
Net income........................................... 3.1 2.6 3.0
======= ======= =======
</TABLE>
Years Ended December 31, 1997, 1998 and 1999
Revenues. Our revenues for 1997, 1998 and 1999 were $16.3 million, $23.5
million and $30.7 million, respectively, representing growth of 43.8% from 1997
to 1998 and 30.6% from 1998 to 1999. The principal reasons for the revenue
growth for both years were an increase in the number of engineers engaged on
billable projects from 94 in January 1998 to 105 in December 1998 and from 121
in January 1999 to 151 in December 1999 and an increase in the average billings
per engineer. These engineers were added to handle an increase in the number of
customers.
Cost of Revenues and Gross Profit. Cost of revenues includes compensation
paid to engineers, software design tools, engineering management and technical
training. Gross profit was $5.7 million, $9.3 million and $12.2 million in
1997, 1998 and 1999, respectively, an increase of 63.4% from 1997 to 1998 and
30.7% from 1998 to 1999. This resulted in gross margins of 34.9%, 39.6% and
39.7% for those periods. The growth of the gross profit in both years was due
to hiring additional design engineers and an increase in average billable
rates. The principal reason for the increase in gross margin from 1997 to 1998
was a result of increased utilization of available engineers and increased
average billable rates.
Research and Development Expenses. Research and development expenses
result from the development of our proprietary software tools and design
methodologies. Research and development expenses were $284,000, $723,000 and
$979,000 in 1997, 1998 and 1999, respectively. The increase in research and
development expenses from 1997 to 1998 of $439,000 and from 1998 to 1999 of
$256,000 was primarily a result of the development of a design reuse department
and investments in our proprietary software tools and design methodologies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include accounting and finance department expenses,
sales and marketing expenses, corporate management expenses, and facilities and
infrastructure-related expenses. Selling, general and administrative expenses
were $4.6 million, $7.6 million and $9.6 million in 1997, 1998 and 1999,
respectively. The 1998 increase of approximately $3.0 million was a result of
opening new design centers and an increase in selling, general and
administrative staff from 22 to 28 people. The 1999 increase of approximately
$2.0 million was primarily due to an increase in selling, general and
administrative staff from 28 to 44 people.
17
<PAGE>
Other Income (Expense). Other income or expense consists primarily of
interest earned on investable cash and interest payments related to long-term
debt. Interest income declined from 1997 to 1998 and from 1998 to 1999 due to
lower cash balances during these periods. Interest expense increased from 1997
to 1998 due to higher levels of borrowings on our lines of credit during the
year. Interest expense declined from 1998 to 1999 due to lower levels of
borrowings on our lines of credit during the year. In December 1999, we
borrowed $1.2 million on our line of credit to facilitate the acquisition of
the Design Division of Telexis Corporation. In January 2000, this borrowing on
our line of credit was converted into a term loan payable over a four year
period.
Income Tax Provision. Our effective income tax rates were 44.2%, 38.9%,
and 41.9% in each of 1997, 1998 and 1999, respectively. Changes in our
effective tax rate are primarily caused by shifts in tax jurisdiction and non-
deductible expenses, such as goodwill amortization.
Quarterly Results
The following table presents our unaudited results of operations for each
of our last eight quarters up to and including the quarter ended December 31,
1999, and also presents such information as a percentage of our total revenue
for the periods indicated. The unaudited results of operations have been
prepared on substantially the same basis as the audited statements of income
contained in this prospectus and include all adjustments, consisting of normal
recurring accruals, that we consider necessary to present this information
fairly when read in conjunction with our financial statements and accompanying
notes appearing elsewhere in this prospectus. The operating results in any
quarter are not necessarily indicative of the results that may be expected for
any future period.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $5,209 $5,746 $6,321 $6,199 $7,210 $7,614 $7,722 $8,111
Cost of revenues........ 3,219 3,548 3,663 3,747 4,411 4,768 4,496 4,826
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 1,990 2,198 2,658 2,452 2,799 2,846 3,226 3,285
Research and development
expenses.............. 80 163 265 215 272 266 196 245
Selling, general and
administrative
expenses.............. 1,615 1,867 1,960 2,132 2,104 2,370 2,360 2,730
------ ------ ------ ------ ------ ------ ------ ------
Operating income........ 295 168 433 105 423 210 670 310
Other income (expense).. 9 (13) (9) (4) (14) -- (1) (1)
------ ------ ------ ------ ------ ------ ------ ------
Income before income tax
provision............. 304 155 424 101 409 210 669 309
Income tax provision.... (117) (61) (164) (41) (163) (85) (272) (149)
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. $ 187 $ 94 $ 260 $ 60 $ 246 $ 125 $ 397 $ 160
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
18
<PAGE>
The following table sets forth the unaudited quarterly total expenses as
a percentage of unaudited quarterly revenue.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 61.8 61.7 57.9 60.5 61.2 62.6 58.2 59.5
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 38.2 38.3 42.1 39.6 38.8 37.4 41.8 40.5
----- ----- ----- ----- ----- ----- ----- -----
Research and development
expenses.............. 1.5 2.8 4.2 3.5 3.8 3.5 2.5 3.0
Selling, general and
administrative
expenses.............. 31.0 32.5 31.0 34.4 29.2 31.1 30.6 33.7
----- ----- ----- ----- ----- ----- ----- -----
Operating income........ 5.7 2.9 6.9 1.7 5.9 2.8 8.7 3.8
Other income (expense).. 0.2 (0.2) (0.1) (0.1) (0.2) -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Income before income tax
provision............. 5.8 2.7 6.7 1.6 5.7 2.8 8.7 3.8
Income tax provision.... (2.3) (1.1) (2.6) (0.7) (2.3) (1.1) (3.5) (1.8)
Net income.............. 3.6 1.6 4.1 1.0 3.4 1.6 5.1 2.0
</TABLE>
Over the eight quarters presented, our quarterly revenues increased from
$5.2 million to $8.1 million. Revenues decreased in the quarter ended December
31, 1998 due to a decrease in customer engagements. Gross margins fluctuated
over the eight quarter period with an absolute increase of 2.3% over that
period. The reasons for this gross margin increase included a decrease in the
use of contract design engineers, who typically have higher costs than
employees, an increase in utilization of our engineering staff and higher
billable rates to customers. Cost of revenues decreased in the third quarter of
1999 as a result of a decreased rate of hiring of design engineers and
decreased use of contract design engineers.
Selling, general and administrative expenses have increased from $1.6
million for the quarter ended March 31, 1998 to $2.7 million for the quarter
ended December 31, 1999. The increase in selling, general and administrative
expenses for the quarter ended December 31, 1998 was primarily a result of an
increase in bad debt reserve. The increase in selling, general and
administrative expenses for the quarter ended December 31, 1999 was primarily a
result of hiring additional recruiting personnel and related recruiting
expenses.
Research and development expenses primarily represent investment in
design and information reuse which, over time, increases the value and
efficiency of services provided to customers. In the second quarter of 1998, we
initiated our design reuse effort. This expense has fluctuated quarterly based
upon our needs to develop software design tools and methodologies.
Liquidity and Capital Resources
Since 1986, our primary source of funding has been cash generated from
operations. In December 1999, we borrowed $1.2 million from BankBoston for use
in financing the expenses associated with the purchase of the assets of the
Design Division of Telexis Corporation. This loan will be repaid with proceeds
from the offering. Furthermore, in connection with the Telexis transaction, we
owe Telexis Corporation up to $175,000, which has been accrued. The exact
amount due to Telexis Corporation, if any, will be determined and paid in June
2000.
At December 31, 1999, our primary sources of liquidity consisted of cash
of approximately $231,000 and accounts receivable, both billed and unbilled, of
approximately $4.2 million. In addition, we have a credit agreement with
BankBoston under which the amounts outstanding at December 31, 1999, of $1.2
million, were
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<PAGE>
converted to a term loan. The term loan also provides for additional borrowings
of up to $1.5 million, based on eligible accounts receivable. Amounts
outstanding under the term loan are repayable in monthly installments of
$25,000, plus interest, at the bank's prime rate plus 0.5% through 2004.
Borrowings under the credit agreement are collateralized by all of our assets.
The agreement contains financial performance requirements related to minimum
levels of defined cash flow and quarterly net profit, and maximum amounts of
total leverage. Under the terms of the agreement, we are precluded from paying
cash dividends. The line of credit facility contained in the agreement expires
in May 2001. We are required to repay any outstanding borrowings under the
credit agreement with a portion of the proceeds of this offering.
Our operating activities have generated cash of $283,000, $713,000 and
$1.1 million in each of the three years ended December 31, 1997, 1998 and 1999,
respectively. This cash generated by operations was primarily attributable to
our net income before depreciation and amortization during those periods,
offset by continued investment in accounts receivable due to revenue growth.
Cash used in investing activities was $409,000, $1.2 million and $1.9
million in 1997, 1998 and 1999, respectively. In 1997 and 1998, this use of
cash was principally for additions of computer equipment and furniture needed
to equip our engineers in the field. In 1999, we continued to acquire computer
equipment and furniture; in addition, approximately $1.2 million was spent to
acquire the Design Division of Telexis Corporation in December 1999. This
acquisition was funded by borrowings on our line of credit with BankBoston,
which were subsequently converted to a term loan as described above.
Cash provided by financing activities was $91,000, $267,000 and $830,000
in 1997, 1998 and 1999, respectively. These cash inflows are primarily
attributable to borrowings on available lines of credit, net, which are used to
fund the working capital growth required by our continued expansion of the
business and our revenues.
We anticipate that cash generated by operations, supplemented by our
available line of credit and the expected net proceeds of this offering, will
be sufficient to meet our anticipated cash needs for at least the next 12
months.
Market Risk
We do not currently utilize any type of derivative instrument which would
subject us to significant amounts of market risk. We do utilize a line of
credit for seasonal funding of working capital, which bears interest at the
bank's prime rate plus 0.5%. The impact of a 10% increase or decrease in
interest rates during 1999 would have resulted in an insignificant change in
interest expense due to limited amounts of debt outstanding during 1999. As we
discussed earlier, in December 1999, we borrowed $1.2 million to fund the
acquisition of the Design Division of Telexis Corporation. This increased
borrowing will lead to increased interest expense in 2000; however, the
borrowings under this agreement will be repaid from the proceeds of this
offering.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. We will be required
to implement SFAS No. 133 for the year ending December 31, 2001. We have not
entered into any foreign currency exchange rate hedging activities to date. We
are currently evaluating the impact, if any, of this statement.
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BUSINESS
Overview
We are an independent provider of advanced electronic design services to
top-tier systems OEMs and semiconductor companies. We design semiconductor
devices, as well as the accompanying system-level hardware and software that
comprise advanced electronics products. We deliver these design services
through three engagement models: outsourcing, insourcing and E sourcing, or
real-time remote collaboration using Internet technology. We sell our services
primarily through our direct sales force, and our customers include Texas
Instruments, 3Com, Siemens, Intel and Lucent. We were founded in 1985 and began
opening remote design centers in 1995. We currently operate 19 design centers
throughout the United States and Canada and have recently begun operations in
Europe. We have been profitable every year since 1991.
Industry Background
The Electronics Industry
The market for electronic products is proliferating as new technologies
and applications are being introduced at rapid rates. The advent of system-on-
chip, or SoC, technology has driven down the cost of advanced electronic
products. The explosive growth of Internet usage, the ubiquity of
communications and the convergence of digital media and communications
technology have driven the increase of electronic content in various types of
products. Electronic content is increasingly included in a wide range of
products, from the traditional personal computer to the communications
infrastructure equipment that drives the Internet to everyday devices such as
home appliances, automobiles and hand-held wireless devices.
Central to the development of these electronic products are systems OEMs
and semiconductor companies. As with the progression of many fast growing
industries, there has been a trend toward specialization in suppliers to the
electronics industry. Different firms are focusing on specific aspects of the
product creation process, thereby resulting in a disaggregation of the value
chain in the electronics industry. This disaggregation has created entirely new
industries. For example, many semiconductor companies have made the strategic
decision to focus on their core competencies and outsource their manufacturing
to third-party semiconductor fabrication facilities. Examples of other
industries that have been created by disaggregation of the electronics value
chain include semiconductor capital equipment, electronic design automation,
electronic manufacturing services, component packaging, embedded operating
software and intellectual property licensing. New industries, such as third-
party electronic design services, continue to emerge as a result of this
disaggregation trend.
Electronic Design Services
A critical element of the electronics value chain is the design and
engineering of semiconductors, software, printed circuit boards, packaging,
enclosures and systems. Traditionally, these design services have been
performed in-house by systems OEMs and semiconductor companies. Constraints on
engineering capability of these companies create obstacles to meeting critical
time to market deadlines resulting in a need for outside design services
providers. These outside design services often have been performed by small,
specialized providers that support local customers. Another source of outside
design services has been groups within electronic design automation, or EDA,
electronic manufacturing services, or EMS, or application-specific integrated
circuit, or ASIC, companies. Recently, the demand for outsourced design
services has grown rapidly. For example, Dataquest reports that 22% of system
designers indicated that they planned to use outsourced design services in
2000. Dataquest forecasts that the market for SoC devices will grow from
approximately $15 billion in 2000 to $32 billion in 2003.
The demand for outsourced design services has been driven by the:
. shortened lifecycle of electronic products;
. need to respond quickly to changing market conditions;
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. demand for SoC integration to reduce size, cost and power consumption;
. acceptance of standardized processes for SoC design;
. new capability for design engineers to collaborate remotely via the
Internet; and
. increasing acceptance of strategic design outsourcing by systems OEMs
and semiconductor companies.
This growing market opportunity has not been adequately served by
traditional outside service providers. Smaller independent design services
companies lack the resources necessary to develop the infrastructure required
to undertake sophisticated, complex designs. On the other hand, design service
business units within EDA, EMS and ASIC companies continually face conflicts
arising from the potential of competing with their customers. In addition, the
design methodologies of these providers may not be independent from their
primary product or service offerings. This may limit the architecture,
performance, choice of design software and component suppliers available to
their customers. As a result, traditional providers of design services lack the
depth, breadth or focus to be a strategic outsourcing partner to systems OEMs
and semiconductor companies with wide-ranging and changing needs.
Systems OEMs and semiconductor companies need strategic design partners
that are independent, large and sophisticated and can provide high quality
services on a where- and when-needed basis. A strategic design partner must
also have the depth and breadth of experience to deploy design processes that
easily integrate with customers' internal teams and other key suppliers.
Solution
We are a leading independent provider of advanced electronic design
services to top-tier systems OEMs and semiconductor companies. We help these
companies produce a broad range of technically advanced, semiconductor-related
end products, especially system-on-chip, or SoC, integrated circuits. We
believe that our scalable organizational and sales and marketing strategies
allow us to offer competitive solutions. Our dedication to providing
independent electronic design services allows us to service a broad range of
customers, including industry leaders such as Texas Instruments, 3Com, Siemens,
Intel and Lucent. The following are key elements of our solution:
Depth and Breadth of Design Expertise. We design electronics for a broad
range of products in applications such as networking, telecommunications,
wireless, broadband, digital media and storage. We have worked on over 300
semiconductor and systems design projects since our inception in 1985. We
employ over 175 highly skilled design engineers. Our engineers have an average
of over 15 years of experience. We staff most of our engagements with senior
and principal-level design engineers. We employ relatively few entry level
designers, unlike conventional consulting firms that tend to have relatively
few experienced individuals managing many junior consultants. Our model is
designed to yield high quality solutions for our customers.
Independence and Focus. We focus on providing design services rather than
selling or licensing products. This focus gives us the independence needed to
objectively select the optimal mix of technologies for our customers, unlike
EDA, EMS and ASIC companies which may be limited to using internal
technologies. This independence enables us to develop deep and broad
relationships with leading suppliers to the electronics industry. Our model is
designed to foster client trust and lasting industry relationships.
Local Design Centers. We maintain close relationships with our customers
by employing distributed engineering teams located geographically near our
customers. We have 19 design centers in the United States and Canada. This
proximity to our customers enables us to be more responsive to their needs and
inspires confidence through one-on-one interactions. We perform our services
either at our customers' premises or at
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our design centers. All design centers are connected by a corporate intranet
and have access to a suite of advanced semiconductor and software development
tools.
Scalability and Flexibility through Remote Collaboration. We provide
scalable and flexible solutions to our customers by employing a large base of
engineers with a variety of specialized skills. We augment our local design
centers with our corporate-wide infrastructure which includes internetworking,
data management and collaboration software. While we operate local design
centers as a way to establish and maintain customer relationships, we also
provide our customers with the services of engineers in remote offices. Using
this infrastructure, we can rapidly respond to changing or specialized
customer needs, differentiating us from our competitors.
Proven Engagement Models. We offer our customers the following three
distinct engagement models:
. outsourcing work to our design centers;
. insourcing teams that work at our customers' facilities and integrate
with our customers' design groups; and
. E sourcing, or real-time remote collaboration between our design
centers and our customers using Internet technology.
Strategy
Our goal is to become the leading independent provider of electronic
design services. Key elements of our strategy to achieve this goal are to
continue to:
Target High Growth Markets. We focus on vertical markets that are growing
rapidly. Markets on which we are currently focused include networking,
wireless, broadband and digital media. We are developing teams across our
design centers with technological expertise for these and other specific
markets. Each team develops specific software toolkits and methodologies to
accelerate product development for customers in its market. We have the
ability to provide entire product design outsourcing in specific markets. We
believe that we are well positioned to leverage this capability as our
customers accelerate their outsourcing.
Attract and Retain Highly Qualified Design Engineers. We will continue to
attract and retain highly qualified design engineers by offering them
attractive professional development and compensation opportunities. We recruit
engineers who have significant technical expertise and offer them the ability
to accelerate their career development by working with sophisticated
technologies in complex multi-vendor environments. We leverage our 19 design
centers to recruit engineers from diverse locations. We employ seven full-time
professional recruiters who maintain long-term relationships within the
industry. We plan to expand our recruiting organization both domestically and
internationally.
Invest in the Advanced Technical Skills of our Engineers. We will
continue to invest in the technical skills of our engineers so that they
continue to develop strong capabilities in deploying advanced technologies.
Our professional development program is designed to ensure high quality
service offerings for our customers and also fosters job satisfaction for our
engineers. We will continue to offer college tuition reimbursement, advanced
technology training, internally developed training, seminars and internal
technology forums. In addition, we work on technically challenging projects
that expose our engineers to the latest offerings of leading technology
suppliers.
Pursue Strategic Acquisitions. We intend to continue to acquire
businesses that will extend our services offerings or expand our geographic
presence. We have acquired three businesses since May 1998. These acquisitions
have extended our technical capabilities and service offerings and expanded
our geographic presence in Silicon Valley and Ottawa, Canada.
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Expand Internationally. We intend to offer services and open design
centers in new geographic markets. We expect to broaden our operations in the
United States and Canada principally by expanding our existing infrastructure.
We recently initiated operations in Europe, and we plan to establish a presence
in Asia, including India and Japan.
Leverage Our Branded Design Methodologies. We intend to leverage the
skills of our distributed design teams by continuing to reuse, expand and
exploit branded design methodologies. For example, we have developed and
branded differentiated service offerings for complex system-on-chip, or SoC,
designs and multi-million transistor ASIC designs. These branded design
methodologies include the Intrinsix microPlatform methodology, the Intrinsix
convergence methodology and the Intrinsix SoC verification methodology.
Expand Strategic Relationships. We seek to continue to develop
relationships with leading suppliers of technology solutions such as
intellectual property, EDA and ASIC suppliers. These relationships provide us
with business opportunities and access to emerging technologies.
Expand E-services. Our e-services initiative provides us with new
delivery mechanisms for our existing services by collaborating with our
customers via the Internet. New e-services offerings will enable real-time,
short-term, high value-added consulting engagements and Internet-enabled
solutions for specific segments of the design process.
Service Offerings
We deliver the following electronic design services:
Systems Architectural Design. We offer systems architectural services
within our four vertically oriented applications groups: networking, wireless,
broadband and digital media. These services include system level analysis of
product feature set requirements, computing and communications bandwidth
analysis, hardware/software partitioning, cost, schedule and usability.
ASIC and SoC Design. ASIC and SoC design services include
microarchitectural design, behavioral design, register transfer level, or RTL,
design, logic synthesis, power management, design for test, or DFT, timing
analysis and closure, formal verification and physical design.
System Verification. Our system verification services include behavioral
simulation, logic simulation, simulation environment development, test-case
development and compliance testing. We provide these services using hardware
description languages such as Verilog and VHDL, C/C++ and specialized, high-
level verification automation, or HLVA, languages and tools.
Embedded Software Development. Our embedded software design services
include design, implementation and porting of applications, protocols, run-time
kernels, digital signal processing, or DSP, device drivers, diagnostics, chip
support packages and other firmware. Our embedded software engineers work
closely with integrated circuit design teams, using hardware, software and DSP
co-development methodologies.
Intellectual Property Integration. Our intellectual property integration
services include selecting architectures and designing systems comprised of
reusable intellectual property. This intellectual property may be implemented
in hardware, such as a microprocessor, or in software, such as a real-time
operating system. We integrate intellectual property from semiconductor
companies, third-party providers and our customers' intellectual property
portfolios. We maintain close business and technical relationships with leading
suppliers of third-party intellectual property.
Printed Circuit Board and FPGA Design. Our printed circuit board and
field programmable gate array, or FPGA, services include FPGA design, FPGA
simulation, microprocessor systems design, DSP systems design, board-level
design and layout, and board-level verification.
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Mixed-Signal Design. Our mixed-signal integrated circuit design services
include analog and radio frequency, or RF, architecture, modeling, design,
layout and verification. We specialize in low-power, high-frequency wireless
transmitters and receivers, analog-to-digital converters and digital-to-analog
converters. Our services also include the integration of analog, RF, digital
logic, third-party intellectual property and software into a single SoC
integrated circuit.
Customers
We have developed a strong customer base among systems OEMs and
semiconductor companies that use our design services. In 1999, Texas
Instruments represented 24.0% and 3Com represented 13.0% of revenues. In 1998,
Texas Instruments represented 18.2% of revenues. In 1997, Texas Instruments
represented 16.9% and GTE Internetworking (formerly BBN) represented 10.3% of
revenues. The following chart provides a representative list of our major
customers and some of the applications in each industry in which customers use
our services.
Customers Networking Applications
Gigabit Ethernet Switching, Embedded
Texas Instruments Ethernet, ATM/SONET, Terabit Routing,
Central Office IP Switching, Voice over
Internet Protocol (VoIP), Network
Processors, FibreChannel, Storage Area
Networking
3Com
United States Government
Siemens (now includes Infineon) Wireless Applications
Intel 3G Cellular, Bluetooth, Wireless
Networking, ReFlex Pagers, Satellite TV,
Satellite Data Communications, GPS
Receivers, Data Security
Lucent
Motorola
Broadband Applications
IBM
Optical Networking, ADSL Modems, xDSL
Modems, Cable Modems, Home Networking, V.90
Modems
Nortel Networks
Fujitsu
Digital Media Applications
Conexant
Set-top Boxes, Digital Television, 3D
Graphics, Voice Switching, Audio
Processing, Video Compression and Editing,
Image Processing, Ultrasound Imaging,
Digital Light Processing
Nokia
Sales and Marketing
We market our services via a direct sales force of nine experienced sales
professionals, the majority of whom have experience selling for leading EDA
companies. We use a top-down selling approach targeted at CEO and Vice
President of Engineering levels to identify opportunities. Once an opportunity
is identified, we deploy a sales team comprised of a salesperson and a project
manager to price, propose and close engagements with the customer at the
project manager level. We offer our sales and project managers financial
incentives for business development.
We build market awareness through a variety of programs, including public
relations and leadership activities such as media relations, analyst relations
and speaking engagements. We attract potential customers through lead
generation activities that include trade shows, seminars, conferences and
website marketing. We also produce materials to help support sales to
prospective customers such as brochures, product sheets, white papers,
presentations and product demonstrations. In addition, we encourage our
engineers to author and publish technical articles. We generally limit our
print advertising to high profile relationships with the key print media in our
industry. These relationships consist of supplying editorial content, articles
and technical reviews in exchange for advertising space.
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We believe that our relationships with intellectual property, EDA and
ASIC suppliers are strategic to the growth of our customer base. These
suppliers benefit from our relationship because we are independent, large and
sophisticated and can provide high quality services on a where- and when-needed
basis. These relationships are developed and maintained by both our sales force
at the local level and our marketing team at the corporate level.
Competition
Competition in the electronic design services market is intense. We
expect competition to increase in the future. We face competition from:
. internal design service groups of EDA companies such as Avant!,
Cadence, Mentor Graphics and Synopsys, EMS companies such as
Flextronics and Solectron, ASIC companies such as Actel, LSI Logic
and Philips, and intellectual property and embedded software
companies such as ARM, Artisan, SiCAN and Wind River Systems; and
. independent design services companies such as Accent Design, Advanced
Digital Design, ASIC Alliance, ASIC International, EASIC, First Pass,
I2P and Qualis.
Furthermore, many of our existing and potential customers have the
resources and capability to internally perform electronic design services. If
these customers decided to expand and focus on developing their internal
electronic design services, we would lose sales opportunities.
Factors on which we compete include design and application expertise and
experience, reputation, responsiveness, price, presence in diverse locations
and ability to meet schedules. We believe that we compete favorably on these
factors.
Employees
As of March 31, 2000, we had 235 employees, including 189 in engineering,
12 in sales and marketing and 34 in general and administrative capacities. Our
employees are not represented by a labor union or subject to a collective
bargaining agreement. We believe that our employee relations are good.
Facilities
We occupy as a tenant at will approximately 8,560 square feet of space at
our headquarters in Westboro, Massachusetts. We occupy a total of approximately
44,879 square feet of space in 19 design centers and sales offices. We intend
to expand our existing facilities to meet our growing needs and believe that
suitable additional space will be available.
Legal Proceedings
We are not a party to any material legal proceedings. From time to time,
we may become a party to legal proceedings incidental to the conduct of our
business.
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MANAGEMENT
Executive Officers, Directors and Key Employees
The following table sets forth information with respect to our executive
officers, directors and key employee as of February 29, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James A. Gobes, Jr............... 41 Chief Executive Officer, Chairman of the
Board of Directors and Director
Mark A. Beal..................... 39 Chief Technical Officer and Director
Brian C. Meeks................... 54 Chief Financial Officer, Treasurer, Clerk
and Director
Romas P. Rudis................... 43 Director of Design Center Operations and
Director
Maurice D. Hiers, Jr............. 48 Key Employee, Vice President of Sales
H. Kent Bowen (1)(2)............. 58 Director
Gintaras R. Subatis (1)(2)....... 47 Director
Wallace A. Cataldo (1)(2)........ 50 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
James A. Gobes, Jr. joined us in June 1986. He has served as our
President since May 1993. Mr. Gobes served as our Vice President, Sales from
1987 to 1993. He became our Chief Executive Officer and chairman of the board
of directors in February 2000. Mr. Gobes has served as a director since June
1987. Prior to joining us, he held a sales position at Texas Instruments, a
semiconductor company. Mr. Gobes received a BS in Management Computer Science
from Worcester Polytechnic Institute.
Mark A. Beal joined us in August 1986. He served as our Vice President,
Engineering from 1987 to February 2000. Mr. Beal became our Chief Technical
Officer in February 2000. He has served as a director since June 1987. Prior to
joining us, Mr. Beal served as a design center manager for LSI Logic, a
semiconductor company. He received a BS in Electrical Engineering from
Worcester Polytechnic Institute.
Brian C. Meeks has served as our Chief Financial Officer and Treasurer
since June 1998, as Assistant Treasurer and Clerk since October 1996, and as a
director since June 1997. Prior to joining us, he served as Chief Financial
Officer for Dove Associates, a strategic marketing and distribution consulting
firm from February 1995 to May 1996. From April 1985 to December 1992, Mr.
Meeks served as Chief Financial Officer of William M. Mercer's Eastern Region,
an employee benefit consulting firm. From January 1983 to April 1985, he served
as Chief Financial Officer for CTM Limited, an international electrical
engineering consulting firm. Mr. Meeks received a Bachelor of Commerce from
Concordia University and is a Canadian Chartered Accountant and a Massachusetts
licensed CPA.
Romas P. Rudis founded Intrinsix in 1985 and served as our President
until May 1993. He served as our Director of Strategic Engineering until 1996
and has served as our Director of Design Center Operations since then. Mr.
Rudis has served as a director since 1985 and served as chairman of the board
of directors from May 1993 to February 2000. Prior to founding Intrinsix, he
held technical positions at Advanced Micro Devices, a semiconductor company,
and Data General, a computer company. Mr. Rudis received a BS and an MS in
Electrical Engineering and a BS in Computer Science from the University of
Michigan, as well as an MBA from Boston University.
Maurice D. Hiers, Jr. has served as our Vice President of Sales since
February 1999. Before joining us, he served as Vice President, North American
Sales for MatrixOne, a provider of Internet business collaboration software
from October 1997 to January 1999. From September 1996 to September 1997, Mr.
Hiers served as the Director of Eastern Sales for Quickturn, a provider of
verification products and engineering services for the design of electronic
systems. From July 1995 to August 1996, he served as Vice President, Sales for
Sente, a supplier of software and services for the estimation, analysis and
reduction of
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power in integrated circuit designs. Prior to that time, Mr. Hiers served as
Vice President, Eastern Sales for Viewlogic Systems, a provider of electronic
product design software and services for advanced electronic systems, from
March 1986 to July 1995. He received a BBA from New Mexico State University.
H. Kent Bowen has served as a director since December 1999. He has been
the Bruce Rauner Professor of Technology and Operations Management at Harvard
Business School since 1992. Prior to joining Harvard Business School, Dr. Bowen
was a professor of engineering at the Massachusetts Institute of Technology
from 1970 to 1992. He currently serves as a director of SPX Corporation, a
provider of industrial products and services, technical products and systems,
service solutions and vehicle components, and Ceramics Process Systems, a
provider of components for microelectronic devices. Dr. Bowen received a BS in
Engineering from the University of Utah and a PhD in Engineering from the
Massachusetts Institute of Technology.
Gintaras R. Subatis has served as a director since 1985 and as our
Treasurer and Chief Financial Officer from November 1985 to October 1994. Since
December 1987, he has been a Project Manager and Assistant Vice President for
Putnam Investments, an investment management company. Mr. Subatis co-founded
Interlynx Technology Corporation, a web-based software company, in October 1994
and served in a senior management capacity until December 1995. He received a
BSBA in Accounting from Suffolk University.
Wallace A. Cataldo has served as a director since December 1999. From
June 1975 to August 1999, he served in several capacities for Keane, a provider
of custom software services, most recently serving as Vice President, Finance
and Administration and Chief Financial Officer. Mr. Cataldo received a BS in
Accounting from Bentley College.
Board Composition
Following this offering, our board of directors will be divided into
three staggered classes, each of whose members will serve for a three-year
term. The board will consist of two Class I Directors (Messrs. Meeks and
Subatis), three Class II Directors (Messrs. Beal, Bowen and Rudis) and two
Class III Directors (Messrs. Cataldo and Gobes). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The
terms of the Class I Directors, Class II Directors and Class III Directors will
expire upon the election and qualification of successor directors at the annual
meeting of stockholders to be held during 2001, 2002 and 2003, respectively.
In October 1994, we issued a promissory note to Mr. Subatis, a director
of ours. In connection with the issuance of this note, we also entered into a
noncompete agreement with Mr. Subatis. The arrangement requires us to retain
Mr. Subatis as a director for so long as the note remains in effect. We intend
to use a portion of the proceeds of this offering to repay the outstanding
balance of this note at the closing of this offering.
Each officer serves at the discretion of the board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. There are no family relationships among any of
our directors or executive officers.
Compensation Committee
The board of directors has a compensation committee composed of Messrs.
Bowen, Cataldo and Subatis, which makes recommendations concerning salaries and
incentive compensation for our employees and administers and grants stock
options under our stock option plans.
Director Compensation
We reimburse each director for reasonable out-of-pocket expenses incurred
in attending meetings of the board of directors and any of its committees.
Currently, non-employee directors receive compensation in the amount of $250
for each board meeting or committee meeting attended. Following this offering,
non-employee directors will receive compensation in the amount of $1,000 for
each board meeting attended including telephonic meetings. Non-employee
directors will be eligible for formula option grants under our 2000 Outside
Director Stock Option Plan.
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Compensation Committee Interlocks and Insider Participation
The current members of our compensation committee are Messrs. Bowen,
Cataldo and Subatis. In 1999, the members of the compensation committee were
Messrs. Beal, Gobes and Rudis, each of whom is an executive officer of ours. No
executive officer has served as a director or member of the compensation
committee, or other committee serving an equivalent function, of any other
entity whose executive officers served as a member of the compensation
committee of our board of directors. Prior to the formation of the compensation
committee, the board of directors as a whole made decisions relative to the
compensation of executive officers.
Executive Compensation
The following table presents the compensation earned by our chief
executive officer and our other two executive officers who were serving as
executive officers on December 31, 1999 and whose salary and bonus for the year
ended December 31, 1999 exceeded $100,000, referred to as the named executive
officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Securities
Underlying All Other
Salary Bonus Options Compensation
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
James A. Gobes, Jr................... $160,000 $29,187 -- $583(1)
Chief Executive Officer
Mark A. Beal......................... 160,000 29,172 -- 583(1)
Chief Technical Officer
Brian C. Meeks....................... 128,750 22,736 60,000 583(1)
Chief Financial Officer
</TABLE>
- --------
(1) Represents reimbursement for disability premiums paid by the respective
individual.
Option Grants In Last Fiscal Year
The following table presents each grant of stock options made to each of
the named executive officers during the fiscal year ended December, 1999. These
options vest in four equal annual installments on each of the first, second,
third and fourth anniversaries of the date of grant, and the exercise price per
share of each option was equal to the fair market value of the common stock on
the date of grant, as determined by our board of directors.
Potential realizable value is calculated assuming that the stock price on
the date of grant appreciates at the indicated rate compounded annually until
the option is exercised and sold on the last day of its term for the
appreciated stock price. The 5% and 10% assumed rates of appreciation are
required by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of the future common stock price.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise or Option Term
Options Employees in Base Price Expiration --------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ---- ---------- ------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
James A. Gobes, Jr...... -- -- -- -- -- --
Mark A. Beal............ -- -- -- -- -- --
Brian C. Meeks.......... 15,000 1.1% $1.60 04/01/09 $ 15,093 $ 38,250
45,000 3.2 2.03 09/28/09 57,450 145,588
</TABLE>
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<PAGE>
Option Exercises and Year-End Option Values
The following table presents option exercises and the value realized from
those exercises during fiscal 1999, as well as unexercised options that were
held at the end of fiscal 1999 by each named executive officer. The value
realized represents the aggregate market value of the underlying securities on
the exercise date, as determined by the board of directors, minus the aggregate
exercise price paid for those shares. Also presented is the value of in-the-
money options, which represents the aggregate market value of the underlying
securities based on the initial offering price, minus the aggregate exercise
price payable for those shares.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Securities Year-End Year-End
Acquired on Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A. Gobes, Jr...... -- -- 56,250 168,750 $ $
Mark A. Beal............ -- -- 28,125 84,375
Brian C. Meeks.......... -- -- 22,500 127,500
</TABLE>
Stock Plans
Incentive Stock Option Plan. Our Incentive Stock Option Plan was
initially adopted by our board of directors in March 1997 and approved by our
stockholders in March 1997. As of December 31, 1999, 4,500,000 shares of common
stock were authorized for issuance upon exercise of outstanding options under
this plan, and options to purchase an aggregate of 3,639,080 shares of common
stock at a weighted-average exercise price of $0.91 per share were outstanding
under this plan.
Under the Incentive Stock Option Plan eligible persons may be granted
options intended to qualify as incentive stock options, under Section 422 of
the Internal Revenue Code, and options that are not intended to so qualify. In
accordance with present law, incentive stock options and options intended to
qualify as performance-based compensation may not be granted at an exercise
price less than the fair market value of the common stock on the date of grant.
The plan is administered by the compensation committee of the board of
directors.
The terms of the stock options granted under this plan may not exceed ten
years. The exercise price of options granted under this plan is determined by
the board of directors. Options may only be granted to our officers and other
employees, including members of the board of directors who are also employees.
Under present law, however, incentive stock options may only be granted to
employees.
Options granted under this plan vest at the rate specified in each option
agreement, which historically have specified vesting ratably over four years.
Incentive stock options may only be exercised by the participant in the order
in which they were granted. No stock option may be transferred by the
participant other than by will or the laws of descent and distribution. Any
shares of common stock acquired upon exercise of options under this plan are
subject to our right of first refusal contained in our Bylaws.
A participant whose relationship with us ceases for the reasons set forth
below may exercise his or her options as follows:
<TABLE>
<CAPTION>
Reason for Termination of Employment Period of Exercisability
- ------------------------------------ ------------------------
<S> <C>
death or disability of the participant one year from date of termination
termination for cause, voluntary immediate termination of all options
termination by the participant without
our consent
termination for any reason other than three months from date of termination
those listed above
</TABLE>
30
<PAGE>
The board of directors may also terminate options granted to a
participant if it determines that such participant has engaged in any act that
is or has been deleterious to our best interests.
The exercise price of incentive stock options granted to an option holder
who owns stock possessing more than 10% of the voting power of our outstanding
capital stock must be at least equal to 110% of the fair market value of the
common stock on the date of grant, and such option holder must exercise his or
her option within five years from the date of the grant of such option.
No participant in the Incentive Stock Option Plan may receive incentive
stock options vesting in a calendar year having a fair market value at the time
granted of more than $100,000.
This plan provides for the full vesting and immediate exercisability of
all options outstanding upon any of the following:
. a merger or consolidation where we are not the surviving corporation;
and
. the transfer, during any 12-month period, of at least 50% of the
voting power of our outstanding capital stock to persons or entities
who, prior to such 12-month period, did not own any shares of our
capital stock.
No options may be granted under this plan after March 26, 2007, but the
vesting and effectiveness of options previously granted may extend beyond that
date. Assuming the closing of this offering, Intrinsix does not intend to grant
any additional options under this plan.
Seva Technologies 1997 Stock Plan. In connection with our merger with
Seva Technologies, we assumed the obligations of Seva Technologies under its
1997 Stock Plan. As of December 31, 1999, options to purchase 44,409 shares of
common stock were outstanding under this plan at a weighted-average exercise
price of $0.31 per share. No additional options will be granted under this
plan.
Under the Seva Technologies 1997 Stock Plan, eligible persons have been
granted options intended to qualify as incentive stock options, unless Section
422 of the Internal Revenue Code, and options that are not intended to so
qualify. In accordance with present law, incentive stock options and options
intended to qualify as performance-based compensation may not be granted at an
exercise price less than the fair market value of the common stock on the date
of grant. The plan is administered by the compensation committee of the board
of directors.
The terms of the stock options granted under this plan will not exceed
ten years. The exercise price of options granted under this plan was determined
by the board of directors of Seva Technologies. The compensation committee of
our board of directors has discretion to determine the terms and conditions of
any options granted under this plan.
The exercise price of incentive stock options granted to an optionholder
who owns stock possessing more than 10% of the voting power of our outstanding
capital stock must be equal to at least 110% of the fair market value of the
common stock on the date of grant, and such option holder must exercise his or
her option within five years from the date of the grant of such option.
No participant in the Seva Technologies 1997 Stock Plan may receive
incentive stock options vesting in a calendar year having a fair market value
at the time granted of more than $100,000.
In the event of our merger with or into another corporation, or the sale
of substantially all of our assets, each outstanding option granted under the
Seva Technologies 1997 Stock Plan shall be assumed; exchanged for an equivalent
option or right substituted by the successor corporation; or shall terminate in
accordance with the plan.
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<PAGE>
2000 Stock Incentive Plan. Our 2000 Stock Incentive Plan was adopted by
our board of directors in March 2000, subject to stockholder approval. A
maximum of 2,000,000 shares of common stock have been made available for grant
under the 2000 Stock Incentive Plan.
The 2000 Stock Incentive Plan provides for the grant of incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code,
nonstatutory stock options, restricted stock awards and other stock-based
awards.
Our employees, officers, directors, consultants and advisors and those of
our subsidiaries are eligible to receive awards under the 2000 Stock Incentive
Plan. Under present law, however, incentive stock options may be granted only
to employees. Under the 2000 Incentive Stock Option Plan, no participant may
receive an award for more than 200,000 shares, subject to adjustment in the
event of stock splits and other similar events, in any calendar year.
In accordance with present law, incentive stock options and options
intended to qualify as performance-based compensation may not be granted at an
exercise price less than the fair market value of the common stock on the date
of grant. The exercise price of incentive stock options granted to an option
holder who owns stock possessing more than 10% of the voting power of our
outstanding capital stock must be at least equal to 110% of the fair market
value of the common stock on the date of grant, and such option holder must
exercise his or her option within five years from the date of the grant of such
option. We may grant nonstatutory options at an exercise price less than, equal
to or greater than the fair market value of the common stock on the date of
grant.
Optionees may pay the exercise price of their options by cash, check or
delivery of shares of our common stock owned by the optionee for at least six
months prior to their delivery, valued at their fair market value as determined
by our board of directors. Our board of directors, in its discretion, may
permit payment of the option exercise price by delivery of an irrevocable
undertaking by a creditworthy broker, delivery by the optionee of a copy of
irrevocable instructions to a creditworthy broker, delivery of a promissory
note of the option holder, payment of other lawful consideration, or any
combination of the permitted forms of payment.
Our board of directors administers the 2000 Stock Incentive Plan. Our
board of directors has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 2000 Stock
Incentive Plan and to interpret its provisions. Our board may delegate
authority under the 2000 Stock Incentive Plan to one or more of its committees
and, subject to certain limitations, to one or more of our executive officers.
Our board of directors has authorized the compensation committee to administer
the 2000 Stock Incentive Plan, including the granting of options to our
executive officers. Subject to any applicable limitations contained in the 2000
Stock Incentive Plan, our board of directors, our compensation committee or any
other committee or executive officer to whom our board of directors delegates
authority, as the case may be, selects the recipients of awards and determines:
. the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
. the duration of options;
. the exercise price of options; and
. the number of shares of common stock subject to any restricted stock
or other stock-based awards and the terms and conditions of such
awards, including the conditions for repurchase, issue price and
repurchase price.
Our board of directors may at any time provide for the acceleration of
the vesting of any options, the removal of restrictions on any restricted stock
awards and the acceleration of the vesting of or the removal of restrictions on
any other stock-based awards, as the case may be.
In the event of an acquisition event, our board of directors must provide
that all outstanding options under the 2000 Stock Incentive Plan be assumed or
substituted for by the acquiror. If the acquiror does not
32
<PAGE>
agree to the assumption or substitution of outstanding options, then our board
of directors must provide for the full acceleration of all outstanding options
for a specified period of time followed by termination of any unexercised
options. However, in the event of an acquisition event involving a cash payment
to our stockholders, our board of directors may instead provide for the
termination of all outstanding options upon the acquisition event in exchange
for a cash payment by us to all option holders.
Upon an acquisition event, our repurchase and other rights under
outstanding restricted stock awards shall inure to the benefit of our
successor. Our board of directors shall specify the effect of an acquisition
event on any other stock-based award at the time of grant of such award.
For purposes of the 2000 Stock Incentive Plan, an "acquisition event"
means the occurrence of a merger, consolidation or statutory share exchange
transaction.
No option may be granted under the 2000 Stock Incentive Plan after March
2010, but the vesting and effectiveness of options previously granted may
extend beyond that date. The board of directors may amend, suspend or terminate
the 2000 Stock Incentive Plan or any portion thereof at any time, except that,
no award granted after an amendment to the 2000 Stock Incentive Plan and
designated as subject to Section 162(m) of the Internal Revenue Code by our
board of directors shall become exercisable, realizable or vested, to the
extent such amendment was required to grant such award, unless and until such
amendment is approved by our stockholders.
2000 Outside Director Stock Option Plan. Our 2000 Outside Director Stock
Option Plan was adopted by our board of directors in March 2000, subject to
stockholder approval. Under the terms of the 2000 Outside Director Stock Option
Plan, directors who are not our employees or employees of our subsidiaries
receive non-qualified options to purchase shares of our common stock. A total
of 200,000 shares of our common stock may be issued upon exercise of options
granted under the 2000 Outside Director Stock Option Plan.
The board of directors has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the 2000 Outside
Director Stock Option Plan. Under the terms of the 2000 Outside Director Stock
Option Plan, each non-employee director continuing as a director following this
offering will receive an option to purchase 5,000 shares of our common stock on
the effective date of this offering at a price per share equivalent to the
initial offering price. In addition, each such non-employee director will
receive an option to purchase 2,500 shares of our common stock on the date of
each annual meeting of stockholders commencing with the 2000 annual meeting of
stockholders, at an exercise price per share equal to the closing price of our
common stock on the date of grant. In addition, individuals who become
directors after this offering and are not our employees will receive an option
to purchase 5,000 shares of common stock on the date of his or her initial
election to the board of directors and an option to purchase 2,500 shares of
our common stock on the date of each annual meeting of stockholders after his
or her election. The exercise price per share of such options will be the
closing price per share of our common stock on the date of the grant. All
options granted under the 2000 Outside Director Stock Option Plan will be fully
vested upon grant.
2000 Employee Stock Purchase Plan. Our 2000 Employee Stock Purchase Plan
was adopted by our board of directors in March 2000, subject to stockholder
approval. The 2000 Employee Stock Purchase Plan authorizes the issuance of up
to a total of 1,000,000 shares of common stock to participating employees.
All of our employees, whose customary employment is more than 20 hours
per week for more than five months in any calendar year, including our
directors who are employees, and all employees of any participating
subsidiaries, are eligible to participate in the 2000 Employee Stock Purchase
Plan. Employees who would immediately after the grant own five percent or more
of the total combined voting power or value of our stock or any subsidiary are
not eligible to participate. As of March 31, 2000, approximately 234 of our
employees were eligible to participate in the 2000 Employee Stock Purchase
Plan.
On the first day of a designated payroll deduction period, the offering
period, we will grant to each eligible employee who has elected to participate
in the 2000 Employee Stock Purchase Plan an option to
33
<PAGE>
purchase shares of common stock as follows: the employee may authorize an
amount, up to 10% of his or her base pay to be deducted from his or her base
pay during the offering period. On the last day of the offering period, the
employee is deemed to have exercised the option, at the option exercise price,
to the extent of accumulated payroll deductions. Under the terms of the 2000
Employee Stock Purchase Plan, the option price is an amount equal to 85% of the
average market price per share of the common stock on either the first day or
the last day of the offering period, whichever is lower. In no event may an
employee purchase in any one offering period a number of shares which exceeds
the number of shares determined by dividing the product of (i) $2,083.33 and
(ii) the number of full months in the offering period by the closing market
price of a share of common stock on the commencement date of the offering
period or such other lower number as may be determined by the board prior to
the commencement date of the offering period. The compensation committee may,
in its discretion, choose an offering period of 12 months or less for each
offering and may choose a different offering period for each offering.
An employee who is not a participant on the last day of the offering
period is not entitled to exercise any option, and the employee's accumulated
payroll deductions will be refunded. However, upon termination of employment
because of death, the employee's beneficiary has certain rights to elect to
exercise the option to purchase the shares that the accumulated payroll
deductions in the participant's account would purchase at the date of death.
Because participation in the 2000 Employee Stock Purchase Plan is
voluntary, currently we cannot determine the number of shares of common stock
to be purchased by any particular current executive officer, by all current
executive officers as a group or by non-executive employees as a group.
401(k) Plan
We offer a 401(k) plan to our United States employees who have completed
six months of service with us. Under the terms of the plan, employees may
contribute 1% to 20% of their compensation within certain limitations. Each
year, we make matching contributions equal to 50% of each participant's
elective deferral up to a maximum of 6% of the participant's yearly
compensation. During 1997, 1998 and 1999, we contributed approximately
$150,000, $242,000 and $375,000, respectively, to the 401(k) plan.
Change in Control Arrangements
Our Incentive Stock Option Plan provides for the full vesting and
immediate exercisability of all options outstanding upon a merger or
consolidation where Intrinsix is not the surviving corporation and the
transfer, during any 12-month period, of at least 50% of the voting power of
our outstanding capital stock to persons or entities who, prior to such 12-
month period, did not own any shares of our capital stock.
In the event of our merger with or into another corporation, or the sale
of substantially all of our assets our board of directors must provide that
each outstanding option granted under the Seva Technologies 1997 Stock Plan be
assumed; exchanged for an equivalent option or right substituted by the
successor corporation; or terminate in accordance with the plan.
Our board of directors may at any time provide for the acceleration of
the vesting of any options, the removal of restrictions on any restricted stock
awards and the acceleration of the vesting of or the removal of restrictions on
any other stock-based awards, as the case may be.
In the event of an acquisition event, our board of directors must provide
that all outstanding options under the 2000 Stock Incentive Plan be assumed or
substituted for by the acquiror. If the acquiror does not agree to the
assumption or substitution of outstanding options, our board of directors must
provide for the full acceleration of all outstanding options for a specified
period of time followed by termination of any unexercised options. However, in
the event of an acquisition event involving a cash payment to our stockholders,
our board of directors may instead provide for the termination of all
outstanding options upon the acquisition event in exchange for a cash payment
by us to all option holders.
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<PAGE>
CERTAIN TRANSACTIONS
In October 1994, we repurchased 3,141,825 shares of our common stock from
Gintaras Subatis, a director of ours, pursuant to an Agreement dated October 1,
1994 between us and Mr. Subatis. In connection with this repurchase, we issued
to Mr. Subatis a promissory note in the amount of $418,910 with an 8.0% annual
interest rate. This note is secured by certain of our assets pursuant to a
Security Agreement dated November 22, 1994 between us and Mr. Subatis. The
principal and interest on the note is payable in monthly installments of $5,922
with the final payment due on September 1, 2002. As of March 1, 2000, we had
repaid a total of $258,372 in principal and interest to Mr. Subatis.
In connection with the repurchase of common stock held by Mr. Subatis, we
also entered into a noncompete agreement, barring Mr. Subatis from entering
into competition with us. In exchange for this commitment, we have ongoing
monthly payments of $835 through September 2002. We are also required to retain
Mr. Subatis as a director for so long as the promissory note remains in effect.
We intend to use a portion of the proceeds of this offering to repay the
outstanding balance of this note at the closing of this offering.
The note issued to Mr. Subatis is subordinated to the Loan and Security
Agreement dated January 13, 2000 between us and BankBoston, N.A. pursuant to a
Subordination Agreement (Debts) dated January 13, 2000 between us and Mr.
Subatis and a Subordination Agreement (Liens) dated January 13, 2000 between us
and Mr. Subatis.
35
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999, by:
. each stockholder known to us to be the beneficial owner of more than
5% of common stock;
. each of our directors;
. each named executive officer; and
. all of our directors and executive officers as a group.
The address of each beneficial owner listed below is c/o Intrinsix Corp.,
33 Lyman Street, Westboro, Massachusetts 01581.
All options exercisable within 60 days of December 31, 1999 are reported
as currently exercisable. The shares issuable under these options are treated
as if outstanding for computing the percentage ownership of the person holding
these options but are not treated as if outstanding for the purposes of
computing the percentage ownership of any other person.
This table assumes that the underwriters do not exercise their over-
allotment option.
Except as otherwise indicated, each stockholder listed in the table has
sole voting and investment powers over the common stock owned by him or share
such powers with his spouse. Beneficial ownership is determined under the rules
of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned After
the Offering the Offering
-------------------- --------------------
Name Number Percentage Number Percentage
- ---- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Romas P. Rudis...................... 2,519,085 25.1% 2,519,085 %
Mark A. Beal(1)..................... 3,144,450 31.2 3,144,450
James A. Gobes, Jr.(2).............. 1,996,275 19.8 1,996,275
Brian C. Meeks(3)................... 22,500 * 22,500 *
W. Kent Bowen....................... -- * -- *
Wallace A. Cataldo.................. -- * -- *
Gintaras R. Subatis................. -- * -- *
All directors and executive officers
as a group (7 persons)(4)......... 7,682,310 75.7% 7,682,310 %
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of the outstanding shares
of common stock.
(1) Includes 28,125 shares issuable upon the exercise of options exercisable
within sixty days of December 31, 1999.
(2) Includes 56,250 shares issuable upon the exercise of options exercisable
within sixty days of December 31, 1999.
(3) Consists of 22,500 shares issuable upon the exercise of options exercisable
within sixty days of December 31, 1999.
(4) Includes 106,875 shares issuable upon the exercise of options exercisable
within sixty days of December 31, 1999.
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock currently consists of 12,000,000 shares of
common stock. As of December 31, 1999 shares of our common stock were held of
record by 81 stockholders.
Upon the closing of the offering, our authorized capital stock will
consist of:
. 70,000,000 shares of common stock; and
. 5,000,000 shares of preferred stock, all of which are undesignated and
remain available for issuance.
After giving effect to this offering and based upon our outstanding
stock, there will be shares of common stock outstanding, excluding shares
of common stock reserved for issuance upon the exercise of options granted
under our stock option plans. All of these shares will be fully paid and
nonassessable. No shares of preferred stock will be outstanding at the closing
of this offering.
Common Stock
Holders of common stock are entitled to one vote per share in all matters
to be voted upon by stockholders and do not have cumulative voting rights.
Subject to rights of any outstanding preferred stock, holders of common stock
are entitled to receive ratably any dividends that may be declared by the board
of directors out of legally available funds. Upon our liquidation, dissolution
or winding up, holders of common stock are entitled to share ratably in all
assets remaining after payment of our debts and other liabilities and any
preference payments on any outstanding preferred stock.
Holders of common stock have no preemptive rights or other subscription
rights and no rights to convert their common stock into any other securities.
There are no redemption or sinking fund provisions applicable to the common
stock. All of the outstanding shares of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may issue in the future.
Preferred Stock
Our board of directors is authorized, without any further vote or action
by the stockholders, to issue up to 5,000,000 shares of preferred stock in one
or more series and to fix, before issuance, the number of shares to be included
in any series. The board of directors can also designate the relative powers,
preferences and rights and qualifications, limitations or restrictions of all
shares of any series.
Our board of directors has the authority to determine any of the
following for each series:
. the number of shares and the designation to distinguish the shares
from any other series;
. the voting powers;
. the redemption provisions, including the redemption price or prices to
be paid;
. the dividend rate, whether or not any dividends will be cumulative,
and the dates and preferences of dividends;
. the rights upon our voluntary or involuntary dissolution, or upon any
distribution of our assets;
. any provisions permitting shares to be converted into, or exchanged
for, shares of any other class or any other series of the same or any
other class of stock, or any other security, of ours or any other
corporation, and the prices or the applicable rates of exchange;
. any right to subscribe for or to purchase any of our securities or
those of any other corporation;
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<PAGE>
. any provisions of a sinking fund applicable to that series; and
. any other relative, participating, optional or other special powers,
preferences, rights, qualifications, limitations or restrictions.
The issuance of preferred stock could adversely affect the rights of
holders of common stock. For example, the issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to
holders of common stock. In addition, any issuance could have the effect of
delaying or preventing a change in control and could make the removal of our
present management more difficult. Upon the closing of this offering, there
will be no shares of preferred stock outstanding and we have no present plans
to issue shares of preferred stock.
Massachusetts Law and Certain Provisions of our Amended and Restated Articles
of Organization and Amended and Restated Bylaws
Our Amended and Restated Articles of Organization provide that we will be
subject to Chapter 110F of the Massachusetts General Laws, an anti-takeover
law, following this offering. In general, this statute prohibits a publicly
held Massachusetts corporation from engaging in a business combination with an
interested stockholder for a period of three years after the date of the
transaction which results in the stockholder becoming an interested
stockholder, unless:
. our board of directors approves the business combination or
transaction which results in the stockholder becoming an interested
stockholder prior to such event; or
. the interested stockholder acquires at least 90% of our outstanding
voting stock, excluding shares held by certain of our directors who
also serve as our officers and by certain employee stock plans, at the
time it becomes an interested stockholder; or
. the business combination is approved by both the board of directors
and the holders of two-thirds of our outstanding voting stock at a
meeting of stockholders, excluding shares held by the interested
stockholder.
Under Massachusetts General Laws, you would be deemed to be an interested
stockholder of ours if you, together with your affiliates and associates, own
(or at any time within the prior three years have owned) 5% or more of our
outstanding voting stock. Massachusetts General Laws defines the term business
combination to include a merger, a stock or asset sale, and certain other
transactions resulting in a financial benefit to the interested stockholder.
Since we are a publicly-held Massachusetts corporation, Massachusetts
General Laws Chapter 156B, Section 50A requires us to have a classified board
of directors consisting of three classes as nearly equal in size as possible,
unless we elect to opt out of the statute's coverage. Our Amended and Restated
Bylaws contain provisions which give effect to Section 50A.
Our Amended and Restated Bylaws include a provision excluding us from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions." In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more
of the outstanding voting stock of a corporation may not vote such stock unless
the stockholders of the corporation so authorize. Our board of directors may
amend our Amended and Restated Bylaws at any time to subject us to this statute
prospectively.
Our Amended and Restated Bylaws require us to call a special stockholders
meeting at the request of stockholders holding at least 80% of our voting
power. Any stockholder seeking to solicit requests to call a special meeting of
stockholders must notify us by notice in writing.
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<PAGE>
Our Amended and Restated Articles of Organization provide that our
directors and officers shall be indemnified by us to the fullest extent
authorized by Massachusetts law, as it now exists or may in the future be
amended, against all expenses and liabilities reasonably incurred in connection
with service for or on behalf of us. In addition, our Amended and Restated
Articles of Organization provide that our directors will not be personally
liable for monetary damages to us for breaches of their fiduciary duty as
directors, unless they
. violated their duty of loyalty to us or our stockholders;
. acted in bad faith;
. knowingly or intentionally violated the law;
. authorized legal dividends or redemptions; or
. derived an improper personal benefit from their action as directors.
We intend to increase the coverage of our insurance policy which insures
our directors and officers against certain losses and which insures us against
certain of our obligations to indemnify such directors and officers.
Our Amended and Restated Articles of Organization provide that the
following corporate actions may be authorized by the approval of the holders of
a majority of the shares of each class of stock entitled to vote thereon,
rather than by two-thirds as otherwise provided by statute, provided that the
transactions have been authorized by a majority of the members of the board of
directors and the requirements of any other applicable provisions of our
Amended and Restated Articles of Organization have been met:
. any amendment to our Amended and Restated Articles of Organization;
. the sale, lease or exchange of all or substantially all of our
property and assets; or
. our merger or consolidation with or into another corporation.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Continental
Stock Transfer & Trust, New York, New York.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price of our common stock and impair our
ability to raise equity capital in the future.
Upon the closing of this offering, we will have outstanding shares of
common stock. Of these shares, the shares sold in the offering, plus any
shares issued upon exercise of the underwriters' over-allotment option, will be
freely tradable without restriction under the Securities Act, unless purchased
by our affiliates. The term affiliate is defined in Rule 144 under the
Securities Act. In general, affiliates include officers, directors or 10%
stockholders.
The remaining shares outstanding are restricted securities within the
meaning of Rule 144. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 under the Securities Act, which are summarized below.
Sales of restricted securities in the public market, or the availability of
these shares for sale, could adversely affect the market price of the common
stock.
Holders of % of the remaining shares outstanding, including all
of our officers and directors, have entered into lock-up agreements which
generally provide that they will not offer, sell, contract to sell or grant any
option to purchase or transfer or dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them for a period
of 180 days after the date of this prospectus without the prior written consent
of FleetBoston Robertson Stephens Inc.
Notwithstanding possible earlier eligibility for sale under the
Securities Act, shares subject to lock-up agreements will not be salable until
these agreements expire or are waived by FleetBoston Robertson Stephens Inc.
Taking into account the lock-up agreements, and assuming FleetBoston Robertson
Stephens Inc. does not release stockholders from these agreements, the
following restricted shares will be eligible for sale in the public market at
the following times:
. beginning on the date of this prospectus, approximately shares will
be immediately available for sale in the public market;
. beginning 90 days after the date of this prospectus, approximately
shares will be eligible for sale, subject to volume, manner of sale
and other limitations under Rule 144;
. beginning 180 days after the date of this prospectus, approximately
shares will be eligible for sale, approximately of which will be
subject to volume, manner of sale and other limitations under Rule
144; and
. the remaining shares will become eligible for sale under Rule 144
from time to time thereafter.
In general, under Rule 144, a person who has beneficially owned
restricted securities for at least one year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after the offering;
or
. the average weekly trading volume of the common stock during the four
calendar weeks immediately before the sale.
Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not considered to have been our
affiliate at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two
40
<PAGE>
years, is entitled to sell shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Our employees, officers, directors or consultants who purchased shares
under a written compensatory plan or contract may be entitled to resell these
shares in reliance upon Rule 701. Rule 701 provides that affiliates may sell
their Rule 701 shares under Rule 144 without complying with the holding period
requirement and that non-affiliates may sell their shares in reliance on Rule
144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
those shares.
We intend to file registration statements under the Securities Act as
promptly as possible after the effective date of this prospectus to register
shares to be issued under our employee benefit plans. As a result, any options
or rights exercised under any of our existing stock option plans after the
effectiveness of the registration statements will also be freely tradable in
the public market. However, shares held by affiliates will still be subject to
the volume limitation, manner of sale, notice and public information
requirements of Rule 144 unless otherwise exempt under Rule 701. As of December
31, 1999, there were outstanding options for the purchase of 3,683,489 shares
of common stock, and options to purchase 731,074 of these shares were
exercisable.
41
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., CIBC World Markets Corp. and Adams,
Harkness & Hill, Inc., have severally agreed with us subject to the terms and
conditions in the underwriting agreement, to purchase from us the number of
shares of common stock set forth opposite their names. The underwriters are
committed to purchase and pay for all shares if any are purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc................................
CIBC World Markets Corp...........................................
Adams, Harkness & Hill, Inc. .....................................
---
Total...........................................................
===
</TABLE>
The representatives have advised us that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to dealers at that
price less a concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession, and reallowance to dealers may be reduced by the representatives.
No such reduction shall change the amount of proceeds to be received by us as
set forth on the cover page of this prospectus. The common stock is offered by
the underwriters on the terms as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the 30-
day period after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discount set forth on the cover page of this prospectus. If the underwriters
exercise their over-allotment option to purchase any of the additional
shares of common stock, the underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof as
the number of shares to be purchased by each of them bears to the total number
of shares of common stock offered in this offering. If purchased, these
additional shares will be sold by the underwriters on the same terms as those
on which the shares offered hereby are being sold. We will be obligated,
pursuant to the over-allotment option, to sell shares to the underwriters to
the extent the option is exercised. The underwriters may exercise the over-
allotment option only to cover over-allotments made in connection with the sale
of the shares of common stock offered in this offering.
42
<PAGE>
The following table summarizes the compensation to be paid to the
underwriters by Intrinsix:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by
Intrinsix.........................................
</TABLE>
Intrinsix estimates expenses payable in connection with this offering,
other than the underwriting discounts and commissions referred to above, will
be approximately $ .
Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and us against civil liabilities, including liabilities under the
Securities Act, and liabilities arising from breaches of representations and
warranties contained in the underwriting agreement.
Lock-Up Agreements
Each executive officer and director of Intrinsix and substantially all of
our other stockholders and optionholders have agreed, subject to specified
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock
or any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by those holders
or with respect to which they have the power of disposition, without the prior
written consent of FleetBoston Robertson Stephens Inc. This restriction
terminates after the close of trading of the shares on the 180th day of (and
including) the day the shares commenced trading on the Nasdaq National Market.
However, FleetBoston Robertson Stephens Inc. may, in its sole discretion at any
time or from time to time before the termination of the 180-day period, without
notice, release all or any portion of the securities subject to lock-up
agreements. There are no existing agreements between the Representatives and
any of our stockholders and optionholders who have executed a lock-up agreement
providing consent to the sale of shares prior to the expiration of the lock-up
period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the lock-
up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of
common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of our common stock upon the exercise of outstanding
options or warrants, and the issuance of options under existing stock options
and incentive plans provided that these options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible For Future Sale."
Listing
We have applied for the listing of our common stock on the Nasdaq
National Market under the symbol "ITRX."
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the shares of common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the
43
<PAGE>
underwriters for the purpose of fixing or maintaining the price of the common
stock. A "syndicate covering transaction" is the bid for or purchase of common
stock on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with the offering
if the common stock originally sold by such underwriter or syndicate member
purchased by the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives have advised us that such transactions may be effected on
the Nasdaq National Market or otherwise and, if commenced, may be discontinued
at any time.
Directed Share Program
At our request, the underwriters have reserved up to shares of common
stock (the "Directed Shares") for sale, at the initial public offering price,
to persons who are directors, officers or employees of ours, or who are
otherwise associated with us and our affiliates and who have advised Intrinsix
of their desire to purchase such shares. The number of shares of common stock
available for sale to the general public will be reduced to the extent of sales
of Directed Shares to any of the persons for whom they have been reserved. Any
shares not so purchased will be offered by the underwriters on the same basis
as all other shares of common stock offered hereby. We have agreed to indemnify
those certain underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, in connection with the sales of Directed
Shares.
44
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for Intrinsix Corp. by Hale and Dorr LLP, Boston,
Massachusetts, and for the underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Intrinsix Corp. as of December
31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999
included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein (which report
expresses an unqualified opinion and includes an explanatory paragraph relating
to the restatement of the consolidated financial statements to reflect a merger
accounted for as a pooling-of-interests), and have been so included in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The statement of direct revenues and direct expenses of the Design
Division of Telexis Corporation for the year ended December 31, 1999, included
in this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act to offer shares of our common
stock. This prospectus is only a part of the registration statement and does
not contain all of the information included in the registration statement.
Further information about us and our common stock can be found in the
registration statement. The rules and regulations of the Securities and
Exchange Commission allow us to omit various information from the prospectus
that is included in the registration statement. Statements made in this
prospectus about the contents of any contract, agreement or other document are
summaries. If we filed any of those documents as exhibits to the registration
statement, you may read the document itself for a complete description of its
terms.
The registration statement and the related exhibits and schedules filed
by us with the Securities and Exchange Commission can be inspected and copies
obtained at prescribed rates from the public reference facilities maintained by
the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549.
You may obtain information on the operation of the public reference room
by calling the Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission also maintains a website that
contains reports, proxy and information statements and other information about
registrants that file electronically with the Securities and Exchange
Commission, like us, at http://www.sec.gov.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INTRINSIX CORP.
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Income for the years ended December 31, 1997,
1998 and 1999.......................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999....................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999.................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
THE DESIGN DIVISION OF TELEXIS CORPORATION
Independent Auditors' Report............................................. F-15
Statement of Revenues and Direct Expenses................................ F-16
Notes to Statement of Revenues and Direct Expenses....................... F-17
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The accompanying consolidated financial statements give effect to the
completion of a 3-for-2 stock split of the Company's outstanding common stock
which will take place prior to the effective date of the offering. The
following report is in the form which will be furnished by Deloitte & Touche
LLP upon the completion of the 3-for-2 stock split of the Company's outstanding
common stock described in Note 2 to the consolidated financial statements and
assuming that from March 17, 2000 to the date of such completion no other
material events have occurred that would affect the accompanying consolidated
financial statements or require disclosure therein.
"INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Intrinsix Corp.:
We have audited the accompanying consolidated balance sheets of Intrinsix
Corp. and its subsidiary (the "Company") as of December 31, 1998 and 1999, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States of America.
As described in Note 3 to the consolidated financial statements, the
consolidated financial statements have been restated to reflect a merger
accounted for as a pooling-of-interests.
Boston, Massachusetts
March 17, 2000 (April , 2000 as to the effects of the stock split described in
Note 2)"
Deloitte & Touche LLP
Boston, Massachusetts
March 31, 2000
F-2
<PAGE>
INTRINSIX CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 235,504 $ 231,302
Accounts receivable, net of allowance for doubtful
accounts of $15,000 and $133,000 in 1998 and 1999,
respectively........................................ 2,489,237 3,329,033
Unbilled accounts receivable.......................... 15,726 888,836
Prepaid expenses and other current assets............. 219,288 401,108
---------- ----------
Total current assets................................. 2,959,755 4,850,279
Property and equipment, net............................ 1,301,240 1,349,525
Other assets........................................... 40,886 59,062
Deferred tax assets.................................... 1,960 --
Goodwill............................................... 74,799 1,374,547
---------- ----------
Total assets......................................... $4,378,640 $7,633,413
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..................... $ 54,674 $ 359,212
Line of credit........................................ 350,000 --
Accounts payable...................................... 360,357 983,402
Accrued compensation and benefits..................... 525,218 952,937
Accrued income taxes.................................. 97,536 529,106
Other accrued expenses................................ 247,396 334,148
Deferred tax liabilities.............................. 115,973 55,657
---------- ----------
Total current liabilities............................ 1,751,154 3,214,462
---------- ----------
Long-term debt, less current portion................... 181,701 1,015,689
---------- ----------
Deferred tax liabilities............................... 58,692 --
---------- ----------
Commitments and contingencies (Note 9).................
Stockholders' equity:
Common stock, no par value, 12,000,000 shares
authorized; 11,755,253 shares issued in 1998 and
1999................................................. 226,510 272,798
Retained earnings...................................... 2,396,124 3,324,235
Treasury stock, 1,881,007 and 1,713,448 shares at cost
in 1998 and 1999, respectively....................... (235,541) (193,771)
---------- ----------
Total stockholders' equity........................... 2,387,093 3,403,262
---------- ----------
Total liabilities and stockholders' equity.......... $4,378,640 $7,633,413
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
INTRINSIX CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $16,329,847 $23,474,943 $30,656,863
Cost of revenues (includes stock-based
compensation of $30,213 in 1999)...... 10,638,264 14,176,582 18,500,931
----------- ----------- -----------
Gross profit........................... 5,691,583 9,298,361 12,155,932
----------- ----------- -----------
Operating expenses:
Research and development expenses...... 283,575 723,437 978,545
Selling, general and administrative
expenses (includes stock-based
compensation of $16,075 in 1999)..... 4,551,782 7,574,043 9,564,004
----------- ----------- -----------
Total operating expenses.............. 4,835,357 8,297,480 10,542,549
----------- ----------- -----------
Operating income........................ 856,226 1,000,881 1,613,383
----------- ----------- -----------
Other income (expense):
Other income........................... 88,823 31,865 19,404
Interest expense....................... (38,722) (49,303) (35,345)
----------- ----------- -----------
Total other income (expense).......... 50,101 (17,438) (15,941)
----------- ----------- -----------
Income before income tax provision...... 906,327 983,443 1,597,442
Income tax provision.................... 400,529 382,709 669,331
----------- ----------- -----------
Net income.............................. $ 505,798 $ 600,734 $ 928,111
=========== =========== ===========
Basic earnings per share................ $ 0.05 $ 0.06 $ 0.09
=========== =========== ===========
Diluted earnings per share.............. $ 0.05 $ 0.06 $ 0.08
=========== =========== ===========
Shares for basic computation............ 9,501,820 9,668,281 9,925,488
=========== =========== ===========
Shares for diluted computation.......... 9,531,188 10,307,005 12,364,656
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
INTRINSIX CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Common Stock
------------------- Retained Treasury
Shares Amount Earnings Stock Total
---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.. 11,755,253 $226,510 $1,289,592 $(333,448) $1,182,654
Issuance of 23,648 shares
of common stock on
exercise of options.... -- -- -- 4,212 4,212
Net income............... -- -- 505,798 -- 505,798
---------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1997.................... 11,755,253 226,510 1,795,390 (329,236) 1,692,664
Issuance of 222,424
shares of common stock
on exercise of options
and 150,000 shares of
common stock for a
business combination... -- -- -- 93,695 93,695
Net income............... -- -- 600,734 -- 600,734
---------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1998.................... 11,755,253 226,510 2,396,124 (235,541) 2,387,093
Issuance of 167,558
shares of common stock
on exercise of options -- -- 41,770 41,770
Stock-based
compensation........... -- 46,288 -- -- 46,288
Net income............... -- -- 928,111 -- 928,111
---------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1999.................... 11,755,253 $272,798 $3,324,235 $(193,771) $3,403,262
========== ======== ========== ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
INTRINSIX CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1998 1999
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 505,798 $ 600,689 $ 928,111
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........... 231,976 494,547 787,276
Bad debt expense........................ 7,249 255,008 139,526
Gain on disposal of assets.............. -- -- (5,652)
Stock-based compensation................ -- -- 46,288
Deferred income taxes................... 65,439 70,213 (117,052)
Changes in assets and liabilities (net
of effect from acquisitions):
Accounts receivable.................... (602,052) (733,436) (979,322)
Unbilled accounts receivable........... -- 105,621 (873,110)
Prepaid expenses and other current
assets............................... (478,993) 170,188 (199,997)
Accounts payable....................... 456,322 (168,940) 623,045
Accrued expenses....................... 36,565 28,466 289,111
Accrued income taxes................... 60,474 (109,264) 431,570
--------- ----------- -----------
Net cash provided by operating
activities......................... 282,778 713,092 1,069,794
Cash flows from investing activities:
Purchase of property and equipment....... (408,595) (1,084,409) (696,102)
Disposal of property and equipment....... -- -- 6,410
Acquisition of a business................ -- (90,850) (1,214,600)
--------- ----------- -----------
Net cash used for investing
activities......................... (408,595) (1,175,259) (1,904,292)
Cash flows from financing activities:
Net increase in line of credit........... -- 350,000 (350,000)
Issuance of long-term debt............... 200,000 -- 1,200,000
Repayments of long-term debt............. (113,282) (177,018) (61,474)
Cancellation of shares from common
stock.................................. -- (6,249) --
Issuance of common stock from treasury
for cash............................... 4,212 99,944 41,770
--------- ----------- -----------
Net cash provided by financing
activities......................... 90,930 266,677 830,296
Net increase (decrease) in cash........... (34,887) (195,490) (4,202)
Cash and cash equivalents, beginning of
year.................................... 465,881 430,994 235,504
--------- ----------- -----------
Cash and cash equivalents, end of year.... 430,994 235,504 231,302
========= =========== ===========
Supplemental cash flow information:
Cash paid for interest................... $ 36,867 $ 46,028 $ 34,934
========= =========== ===========
Cash paid for income taxes............... $ 253,969 $ 445,852 $ 354,813
========= =========== ===========
Issuance of common stock from treasury
for business combination............... $ -- $ 57,000 $ --
========= =========== ===========
Net assets acquired from acquisition of a
business............................... $ -- $ 39,052 $ 126,515
========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Intrinsix Corp. and its subsidiaries, together referred to as the
"Company," are providers of advanced electronic design services to systems
original equipment manufacturers and semiconductor companies. The Company
designs semiconductor devices, as well as the accompanying system-level
hardware and software that comprise advanced electronic products. The Company
operates primarily in the United States of America, and has recently opened
facilities in Canada and Europe.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements reflect a 3-for-2 split of the
Company's common stock which is expected to occur prior to effectiveness of the
Company's proposed public offering. All share and per share information herein
has been retroactively restated to reflect this split.
Significant Accounting Policies
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of Intrinsix Corp. and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates--The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition--Revenues from design services are recognized as the
services are provided, provided that no significant obligations remain and
collection of the receivable is considered probable. Generally, contracts call
for billings on a time and materials basis; however, in instances when a fixed
fee contract is signed, revenue is recognized on a percentage-of-completion
basis.
Cost of Revenues--Cost of revenues consists primarily of personnel costs
related to the provision of services.
Research and Development Expenses--Research and development costs
associated with the development of proprietary products and design
methodologies are expensed as incurred.
Comprehensive Income--The Company does not have any items of
comprehensive income other than net income.
Concentration of Credit Risk--The majority of the Company's revenues are
from customers in technology industries that are not required to provide
collateral. The Company's customers are dispersed over a wide geographic area
and are subject to periodic review under the Company's credit policies. The
Company does not believe that it is subject to any unusual credit risks, other
than the normal level of risk attendant to operating its business.
F-7
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Major customers accounted for the following percentages of the Company's
revenues and accounts receivable as of and for the years ended December 31:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------------------- -------------------
Accounts Accounts
Revenues Revenues Receivable Revenues Receivable
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Customer A..................... 17% 18% 8% 24% 6%
Customer B..................... -- -- -- 13% 4%
Customer C..................... 10% -- -- -- --
</TABLE>
No other customers accounted for more than 10% of revenue or accounts
receivable in any of the periods presented.
Cash Equivalents--Cash equivalents consist of short-term highly liquid
investments purchased with a remaining maturity of three months or less.
Financial Instruments--A financial instrument is defined as cash,
evidence of an ownership in an entity, and certain contracts to exchange cash
or other financial instruments. For financial instruments such as accounts
receivable, accounts payable and accrued expenses, which are settled generally
within three months of the reporting date, carrying amount approximates fair
value. At December 31, 1998 and 1999, the carrying amounts of long-term debt
approximate their fair values. SFAS No. 107 excludes from its scope certain
financial instruments and all nonfinancial instruments including property,
plant and equipment, retirement benefit obligations and leases. Accordingly,
the aggregate fair value amounts presented do not represent the underlying fair
value of the Company. The carrying amount of cash and cash equivalents
approximates fair value.
Property and Equipment--Property and equipment are recorded at cost and
depreciated using the straight-line method over their estimated useful lives of
the various assets, generally three years. Leasehold improvements are amortized
using the straight-line method over the lesser of the estimated life of the
improvement or the remaining life of the lease.
Long-Lived Assets--Upon occurrence of certain events or changes in
circumstances, the Company reviews the carrying value of its long-lived assets
to determine if impairment has occurred and if necessary, adjusts the carrying
value to fair market value. No adjustments have been required to date.
Income Taxes--Deferred income taxes are provided for differences between
the financial statement carrying amounts and tax bases of the Company's assets
and liabilities, using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are provided to the
extent realization of deferred tax assets is not considered more likely than
not.
Stock-Based Compensation--Compensation expense associated with awards of
stock or options to employees is measured using the intrinsic-value method.
(See Note 7)
Earnings Per Share--Net income per share has been computed using the
weighted-average number of shares of common stock outstanding during each
period. Diluted amounts per share include the impact of the Company's
outstanding options.
F-8
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of shares used in the basic computation
to shares used in the diluted computation for the years ended December 31:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Shares used in basic computation................ 9,501,820 9,668,281 9,925,488
Potential common shares from options............ 29,368 638,724 2,439,168
--------- ---------- ----------
Shares used in diluted computation.............. 9,531,188 10,307,005 12,364,656
========= ========== ==========
</TABLE>
Segments--The Company operates in a single operating segment.
Substantially all of the Company's activities to date have been conducted in
the United States of America.
Newly Issued Accounting Standards--During 1998, SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board. This statement is effective for fiscal years
beginning after June 15, 2000. The Company is currently evaluating the impact,
if any, of this statement.
3. Business Combinations
Pooling of Interests--In June 1999, the Company issued 750,000 shares of
common stock in exchange for all of the outstanding common shares of Seva
Technologies, Inc. ("Seva"), a design services company. In addition, the
Company assumed Seva's outstanding obligations to issue shares on exercise of
options held by Seva employees, which options had been issued in 1997. These
Seva options converted to options to acquire Company common stock on the same
terms and conditions present in the options prior to the combination, adjusted
only for changes in the number of shares and exercise price due to the exchange
ratio presented in the merger agreement. The merger with Seva was accounted for
as a pooling of interests and, accordingly, the accompanying consolidated
financial statements include the accounts and balances of Seva for all periods
presented. There were no adjustments required to conform the accounting
policies of the two companies.
Information regarding the revenues and results of operations of the
Company and Seva prior to the combination are as follows:
<TABLE>
<CAPTION>
Years Ended December 31, Period from
------------------------- January 1 to
1997 1998 June 11, 1999
------------ ------------ -------------
<S> <C> <C> <C>
Revenues:
Company............................... $ 14,641,418 $ 21,474,800 $13,528,716
Seva.................................. 1,688,429 2,000,143 1,295,814
------------ ------------ -----------
Combined............................. $ 16,329,847 $ 23,474,943 $14,824,530
============ ============ ===========
Net income (loss):
Company............................... $ 470,799 $ 528,317 $ 505,169
Seva.................................. 34,999 72,417 (264,307)
------------ ------------ -----------
Combined............................. $ 505,798 $ 600,734 $ 240,862
============ ============ ===========
</TABLE>
Asset Purchases
Telexis Corporation--On December 29, 1999, the Company acquired the
operating assets of a design services division of a Canadian company, the
Design Division of Telexis Corporation, for a purchase price of $1,386,000. The
majority of this consideration was paid on December 29, 1999; however, $172,000
was retained by the Company to ensure satisfaction of certain conditions such
as employees remaining with the business and transfer of customers. The exact
amount due to Telexis Corporation, if any, will be determined
F-9
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and paid in June 2000. The acquisition has been accounted for as a purchase and
the purchase price has been preliminarily allocated to the assets acquired
based upon the estimated fair values. Upon completion of appraisal activities,
which are currently being undertaken, the purchase price will be reallocated to
the assets acquired based upon the final estimated fair value. Goodwill
generated by the transaction is expected to be amortized to expense using the
straight-line method over 10 years, its estimated useful life. Operating
activity related to these assets for the two days ended December 31, 1999 was
immaterial. The results of operations from these assets are included in the
consolidated results from the date of the acquisition forward.
Prism Acoustics, Inc.--In 1998, the Company acquired the assets of Prism
Acoustics, Inc., a design services company. The purchase price consisted of
cash of $90,850 and the issuance of 150,000 shares of common stock from
treasury with an estimated fair value of $0.38 per share at the time of
issuance. The purchase price was allocated to the assets acquired based on
estimated fair value. The results of operations of the assets acquired are
included with those of the Company from the date of acquisition. Goodwill
associated with the acquisition is being amortized to expense using the
straight-line method over a two year period.
Pro Forma Information (Unaudited)--Had the purchase combinations
described above occurred on January 1, of each year, the consolidated results
of operations would have been as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Revenues............................................... $25,660,263 $32,654,029
Net income............................................. $ 480,176 $ 956,111
Basic earnings per share.............................. $ 0.05 $ 0.10
Diluted earnings per share............................ $ 0.05 $ 0.08
</TABLE>
This pro forma information is not necessarily indicative of the results
of operations which would have been recorded had such acquisitions occurred at
the dates indicated.
4. Property and Equipment
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Computer equipment and software....................... $ 2,086,143 $ 2,627,082
Furniture and fixtures................................ 280,919 383,717
Leasehold improvements................................ 49,796 55,569
----------- -----------
Total................................................ 2,416,858 3,066,368
Less accumulated depreciation......................... (1,115,618) (1,716,843)
----------- -----------
Property and equipment, net........................... $ 1,301,240 $ 1,349,525
=========== ===========
</TABLE>
5. Long-term Debt
Line of Credit--The Company has a line of credit with a bank providing
for borrowings of up to $1.5 million, of which $1.2 million has been drawn down
at December 31, 1999, all to fund the purchase of assets from Telexis
Corporation (see Note 3). Borrowings under the line bear interest at the bank's
base rate plus 0.5% (9.0% at December 31, 1999) and are collateralized by a
first security interest in all of the Company's assets. At December 31, 1999,
$300,000 was available for borrowing under the line of credit. In January 2000,
the line of credit agreement was amended as follows:
F-10
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. Amounts outstanding under the line of credit on the date of amendment
(January 13, 2000) were converted to a term loan of $1.2 million. The
term loan is payable in $25,000 monthly installments through January
2004, with interest at the bank's prime rate plus 0.5%. Amounts due
under this arrangement at December 31, 1999 have been classified in
accordance with the terms of the amendment.
. A new revolving line of credit facility was provided, allowing for
borrowings of up to $1.5 million, based on eligible accounts
receivable. Borrowings under the revolving line of credit facility
bear interest at the bank's prime rate plus 0.5%. The amended
revolving line of credit facility expires on May 31, 2001.
. The amended agreements with the bank contain covenants with which the
Company must comply, including minimum levels of defined cash flow and
quarterly net profit, and maximum amounts of allowable leverage. Under
the amended agreements, the Company is precluded from paying cash
dividends on its common stock. In addition, the amended agreements
require that all outstanding term debt be retired with a portion of
the proceeds of an initial public offering.
Note Payable--In connection with the repurchase of common stock held by
two members of the board of directors in 1994, the Company entered into notes
payable agreements. At December 31, 1999, one of these agreements remained
outstanding, with a balance of $174,901. The note payable calls for monthly
payments of $5,922, including interest at a fixed rate of 8.0%. The note is
subordinated to the line of credit and is collateralized by all of the assets
of the Company.
Principal payments due for the note payable and the term loan are as
follows for the years ending December 31:
<TABLE>
<S> <C>
2000............................................................ $ 359,212
2001............................................................ 415,689
2002............................................................ 300,000
2003............................................................ 300,000
----------
Total.......................................................... $1,374,901
==========
</TABLE>
6. Provision for Income Taxes
The provision for income taxes consisted of the following for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Current:
Federal.......................................... $267,247 $266,020 $ 668,425
State............................................ 67,843 46,476 117,958
-------- -------- ---------
Total........................................... 335,090 312,496 786,383
-------- -------- ---------
Deferred:
Federal.......................................... 55,573 59,771 (99,494)
State............................................ 9,866 10,442 (17,558)
-------- -------- ---------
Total........................................... 65,439 70,213 (117,052)
-------- -------- ---------
Provision for income taxes........................ $400,529 $382,709 $ 669,331
======== ======== =========
</TABLE>
F-11
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the statutory federal income tax rate and the
effective rate for the years ended December 31 consists of the following:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate................................ 34% 34 % 34%
State income taxes--net of federal income tax benefit............ 6% 6 % 6%
Other............................................................ 4% (1)% 1%
--- ---- ---
Effective rate.................................................. 44% 39 % 41%
=== ==== ===
</TABLE>
The tax effect of significant items comprising the Company's net deferred
tax assets (liabilities) as of December 31, are as follows:
<TABLE>
<CAPTION>
1998 1999
--------- --------
<S> <C> <C> <C>
Accounts receivable.................................... $(155,271) $(96,596)
Accrued expenses....................................... 41,262 35,954
Property and equipment................................. (61,487) (76,363)
Intangible assets...................................... 2,791 29,412
Loss carryforwards..................................... -- 51,936
--------- -------- ---
Deferred tax liabilities.............................. $(172,705) $(55,657)
========= ======== ===
</TABLE>
7. Stockholders' Equity
Stock Option Plans--The Company's Incentive Stock Option Plan (the
"Plan"), established in March 1997, provides for grants of options to purchase
up to 4,500,000 shares of common stock. Grants may be in the form of incentive
stock options or nonqualified options. Exercise prices and vesting periods are
determined by the board of directors on the date of grant. Options generally
vest ratably over a four-year period. Included within the option activity
presented below are obligations to issue shares on exercise of options held by
former Seva employees. These Seva options were converted to options to acquire
Company common stock on the same terms and conditions present in the options
prior to the combination, adjusted only for changes in the number of shares and
exercise price due to the exchange ratio present in the merger agreement. A
summary of activity in the plans are as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Number Exercise
of Shares Price
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1997............................. -- $ --
Granted................................................... 1,072,999 0.17
Exercised................................................. (75) 0.16
Cancelled................................................. (19,500) 0.18
---------
Outstanding at December 31, 1997........................... 1,053,424 0.17
Granted................................................... 1,919,397 0.47
Exercised................................................. (263,542) 0.16
Cancelled................................................. (97,275) 0.28
---------
Outstanding at December 31, 1998........................... 2,612,004 0.39
Granted................................................... 1,396,537 1.76
Exercised................................................. (157,690) 0.26
Cancelled................................................. (167,362) 0.50
---------
Outstanding at December 31, 1999........................... 3,683,489 $0.90
=========
</TABLE>
F-12
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The weighted-average fair market value of options granted was $0.16,
$0.41 and $2.70 per share for the years ended 1997, 1998 and 1999,
respectively, measured using the assumptions and methodology described below.
The following table sets forth information regarding options outstanding
and vested at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Vested
- -------------------------------------------------------- -----------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Life Exercise Exercise
Shares Exercise Price (in years) Price Shares Price
- --------- -------------- ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
598,722 $0.16--$0.18 7.37 $0.18 299,361 $0.18
691,309 $0.28--$0.38 8.30 $0.36 172,827 $0.36
1,016,419 $0.51--$0.70 8.75 $0.54 254,104 $0.54
790,875 $1.16--$1.60 9.23 $1.40 4,782 $1.16
586,164 $2.03--$2.46 9.76 $2.24 -- --
- ---------
- --------- -------
3,683,489 731,074
========= =======
</TABLE>
The Company accounts for stock-based compensation under the provisions of
Accounting Principles Board (APB) Opinion No. 25. During 1999, the Company
granted options with exercise prices less than the fair market value of the
stock at the date of grant. For those grants, compensation cost aggregated $1.6
million, which will be amortized to expense over the vesting period of the
affected grants (four years). Compensation cost related to these option grants
recognized in 1999 aggregated $46,000.
Subsequent to December 31, 1999, the Company granted 375,000 options with
a weighted average exercise price of $3.00 per share. For those grants,
compensation cost aggregated $1.8 million, which will be amortized to expense
over the vesting period of the affected grants (four years).
If compensation cost for stock option grants had been determined based on
the fair value of the grant for 1997, 1998 and 1999 consistent with the method
prescribed by SFAS No. 123, the Company's fiscal 1997, 1998 and 1999 net income
and earnings per share on a pro forma basis would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
As reported................................... $505,798 $600,734 $928,111
Pro forma..................................... $484,886 $525,404 $644,611
Pro forma basic earnings per share .......... $0.05 $0.05 $0.06
Pro forma diluted earnings per share......... $0.05 $0.05 $0.05
The fair value of the options on their grant date was measured using the
Black-Scholes option pricing model. Key assumptions used to apply this option
pricing model are as follows:
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate....................... 5.77% 4.75% 5.00%
Expected life of option grants................ 9.75 years 9.75 years 9.75 years
Expected dividend payment rate, as a
percentage of the stock price on the date of
the grant................................... 0% 0% 0%
Assumed volatility............................ 40% 40% 40%
</TABLE>
F-13
<PAGE>
INTRINSIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The option-pricing model used was designed to value readily tradeable
stock options with relatively short lives. However, management believes that
the assumptions used to value the options and the model applied yield a
reasonable estimate of the fair value of the grants made under the
circumstances.
Reserved Shares--At December 31, 1999, 4,078,693 shares of common stock
were reserved for issuance upon exercise of options.
8. Retirement Savings Plan
In 1994, the Company established a 401(k) retirement savings plan
covering all employees who have completed six months of service. Under the
provisions of the plan, employees may contribute 1% to 20% of their
compensation within certain limitations. Each year, the Company will make
matching contributions equal to 50% of each participant's elective deferral up
to a maximum of 6% of the participant's yearly compensation. During 1997, 1998
and 1999, the Company contributed $149,521, $242,155 and $375,359,
respectively, to the plan.
9. Commitments and Contingencies
Noncompete Agreement--In connection with the repurchase of common stock
held by a member of the board of directors, the Company entered into a
noncompete agreement, barring such member of the board of directors from
entering into competition with the Company. In exchange for this commitment,
the Company agreed to pay the member of the board of directors $1,184 per month
through March 1996. In April 1996, the Company made a one-time payment to this
member of the board of directors of $22,284, with ongoing monthly payments
subsequent to that date of $835 through September 2002. Since continued payment
is conditional upon the member of the board of directors' compliance with the
agreement, payments made have been charged to expense on a current basis.
Expense recorded related to this agreement amounted to $10,018 for each year
ended 1997, 1998 and 1999.
Operating Leases--The Company leases its office facilities under
noncancelable operating leases expiring through 2004. Total rent expense was
$291,003, $483,028 and $731,587 for the years ended December 31, 1997, 1998 and
1999, respectively.
Future minimum payments under noncancelable operating leases for the
years ending December 31 are as follows:
<TABLE>
<S> <C>
2000................................................................ $385,102
2001................................................................ 300,592
2002................................................................ 199,397
2003................................................................ 100,537
2004................................................................ 82,397
</TABLE>
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Intrinsix Corp.:
We have audited the accompanying statement of revenues and direct
expenses of the Design Division of Telexis Corporation for the year ended
December 31, 1999 prepared pursuant to the sale of this division to Intrinsix
Corp. under the Purchase Agreement described in Note 2. This statement is the
responsibility of Telexis Corporation's management. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the statement of revenues and direct
expenses of the Design Division of Telexis Corporation is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of revenues and direct expenses.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the statement of revenues and direct expenses.
The accompanying statement of revenues and direct expenses of the Design
Division of Telexis Corporation was prepared solely to provide information
about the revenues and direct expenses of the Design Division of Telexis
Corporation and is not intended to be a complete presentation of the financial
position and results of operations of the Design Division of Telexis
Corporation in accordance with generally accepted accounting principles.
In our opinion, the accompanying statement presents fairly, in all
material respects, the revenues and direct expenses of the Design Division of
Telexis Corporation for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Deloitte & Touche LLP
Ottawa, Canada
March 29, 2000
F-15
<PAGE>
THE DESIGN DIVISION OF TELEXIS CORPORATION
Statement of Revenues and Direct Expenses
Year Ended December 31, 1999
(in thousands of Canadian dollars)
<TABLE>
<S> <C>
Revenues........................................................... $2,889
Cost of revenues................................................... 2,032
------
Gross profit....................................................... 857
Direct expenses.................................................... 436
------
Excess of revenues over direct expenses............................ $ 421
======
</TABLE>
F-16
<PAGE>
THE DESIGN DIVISION OF TELEXIS CORPORATION
NOTES TO THE STATEMENT OF REVENUES AND DIRECT EXPENSES
Year Ended December 31, 1999
(in thousands of Canadian dollars)
1. SALE OF THE DESIGN DIVISION
On December 31, 1999, the Telexis Corporation (the "Company") sold its
Design Division to Intrinsix Corp. The Company received gross proceeds of
$1,750 and recorded a gain of $1,585 on the transaction. The Company is
entitled to additional compensation of up to $250 subject to the Design
Division achieving certain performance targets for the six-month period January
1, 2000 to June 30, 2000.
2. BASIS OF PRESENTATION
The accompanying statements of revenues and direct expenses of the Design
Division of Telexis Corporation were prepared for the purpose of complying with
the Purchase Agreement and are not intended to be a complete presentation of
the results of operations of the Design Division of Telexis Corporation. Prior
to the purchase, the Design Division was an integral part of Telexis
Corporation's operations and did not constitute a legal or reporting entity for
which financial statements were prepared.
Revenues represent charges for engineering services, complex multimedia
integration projects including custom hardware, software and firmware
development applications as well as turnkey project management. Cost of sales
includes engineering salaries and material purchases related to the above
mentioned projects.
Direct expenses include training, sales and administrative compensation,
consultants, travel-related expenses, telephone, software and supplies. Since a
portion of the depreciation and corporate overhead expenses are accumulated and
accounted for in Telexis Corporation's accounting system without regard to the
division incurring these expenses, these expenses have been allocated to the
Design Division based upon the percentage of workforce in the Design Division
to the total Telexis Corporation workforce. Allocated expenses amounted to $500
for the year ended December 31, 1999. These costs have not been included in the
accompanying financial statement of revenues and direct expenses.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Revenue from service and installation are recognized when the services
are performed, or for fixed-price contracts on percentage-of-completion basis.
Percentage of completion is estimated using contract costs incurred to date in
relation to estimated total contract costs.
Foreign currency translation
Foreign currency revenues and direct expenses are translated at rates in
effect during the year. Gains and losses from translation are included in the
statement of operations in the year in which they occur.
Use of accounting estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of revenues and expenses during the reporting period presented. Actual
results could differ from those estimates.
F-17
<PAGE>
THE DESIGN DIVISION OF TELEXIS CORPORATION
NOTES TO THE STATEMENT OF REVENUES AND DIRECT EXPENSES--(Continued)
Year Ended December 31, 1999
(in thousands of Canadian dollars)
4. RELATED PARTY TRANSACTIONS
During 1999, the Design Division of Telexis Corporation had sales of $381
to Newbridge Networks Corporation, a shareholder of the Company.
5. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar problems
may arise in some systems which use certain dates in 1999 to represent
something other than a date. Although the change in date has occurred, it is
not possible to conclude that all aspects of the Year 2000 Issue that may
affect the Company, including those related to customers, suppliers, or other
third parties, have been fully resolved.
F-18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations gives effect to our acquisition of the assets of the Design Division
of Telexis Corporation as though the acquisition had occurred on January 1,
1999. An unaudited pro forma condensed consolidated balance sheet is not
provided, as we acquired the assets of the Design Division of Telexis
Corporation on December 29, 1999, and this transaction is already reflected, on
a preliminary basis, in our consolidated balance sheet.
The pro forma as adjusted condensed consolidated statement of operations
gives effect to our proposed stock offering and the use of proceeds thereof to
repay indebtedness incurred to fund the acquisition of the assets of the Design
Division of Telexis Corporation in the amount of $1.2 million.
This unaudited pro forma condensed consolidated statement of operations,
including the notes to the unaudited pro forma condensed consolidated statement
of operations, is qualified in its entirety by reference to, and should be read
in conjunction with, our consolidated financial statements and the notes
thereto included elsewhere in this prospectus.
The following unaudited pro forma condensed consolidated statement of
operations is presented for illustrative purposes only and is not necessarily
indicative of the actual results of operations that would have been realized
had we acquired the assets of the Design Division of Telexis Corporation on
January 1, 1999. In addition, as discussed in the notes to the unaudited pro
forma condensed consolidated statement of operations, the purchase price
allocation is preliminary and could change upon completion of appraisal
activities.
P-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(1)
(dollars in thousands, except per share data)
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Historical Design Design Pro As
Intrinsix Division of Division of Forma Pro Adjusted Pro Forma
Corp. Telexis Corp. Telexis Corp. Entries Forma Entries As Adjusted
-------------- ------------------ ----------------- ------- ------- -------- -----------
(U.S. Dollars) (Canadian Dollars) (U.S. Dollars)(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $30,657 $2,889 $1,997 $ -- $32,654 $ -- $32,654
Cost of revenues........ 18,501 2,032 1,405 -- 19,906 -- 19,906
------- ------ ------ ----- ------- ---- -------
Gross profit........... 12,156 857 592 -- 12,748 -- 12,748
------- ------ ------ ----- ------- ---- -------
Operating expenses:
Research and
development
expenses............. 979 -- -- -- 979 -- 979
Selling, general and
administrative
expenses............. 9,564 436 301 137(3) 10,002 -- 10,002
------- ------ ------ ----- ------- ---- -------
Total operating
expenses............ 10,543 436 301 137 10,981 -- 10,981
------- ------ ------ ----- ------- ---- -------
Operating income
(loss)................ 1,613 421 291 (137) 1,767 -- 1,767
Total other income
(expense)............. (16) -- -- (108)(4) (124) 122(4) (2)
------- ------ ------ ----- ------- ---- -------
Income (loss) before
income tax provision.. 1,597 421 291 (245) 1,643 122 1,765
Income tax provision.... 669 -- -- 18(5) 687 49(5) 736
------- ------ ------ ----- ------- ---- -------
Net income (loss)...... $ 928 $ 421 $ 291 $(263) $ 956 $ 73 $ 1,029
======= ====== ====== ===== ======= ==== =======
Basic earnings per
share................. $ 0.09 $ 0.10 $
======= ======= =======
Diluted earnings per
share................. $ 0.08 $ 0.08 $
======= ======= =======
Shares for basic
computation........... 9,925 9,925
======= ======= =======
Shares for diluted
computation........... 12,365 12,365
======= ======= =======
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
P-2
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
1. On December 29, 1999, we acquired the operating assets of the Design
Division of Telexis Corporation, a Canadian company, for consideration of
approximately US$1.4 million. We accounted for this acquisition as a
purchase and the purchase price has been preliminarily allocated to the
assets acquired based upon their estimated fair values. Upon completion of
appraisal activities, which are currently being undertaken, the purchase
price will be reallocated to the assets acquired based upon the estimated
fair value. Goodwill generated by the transaction is expected to be
amortized to expense using the straight-line method over 10 years, its
estimated useful life.
2. Telexis Corporation operates in Canada and keeps its books and records in
Canadian dollars. For purposes of this unaudited pro forma condensed
consolidated statement of income, we translated the results of operations
of the Design Division of Telexis Corporation using the average 1999
exchange rate of 0.693 U.S. dollar per Canadian dollar.
3. To record amortization expense related to the intangible assets acquired
through the acquisition (preliminarily goodwill) based on their estimated
useful lives of 10 years. As discussed in Note 1, the purchase price
allocation is preliminary and could change upon completion of final
appraisals. As a result, the amount of amortization cost incurred could
change.
4. To record on a pro forma basis interest expense incurred related to
borrowings used to fund the acquisition of the assets of the Design
Division of Telexis Corporation ($1.2 million) at the rate carried by the
debt at December 31, 1999 (9.0%). To record on a pro forma as adjusted
basis the reduction in interest expense from use of a portion of the
proceeds from this offering to repay the indebtedness incurred to fund the
acquisition of the Design Division of Telexis Corporation and the note
payable in the amount of $174,901 bearing interest at 8.0%.
5. To record the estimated tax effect of the amortization of the intangible
assets acquired and incremental interest expense (savings) at the estimated
effective tax rate of 40.0%.
P-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $12,144
NASD filing fee..................................................... 5,100
Nasdaq National Market listing fee.................................. *
Blue Sky fees and expenses.......................................... *
Transfer Agent and Registrar fees................................... *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
Director and Officer Liability Insurance............................ *
Printing and mailing expenses....................................... *
Miscellaneous....................................................... *
-------
Total.............................................................. $
=======
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Article VI of the Registrant's Amended and Restated Articles of
Organization provide that no director of the Registrant shall be personally
liable for any monetary damages for any breach of fiduciary duty as a director,
except to the extent that the Massachusetts General Laws prohibit the
elimination or limitation of liability of directors for breach of fiduciary
duty.
Article VI of the Registrant's Amended and Restated Articles of
Organization provide that the Registrant shall indemnify each person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was, or has agreed to
become, a director or officer of the corporation, or is or was serving, or has
agreed to serve, at the request of the corporation, as a director or officer
of, or in a similar capacity with, another organization or in any capacity with
respect to any employee benefit plan of the corporation, each an Indemnitee, or
by reason of any action alleged to have been taken or omitted in such capacity,
against all expenses including attorneys' fees, judgments and fines incurred by
him or on his behalf in connection with such action, suit or proceeding and any
appeal therefrom, unless the Indemnitee shall be finally adjudicated in such
action, suit or proceeding not to have acted in good faith in the reasonable
belief that his action was in the best interests of the Registrant or, to the
extent such matter relates to service with respect to an employee benefit plan,
in the best interests of the participants or beneficiaries of such employee
benefit plan. Except as otherwise set forth in the Amended and Restated
Articles of Organization, the Registrant shall not indemnify an Indemnitee
seeking indemnification in connection with a proceeding (or part thereof)
initiated by the Indemnitee unless the initiation thereof was approved by the
board of directors of the Registrant. The Registrant shall not indemnify an
Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of
insurance, and in the event the Registrant makes any indemnification payments
to an Indemnitee and the Indemnitee is subsequently reimbursed from the
proceeds of insurance, such Indemnitee shall promptly refund such
indemnification payments to the corporation to the extent of such insurance
reimbursement. The right to indemnification shall include the right to be paid
by the Registrant for amounts
II-1
<PAGE>
paid in settlement of any such action, suit or proceeding and any appeal
therefrom, and all expenses, including attorneys' fees, incurred in connection
with such settlement, pursuant to a consent decree or otherwise, unless the
Indemnitee did not act in good faith in the reasonable belief that his action
was in the best interests of the Registrant or, to the extent such matter
relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director
or officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article VI of the Registrant's Amended and Restated Articles of
Organization further provide that the indemnification provided therein is not
exclusive, and provides that in the event that the Massachusetts General Laws
are amended to expand the indemnification permitted to directors or officers,
the Registrant must indemnify those persons to the fullest extent permitted by
such law as so amended.
Section 67 of Chapter 156B of the Massachusetts General Laws provides
that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of
the corporation in related capacities, including with respect to any employee
benefit plan, against expenses incurred in defending a civil or criminal action
or proceeding in advance of the final disposition of such action or proceeding,
provided that the indemnified person:
. undertakes to repay such payment to the corporation if a court
determines that he is not entitled to indemnification; and
. acted in good faith in the reasonable belief that his action was in
the best interest of the corporation or the participants or
beneficiaries of the relevant employee benefit plan, as applicable.
The corporation may provide for indemnification as follows:
. in its articles of organization;
. in its bylaws;
. by a vote adopted by the holders of a majority of the shares of
capital stock entitled to vote on the election of directors; or
. in the case of indemnified persons who are not directors of the
corporation, by authorization of its directors.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1.1 hereto.
Item 15. Recent Sales of Unregistered Securities
Set forth in chronological order is information regarding shares of
common stock issued and options granted by the Registrant since April 1, 1997.
Further included is the consideration, if any, received by the Registrant for
such shares and options and information relating to the section of the
Securities Act, or rule of the Securities and Exchange Commission under which
exemption from registration was claimed.
II-2
<PAGE>
(a) Issuances of Capital Stock.
In May 1998, the Registrant issued 150,000 shares of common stock as part
of the purchase price for the assets of Prism Acoustics, Inc.
In June 1999, the Registrant issued an aggregate of 750,000 shares of
common stock as part of an Agreement and Plan of Merger dated June 11, 1999 by
and among the Registrant, Intrinsix Merger Corp. and Seva Technologies, Inc. Of
these shares, 74,918 shares were placed in reserve with State Street Bank and
Trust Company pursuant to an Escrow Agreement dated June 11, 1999 by and among
the Registrant, Yatin Trivedi, Larry F. Saunders and State Street Bank and
Trust Company, as Escrow Agent, to satisfy claims for indemnification by the
Registrant. The shares of common stock remaining in escrow will be released to
Mr. Trivedi and Mr. Saunders on the earlier of the release of the Independent
Auditors' Report on our 1999 consolidated financial statements or June 11, 2000
pursuant to the terms of the Escrow Agreement.
(b) Certain Grants and Exercises of Stock Options.
As of the date hereof, options to purchase 152,700 shares of common stock
had been exercised for a consideration of $55,129 under the Registrant's stock
option plans and options to purchase 3,683,489 shares of common stock were
outstanding under the Registrant's stock option plans. No options to purchase
shares of common stock are outstanding under any of the following plans:
. 2000 Outside Director Stock Option Plan;
. 2000 Stock Incentive Plan; or
. 2000 Employee Stock Purchase Plan.
The securities issued in the foregoing transactions were either (i)
offered and sold in reliance upon exemptions from Securities Act registration
set forth in Sections 3(b) and 4(2) of the Securities Act, or any regulations
promulgated thereunder, relating to sales by an issuer not involving any public
offering, or (ii) in the case of certain options to purchase shares of common
stock and shares of common stock issued upon the exercise of such options, such
offers and sales were made in reliance upon an exemption from registration
under Rule 701 of the Securities Act. No underwriters were involved in the
foregoing sales of securities
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Articles of Organization of Intrinsix Corp., as amended, as currently
in effect
3.2* Form of Amended and Restated Articles of Organization of Intrinsix
Corp., to be filed with the Secretary of State of the Commonwealth of
Massachusetts and effective upon the effectiveness of the registration
statement
3.3 Bylaws of Intrinsix Corp., as amended, as currently in effect
3.4* Form of Amended and Restated Bylaws of Intrinsix Corp. to be effective
upon the effectiveness of the registration statement
4.1* Specimen Certificate for shares of common stock of Intrinsix Corp.
5.1* Opinion of Hale and Dorr LLP
10.1 Incentive Stock Option Plan (1997)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.2 2000 Stock Incentive Plan
10.3 2000 Outside Director Stock Option Plan
10.4 2000 Employee Stock Purchase Plan
10.5 Loan and Security Agreement dated January 13, 2000 between
Intrinsix Corp. and BankBoston, N.A.
10.6 Revolving Line of Credit Note dated January 13, 2000 payable to
BankBoston, N.A.
10.7 Term Note dated January 13, 2000 payable to BankBoston, N.A.
10.8 Subordination Agreement (Debts) dated January 13, 2000 between
Intrinsix Corp. and Gintaras Subatis.
10.9 Subordination Agreement (Liens) dated January 13, 2000 between
Intrinsix Corp. and Gintaras Subatis.
10.10 Asset Purchase Agreement by and among Intrinsix Corp., Prism
Acoustics, Inc. (d/b/a The VHDL Technology Group) and William D.
Billowitch dated May 18, 1998
10.11 Agreement and Plan of Merger among Intrinsix Corp., Intrinsix
Merger Corp. and Seva Technologies, Inc. dated June 11, 1999
10.12 Asset Purchase Agreement by and between Intrinsix Canada Co. and
Telexis Corp. dated December 29, 1999
10.13 Escrow Agreement dated June 30, 1999 by and among Intrinsix Corp.,
Yatin Trivedi, Larry F. Saunders and State Street Bank and Trust
Company
10.14 Bill of Sale dated May 18, 1998 by Prism Acoustics, Inc. (d/b/a
The VHDL Technology Group) and William D. Billowitch to Intrinsix
Corp.
10.15 Instrument of Assumption of Liabilities dated May 18, 1998 by
Intrinsix Canada Co. in favor of Prism Acoustics, Inc. (d/b/a The
VHDL Technology Group)
10.16 Trademark Assignment by Prism Acoustics, Inc. (d/b/a The VHDL
Technology Group) to Intrinsix Corp.
10.17 Bill of Sale dated December 29, 1999 by Telexis Corporation to
Intrinsix Canada Co.
10.18 Instrument of Assumption of Liabilities dated December 29, 1999 by
Intrinsix Canada Co. in favor of Telexis Corporation
10.19 License dated December 29, 1999 between Telexis Corporation and
Intrinsix Canada Co.
10.20 Agreement dated October 1, 1994 by and between Gintaras Subatis
and Intrinsix Corporation
10.21 Promissory Note dated October 1, 1994 of Intrinsix Corp. payable
to Gintaras Subatis
10.22 Security Agreement dated November 22, 1994 in favor of Gintaras
Subatis
10.23 Seva Technologies, Inc. 1997 Stock Plan
21.1 Subsidiaries of Intrinsix Corp.
23.1* Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP - Intrinsix Corp.
23.3 Consent of Deloitte & Touche LLP - Design Division of Telexis
Corporation
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
II-4
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because
the required information is given in the Registrant's Financial Statements or
Notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Articles of Organization of the Registrant and the laws of the Commonwealth of
Massachusetts, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities, other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Westboro,
Massachusetts, on this 3rd day of April, 2000.
Intrinsix Corp.
/s/ James A. Gobes
By:__________________________________
James A. Gobes, Jr.
Chief Executive Officer
II-6
<PAGE>
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Intrinsix Corp., hereby
severally constitute and appoint James A. Gobes, Jr., and Brian C. Meeks, and
each of them singly, our true and lawful attorneys with full power to them, and
each of them singly, to sign for us and in our names in the capacities
indicated below, the Registration Statement on Form S-1 filed herewith and any
and all pre-effective and post-effective amendments to said Registration
Statement, and any subsequent Registration Statement for the same offering
which may be filed under Rule 462(b), and generally to do all such things in
our names and on our behalf in our capacities as officers and directors to
enable Intrinsix Corp. to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto or to any subsequent Registration Statement
for the same offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James A. Gobes Chief Executive Officer, April 3, 2000
______________________________________ Chairman of the Board of
James A. Gobes, Jr. Directors and Director
(principal executive
officer)
/s/ Brian C. Meeks Chief Financial Officer, April 3, 2000
______________________________________ Treasurer, Clerk and
Brian C. Meeks Director (principal
accounting officer)
/s/ Mark A. Beal Chief Technical Officer April 3, 2000
______________________________________ and Director
Mark A. Beal
/s/ Romas P. Rudis Director, Design Center April 3, 2000
______________________________________ Operations and Director
Romas P. Rudis
/s/ Wallace A. Cataldo Director April 3, 2000
______________________________________
Wallace A. Cataldo
/s/ H. Kent Bowen Director April 3, 2000
______________________________________
H. Kent Bowen
/s/ Gintaras R. Subatis Director April 3, 2000
______________________________________
Gintaras R. Subatis
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Articles of Organization of Intrinsix Corp., as amended, as currently
in effect
3.2* Form of Amended and Restated Articles of Organization of Intrinsix
Corp., to be filed with the Secretary of State of the Commonwealth of
Massachusetts and effective upon the effectiveness of the registration
statement
3.3 Bylaws of Intrinsix Corp., as amended, as currently in effect
3.4* Form of Amended and Restated Bylaws of Intrinsix Corp. to be effective
upon the effectiveness of the registration statement
4.1* Specimen Certificate for shares of common stock of Intrinsix Corp.
5.1* Opinion of Hale and Dorr LLP
10.1 Incentive Stock Option Plan (1997)
10.2 2000 Stock Incentive Plan
10.3 2000 Outside Director Stock Option Plan
10.4 2000 Employee Stock Purchase Plan
10.5 Loan and Security Agreement dated January 13, 2000 between Intrinsix
Corp. and BankBoston, N.A.
10.6 Revolving Line of Credit Note dated January 13, 2000 payable to
BankBoston, N.A.
10.7 Term Note dated January 13, 2000 payable to BankBoston, N.A.
10.8 Subordination Agreement (Debts) dated January 13, 2000 between
Intrinsix Corp. and Gintaras Subatis.
10.9 Subordination Agreement (Liens) dated January 13, 2000 between
Intrinsix Corp. and Gintaras Subatis.
10.10 Asset Purchase Agreement by and among Intrinsix Corp., Prism
Acoustics, Inc. (d/b/a The VHDL Technology Group) and William D.
Billowitch dated May 18, 1998
10.11 Agreement and Plan of Merger among Intrinsix Corp., Intrinsix Merger
Corp. and Seva Technologies, Inc. dated June 11, 1999
10.12 Asset Purchase Agreement by and between Intrinsix Canada Co. and
Telexis Corp. dated December 29, 1999
10.13 Escrow Agreement dated June 30, 1999 by and among Intrinsix Corp.,
Yatin Trivedi, Larry F. Saunders and State Street Bank and Trust
Company
10.14 Bill of Sale dated May 18, 1998 by Prism Acoustics, Inc. (d/b/a The
VHDL Technology Group) and William D. Billowitch to Intrinsix Corp.
10.15 Instrument of Assumption of Liabilities dated May 18, 1998 by
Intrinsix Canada Co. in favor of Prism Acoustics, Inc. (d/b/a The VHDL
Technology Group)
10.16 Trademark Assignment by Prism Acoustics, Inc. (d/b/a The VHDL
Technology Group) to Intrinsix Corp.
10.17 Bill of Sale dated December 29, 1999 by Telexis Corporation to
Intrinsix Canada Co.
10.18 Instrument of Assumption of Liabilities dated December 29, 1999 by
Intrinsix Canada Co. in favor of Telexis Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.19 License dated December 29, 1999 between Telexis Corporation and
Intrinsix Canada Co.
10.20 Agreement dated October 1, 1994 by and between Gintaras Subatis and
Intrinsix Corporation
10.21 Promissory Note dated October 1, 1994 of Intrinsix Corp. payable to
Gintaras Subatis
10.22 Security Agreement dated November 22, 1994 in favor of Gintaras
Subatis
10.23 Seva Technologies, Inc. 1997 Stock Plan
21.1 Subsidiaries of Intrinsix Corp.
23.1* Consent of Hale and Dorr LLP (contained in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP - Intrinsix Corp.
23.3 Consent of Deloitte & Touche LLP - Design Division of Telexis
Corporation
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 3.1
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
Incorporators
NAME POST OFFICE ADDRESS
Include given name in full in case of natural persons; in case of a corporation,
give state of incorporation.
ROMAS P. RUDIS
210 Old Westboro Road
North Grafton, MA 01536
The above-named incorporator(s) do hereby associate (themselves) with the
intention of forming a corporation under the provisions of General Laws, Chapter
156B and hereby state(s):
1. The name by which the corporation shall be known is:
NEBULA SYSTEMS CORP.
2. The purpose for which the corporation is formed is as follows:
To conduct a business of performing computer engineering and services for
the scientific, technical and engineering professions; to develop, devise,
design and manufacture all forms of computer systems and equipment, including
but not limited to hardware, software, silicon chips and microchips, and to sell
and distribute at wholesale, at retail or on commission said products for import
or export, and to contract to lease said systems or equipment; to provide
technical sales support for corporations, partnerships, associations,
individuals and other legal entities; to act as a consultant or professional
advisor and to provide management services for corporations, partnerships,
associations, individuals and other legal entities.
To acquire on said computer systems and equipment, patents, copyrights and
other interests or forms of protection of interests or rights, including the
power to purchase, lease, license or receive grants or gifts of interests from
the owners of an existing patent or other rights, and to sell, assign, lease or
license such rights or interests thereunder to others.
(SEE CONTINUATION SHEET 2A)
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one article may be continued on a single sheet so long as each article
requiring each such addition is clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock within the corporation is authorized as follows:
- --------------------------------------------------------------------------------
WITHOUT PAR
CLASS OF STOCK VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES SHARES PAR VALUE AMOUNT
- --------------------------------------------------------------------------------
Preferred none none $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common 15,000 none
- --------------------------------------------------------------------------------
4. *If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
none
5. *The restrictions, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are as follows:
Any stockholders, including the heirs, assigns, executors or
administrators of a decreased stockholder, desiring to sell or to transfer such
stock owned by him or them, shall first offer it to the corporation through the
Board of Directors of his desire to sell or transfer by notice in writing, which
notice shall contain the price at which he is willing to sell or transfer and
the name of one arbitrator. The Directors shall within thirty (30) days
thereafter either accept the offer or by notice to him in writing shall name a
second arbitrator, and these two shall name a third. It shall then be the duty
of the arbitrators to ascertain the value of the stock, and if any arbitrator
shall neglect or refuse to appear at any meeting appointed by the arbitrators, a
majority may act in the absence of such arbitrator. After the acceptance of the
offer, or the report of the arbitrators as to the value of the stock, the
Directors shall have thirty (30) days within which to purchase the same at such
valuation, but if at the expiration of thirty (30) days the corporation shall
not have exercised the
(SEE CONTINUATION SHEET 5A)
6. *Other lawful provisions, if any, for the conduct and regulation of
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or its
directors or stockholders, or of any class of stockholders:
Any corporate meeting may be held within or without the Commonwealth of
Massachusetts. The corporation may become a partner in any business enterprise
in which the corporation has the power to conduct itself.
*If there are no provisions state "None".
<PAGE>
- ---------------------
Articles of Organization
Continuation Sheet 2A
To purchase, take or lease, or exchange, hire or otherwise acquire, any real and
personal property, or any rights or privileges therein, which this corporation
may think necessary or convenient for the purposes of securing debts due the
corporation, and to sell and dispose of and mortgage the same at will, and to
make any and all necessary instruments of conveyances, therefor.
To acquire, by purchase, exchange, or otherwise, all or any part of or any
interest in, the properties, assets, business and goodwill of any one or more
persons, firms, associations, or corporations heretofore or hereafter engaged in
any business for which a corporation may now or hereafter be organized under the
laws of this state; to pay for the same in cash, property, or its own or other
securities; to hold, operate, reorganize, liquidate, sell, or in any manner
dispose of the whole or any part thereof; and in connection therewith, to assume
or guarantee performance of any liabilities, obligations, or contracts of such
persons, firms, associations, or corporations, and to conduct the whole or any
part of any business thus acquired.
To employ, hire, and appoint corporations, firms, and individuals in any and all
parts of the world to act as agents for this corporation in such capacity and on
such conditions as may be determined from time to time by the Board of
Directors.
To act for itself or others in the development, promotion, exploitation, and
marketing of new devices and ideas with respect to any merchantable product and
for such purpose to engage in any advertising, circularization, and all other
lawful means of public education adopted to that end.
To have one or more offices, conduct and carry on its business and operations,
and acquire (by purchase, exchange, lease, hire or otherwise), own, hold,
develop, operate, lease, sell, assign, transfer, exchange, mortgage, create
security interests in, pledge, or otherwise, dispose of, or turn to account, or
convey real and personal property of every kind and nature, and rights and
privileges, and otherwise to promote its objects within and without this state,
in other states, the District of Columbia, the territories, and dependencies of
the United States, and in foreign countries, without restriction as to place or
amount, but subject to the laws of such state, district, territory, dependency,
or country.
To borrow or raise money without limit as to amount; to sell, create security
interests in, pledge, and otherwise dispose of and realize upon book accounts
and other choses in action; to make, draw, accept, endorse, execute, and issue
bonds, debentures,
<PAGE>
- ---------------------
Articles of Organization
Continuation Sheet 2B
notes, or other obligations of any nature or in any manner for money so borrowed
or in payment for property purchased or for any other of the objects or purposes
of this corporation, and to secure the principal thereof and the interest
thereon by mortgage upon, or creation of security interests in, or pledge of, or
conveyance or assignment in trust of, the whole or any part of the property,
real or personal, of this corporation, wherever situated and whether at the time
owned or thereafter acquired; and, in such manner and upon such terms as the
Board of Directors may from time to time determine, to sell, exchange, pledge,
offer for discount, or otherwise dispose of any and all such bonds, debentures,
notes, or other obligations.
To lend money to other persons, partnerships, associations, and corporations,
secured by mortgage or other lien on real estate, or pledge or security interest
in personal property or without security, but only to the extent permitted a
business corporation under the business corporation law of this state.
Insofar as may be permitted by law to enter into, make, perform and carry out
contracts of any kind with, and to act as agent or accommodation maker, for any
person, firm, association or corporation, whether private, public, quasi public
or municipal, or body politic, whether foreign or domestic, and with and for any
domestic or foreign state or government or territory or colony thereof. To
conduct its business in all branches, so far as permitted by law in the
Commonwealth of Massachusetts, and in any other Commonwealth or State in or of
the United States; and in any foreign country, and to maintain offices and
agencies in any part of the world, either within or without the Commonwealth of
Massachusetts, and to purchase, hold, mortgage, convey, property, in any such
place or places.
In furtherance and not in limitation of these purposes and powers to do any and
all things and exercise any and all powers necessary, convenient or advisable to
accomplish one or more of the purposes of the corporation, or which shall at any
time appear to be for the benefit of the corporation in connection therewith,
which may now or hereafter be lawful for the corporation to do or exercise under
and in pursuant of the laws of the Commonwealth of Massachusetts.
- ---------------------
Articles of Organization
Continuation Sheet 5A
right so to purchase, the owner of the stock shall be at liberty to dispose of
the same in any manner he may see fit. No shares of stock shall be sold or
transferred on the books of the corporation until these provisions have been
complied with, but the Board of Directors may in particular instance waive the
requirement. No transfer of stock shall affect the rights of the corporation,
except by transfer records on the books of the corporation in person or by
attorney and upon surrender of certificate.
<PAGE>
7. By-laws of the corporation have been duly adopted and the initial
directors, president, treasurer and clerk, whose names are set out below, have
been duly elected.
8. The effective date of organization of the corporation shall be the date
of filing with the Secretary of the Commonwealth or if later date is desired,
specify date (not more than 30 days after the date of filing.)
9. The following information shall not for any purpose be treated as a
permanent part of the Articles of Organization of the corporation.
a. The post office address of the initial principal office of the
corporation of Massachusetts is:
210 Old Westboro Road, North Grafton MA 01536
b. The name, residence, and post office address of each of the
initial directors and following officers of the corporation
are as follows:
POST OFFICE
NAME RESIDENCE ADDRESS
President: Romas P. Rudis 210 Old Westboro Road Same
North Grafton, MA 01536
Treasurer: Gintaras Subatis 59 Dayton Street Same
Quincy, MA 02169
Clerk: Gintaras Subatis 59 Dayton Street Same
Quincy, MA 02169
Directors: Romas P. Rudis 210 Old Westboro Road Same
North Grafton, MA 01536
Gintaras Subatis 59 Dayton Street Same
Quincy, MA 02169
c. The date initially adopted on which the corporation's fiscal
year ends is:
December 31
d. The date initially fixed in the by-laws for the annual meeting
of stockholders of the corporation is:
May 31
<PAGE>
e. The name and business address of the resident agent, if any,
of the corporation is:
IN WITNESS WHEREOF and under the penalties of perjury the INCORPORATOR(S)
sign(s) these Articles of Organization this 13 day of Nov. 1985.
/s/ Romas P. Rudis
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The signature of each incorporator which is of a natural person must be an
individual who shall show the capacity in which he acts and by signing shall
represent under the penalties of perjury that he is duly authorized on its
behalf to sign these Articles of Organization.
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-2891898
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
---------------
We, ROMAS P. RUDIS , President and
MARIUS ZIAUGRA , Clerk of
NEBULA SYSTEMS CORP.
(Name of Corporation)
located at 33 Lyman Street, Westboro, MA 01581
do hereby certify that the following amendment to the articles of organization
of the corporation was duly adopted at a meeting held on August 15, 1988, by
vote of 8 to 0
10, 960 shares of common with no par value out of 10,960 shares outstanding,
____________ shares of _____________ out of ____________ shares outstanding, and
(Class of Stock)
____________ shares of _____________ out of ____________ shares outstanding.
(Class of Stock)
being at least a majority of each class outstanding and entitled to vote
thereon:(1)
CROSS OUT
INAPPLICABLE
CLAUSE
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2x 11 sheets of paper
leaving a left hand margin of at least 1 inch for binding. Additions to more
than one Amendment may be continued on a single sheet so long as each Amendment
requiring each such addition is clearly indicated.
- --------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
<PAGE>
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:
The total presently authorized is:
-----------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR VALUE
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES
-----------------------------------------------------------------
COMMON 15,000 none
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
PREFERRED none
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
CHANGE the total to:
-----------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR VALUE
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARE
-----------------------------------------------------------------
COMMON 200,000 none
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
PREFERRED none
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
<PAGE>
TO CHANGE THE NAME OF THE CORPORATION TO NEBULA CORPORATION
------------------
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 15th day of August, in the year 1988
/s/ Romas P. Rudis President
- ---------------------------------------------------------------
/s/ Marius Ziaugra Clerk
- ---------------------------------------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and,
the filing fee in the amount of $1,925.00 having been paid,
said articles are deemed to have been filed with me this 25th
day of August, 1988.
/s/ Michael J. Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
NEBULA SYSTEMS CORP.
33 Lyman Street
Westboro, MA 01581
Telephone ___________________
<PAGE>
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT FEDERAL
General Laws, Chapter 156B, Section 72 IDENTIFICATION
NO. 021-04-2891898
We ROMAS RUDIS, PRESIDENT , President/Vice President, and
MARIUS ZIAUGRA, CLERK , Clerk/Assistant Clerk of
NEBULA CORPORATION
- --------------------------------------------------------------------------------
(EXACT Name of Corporation)
located at: 33 Lyman Street, Westboro, MA 01581
---------------------------------------------------------------------
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles
NUMBERED: 1
-----------------
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on April 22,
1993, by vote of:
138,848 shares of Common out of 138,848 shares outstanding,
- --------- ---------------- -------
type, class & series, (if any)
shares of out of shares outstanding, and
- --------- ---------------- -------
type, class & series, (if any)
shares of out of shares outstanding.
- --------- ---------------- -------
type, class & series, (if any)
CROSS OUT being at least a majority of each type, class or series outstanding
INAPPLI- and entitled to vote thereon:(1)
CABLE thereon and of each type, class or series of stock whose rights are
CLAUSE: adversely affected thereby:(2)
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one Amendment may be continued on a single sheet so long as each
Amendment requiring each such addition is clearly indicated.
- ----------
2 For amendments adopted pursuant to Chapter 156B, Section 71.
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------- ---------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
COMMON:...... ................ COMMON:...... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
PREFERRED:... ................ PREFERRED:... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
CHANGE the total to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------- ---------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
COMMON:...... ................ COMMON:...... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
PREFERRED:... ................ PREFERRED:... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
<PAGE>
[Intrinsix Corp. Letterhead]
September 15, 1993
The Commonwealth of Massachusetts
Office of the Secretary of State
One Ashburton Place
Boston, MA 02108
To whom it may concern:
This is to notify you that Intrinsix Corp. is being voluntarily dissolved as of
September 30, 1993. In conjunction with this, we authorize the use of the
Company's name to be used by its parent company, Nebula Corporation. Articles of
Amendment are being filed by Nebula Corporation to change its name to Intrinsix
Corp. effective October 1, 1993.
Very truly yours,
/s/ James Gobes /s/ Marius Ziaugra
- ------------------------------ --------------------------------
James Gobes Marius Ziaugra
President Clerk
<PAGE>
CHANGE THE NAME OF THE CORPORATION TO INTRINSIX CORP.
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date.
EFFECTIVE DATE: September 30, 1993
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 15th day of September, in the year 1993.
/s/ Romas P. Rudis , President/Vice President
- -----------------------------------------------------
/s/ Marius Ziaugra , Clerk/Assistant Clerk
- -----------------------------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
========================================
I hereby approve the within articles of
amendment and, the filing fee in the amount of $100
having been paid, said articles are deemed to have
been filed with me this 24th day of September 1993.
Effective date
September 30th 1993
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT
TO: Rich Tosti, CPA
161 Worcester Rd.
Framingham, MA 01701
Telephone (508) 878-6768
<PAGE>
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT FEDERAL
General Laws, Chapter 156B, Section 72 IDENTIFICATION
NO. 04-2891898
We, James A. Gobes , President and
Brian C. Meeks , Clerk of
INTRINSIX CORP.
(EXACT Name of Corporation)
located at 33 Lyman Street, Westboro, MA
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles NUMBERED:
3 (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on March 26,
1997, by vote of:
114,159 shares of NPV Common out of 115,959 shares outstanding,
- ------- ------------------ -------
type, class & series, (if any)
shares of out of shares outstanding, and
- --------- ---------------- -------
type, class & series, (if any)
shares of out of shares outstanding.
- --------- ---------------- -------
type, class & series, (if any)
CROSS OUT being at least a majority of each type, class or series outstanding
INAPPLI- and entitled to vote thereon:(1)
CABLE
CLAUSE:
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2x 11 sheets of paper
leaving a left-hand margin of at least 1 inch for binding. Additions to more
than one Amendment may be continued on a single sheet so long as each Amendment
requiring each such addition is clearly indicated.
- ----------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
<PAGE>
TO CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------- ---------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
COMMON:...... 200,000 COMMON:...... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
PREFERRED:... ................ PREFERRED:... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
CHANGE the total to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------- ---------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
COMMON:...... 2,000,000 COMMON:...... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
- --------------------------------- ---------------------------------------------
PREFERRED:... ................ PREFERRED:... ................ ............
............. ................ ............. ................ ............
- --------------------------------- ---------------------------------------------
<PAGE>
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date. LATER
EFFECTIVE DATE:_______________________________________________
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 22nd day of April, in the year 1997.
/s/ James Gobes President
- -----------------------------------------------------------
/s/ Brian Meeks Clerk
- -----------------------------------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
========================================
I hereby approve the within articles of
amendment and, the filing fee in the amount of
$1,800.00 having been paid, said articles are deemed
to have been filed with me this 23rd day of April,
1997.
/s/ William Francis Galvin
William Francis Galvin
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES AMENDMENT TO BE SENT
TO: Peter L. Banis, Esq.
21 Custom House Street, Suite 920
Boston, MA 02110
Telephone (617) 204-9600
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-2891898
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, James A. Gobes.... , *President
and Brian C. Meeks.... , *Clerk
of Intrinsix Corp.
(Exact name of corporation)
located at: 33 Lyman Street, Westboro, Massachusetts 01581
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
3
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on October
30, 1998, by vote of:
1,169,149 shares of Common Stock of 1,217,832 shares outstanding,
- ---------- --------------------- -----------
(type, class & series, if any)
shares of of shares outstanding, and
- ---------- --------------------- -----------
(type, class & series, if any)
shares of of shares outstanding.
- ---------- --------------------- -----------
(type, class & series, if any)
1**being at least a majority of each type, class or series outstanding and
entitled to vote thereon:
*Delete the inapplicable words. **Delete the inapplicable clause.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper leaving a left hand margin of at least 1 inch for binding.
Additions to more than one article may be made on a single sheet so long as each
article requiring each such addition is clearly indicated.
- ----------
1 For amendments adopted pursuant to Chapter 156B, Section 70.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- ---------------------------------- --------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ---------------------------------- --------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---------------------------------- --------------------------------------------
Common: 2,000,000 Common:
- ---------------------------------- --------------------------------------------
- ---------------------------------- --------------------------------------------
Preferred: Preferred:
- ---------------------------------- --------------------------------------------
- ---------------------------------- --------------------------------------------
Change the total authorized to:
- ---------------------------------- --------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ---------------------------------- --------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---------------------------------- --------------------------------------------
Common: 12,000,000 Common:
- ---------------------------------- --------------------------------------------
- ---------------------------------- --------------------------------------------
Preferred: Preferred:
- ---------------------------------- --------------------------------------------
- ---------------------------------- --------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: __________________________
SIGNED UNDER THE PENALTIES OF PERJURY, this 30th day of October, 1998.
/s/ James Gobes , *President
- ------------------------------------------------------
James A. Gobes
/s/ Brian Meeks , *Clerk
- ------------------------------------------------------
Brian C. Meeks
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
===============================================
I hereby approve the within Articles of
Amendment and, the filing fee in the amount of
$10,000.00 having been paid, said articles are
deemed to have been filed with me this 2nd day of
November, 1998.
Effective date: _________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Christopher Umana, Esq.
Hale and Dorr LLP
60 State Street, Boston, MA 02109
Telephone: (617) 526-6000
<PAGE>
Exhibit 3.3
BYLAWS
OF
INTRINSIX CORP.
ARTICLE FIRST
DIRECTORS
Section 1. Number. The property, affairs and business of the corporation
shall be managed by a Board of Directors which shall consist of such number not
less than three (3), except that whenever there shall be only two (2)
stockholders, the number of directors shall be not less than two (2) and
whenever there shall be only one (1) stockholder or prior to the issuance of any
stock, there shall be at least one (1) director, and not more than nine (9)
directors, as the stockholders having voting power may at the annual, or a
special meeting in lieu of the annual, meeting of stockholders determine and
elect. If a vacancy or vacancies shall occur, for any reason, in the membership
of the Board, other than through removal by stockholder action, the remaining
directors or director, quorum requirements notwithstanding, may elect a
successor or successors.
Section 2. Increase or Decrease. The Board of Directors shall have the
power at any time when a stockholders' meeting is not in session to increase or
decrease their own number within the limits provided in Section 1 above. If the
number of directors be increased, the additional directors may be elected by a
majority of the directors at the time in office or, if not so elected prior to
the next following meeting of stockholders, by the stockholders. If the
directors shall vote to decrease their number, the decrease shall become
effective to the extent made
<PAGE>
possible by vacancies in the office of director or by resignations and no
director may be removed solely for the purpose of effecting such decrease.
Section 3. Removal. Directors may be removed from office with cause by the
Board of Directors or with or without cause by the stockholders at a meeting
called at least in part for the purpose of considering removal upon the
affirmative vote of a majority of the Board of Directors or the holders of a
majority in interest of the stock or class of stock entitled to vote upon the
election of the director or directors proposed to be removed. Removal may be
effected with cause only after reasonable notice to each director proposed to be
removed and the opportunity to be heard by the body proposing removal.
Section 4. Term of Office. The term of office of a director elected at the
annual meeting of the stockholders shall be one year, provided, however, that he
shall hold his office until his successor shall be elected and qualified. A
director elected by the stockholders at other than the annual meeting of
stockholders, or elected by the directors, shall hold office until the next
annual meeting of stockholders and the election and qualification of his
successor.
Section 5. Meetings. The Board of Directors shall meet at the principal
office of the corporation or at such other place within the United States as may
from time to time be fixed by resolution of the Board or as may be specified in
the notice of the meeting. Regular meetings of the Board of Directors shall be
held at such times as the Board may by resolution fix; special meetings may be
held at any time upon the call of the President or a Vice President or the
Clerk, or of the director if there is only one (1), or of any two (2) directors
if more than one (1), by written (including telegraphic) notice specifying the
purpose of the meeting served on or sent or mailed to each director not less
than two (2) days before the meeting.
-2-
<PAGE>
A meeting of the Board of Directors may be held without notice immediately
after the annual meeting of stockholders. Notice need not be given of any
regular meeting of the Board. Notice of a Meeting need not be given to a
director, if a written waiver of notice, executed by him before or after the
meeting is filed with the records of the meeting, nor to any director attending
a meeting without protesting the lack of notice prior to or at the commencement
of the meeting.
Section 6. Committees. The Board of Directors may, by the affirmative vote
of a majority of the Board, appoint committees which shall have and exercise
such powers as may be permitted by law and as shall be conferred or authorized
by the resolutions appointing them. A majority of any such committee may
determine its action and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power at any time to fill vacancies in, change the membership of, or discharge
any such committee.
Section 7. Management. The Board of Directors shall have the entire
charge, control and management of the corporation and its property and business
and may exercise all or any of its powers. Among other things the Board may (1)
appoint and at its discretion remove or suspend such subordinate officers,
agents and employees as it from time to time thinks fit, determine their duties,
and fix and, from time to time as it sees fit, change their salaries and
compensation; (2) appoint any officer, permanently or temporarily as it sees
fit, to have the powers and perform the duties of any other officer; (3) appoint
any persons to be agents of the corporation (with the power to subdelegate) upon
such terms as it sees fit; (4) appoint any person or persons to accept and hold
in trust for the corporation any property belonging to the corporation or in
which it is interested and cause such instruments to be executed, and do and
-3-
<PAGE>
cause to be done such things as it may deem requisite, in relation to any such
trust; (5) authorize the issuance of the shares of the corporation from time to
time in its discretion for such considerations as the Board shall determine and
as may be permitted by law; and (6) determine the amounts to be distributed as
dividends.
Section 8. Quorum and Voting. The presence of a majority of the members of
the Board of Directors acting at a meeting duly assembled, shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at a meeting at which a quorum exists shall be the act of the
Board of Directors. If, at any meeting of the Board of Directors, less than a
quorum shall be present, a majority of the directors present may adjourn the
meeting, without further notice, from time to time until a quorum shall have
been obtained.
Section 9. Class Voting. Whenever the Board of Directors shall consist of
directors elected by two or more classes of stockholders having voting rights, a
quorum at all meetings of directors, unless the Articles of Organization
otherwise provide, shall, Section 8 above notwithstanding, consist of a majority
of the directors then in office of each class, and the vote of a majority of the
directors present at a meeting at which a quorum is had shall be required to
approve any matter before the Board; provided, however, that with respect to the
filling of vacancies among the directors of any class whether arising from
death, resignation, removal, or an increase in the membership of the Board, such
vacancy shall be filled by the remaining director or directors of that class, a
majority of the votes cast by the directors of that class shall be sufficient to
elect, and, for the purpose of such election, the presence of a majority of the
directors of that class in office at the time of such election shall constitute
a quorum.
-4-
<PAGE>
Section 10. Chairman. The directors may elect from their number a Chairman
of the Board who shall preside at all meetings of the Board of Directors and may
have such additional powers and responsibilities, executive or otherwise, as may
from time to time be vested in him by resolution of the Board of Directors.
Section 11. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if prior to such action a written consent thereto is
signed by all members of the Board or of the committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the board or
the Committee.
ARTICLE SECOND
OFFICERS
Section 1. General. The Board of Directors, as soon as may be after its
election in each year, shall elect a President, and from time to time may
appoint one (1) or more Vice Presidents and such Assistant Clerks, Assistant
Treasurers and such other officers, including a Secretary to the Board of
Directors, agents and employees as it may deem proper. The President may but
need not be chosen from among the directors. The Treasurer and the Clerk shall
be elected annually by the stockholders at the Annual Meeting of the
Stockholders.
Section 2. Term of Office. The term of office of all officers shall be one
(1) year and until their respective successors are elected and qualify, but any
officer may at any time be removed from office, with or without cause, as
provided by law, by the affirmative vote of a majority of the members of the
Board of Directors then in office at a meeting called for the purpose. If
removal of any officer be proposed for cause, reasonable notice shall be
provided
-5-
<PAGE>
such officer and an opportunity to be heard by the Board. A vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors.
Section 3. President. The President when present shall preside at all
meetings of the stockholders and, if a director, unless a Chairman of the Board
has been appointed and is present, at all meetings of the Board of Directors. It
shall be the duty of the President, and he shall have the power to see to it,
that all orders and resolutions of the Board are carried into effect. The
President, as soon as reasonably possible after the close of each fiscal year,
shall submit to the Board a report of the operations of the corporation for such
year and a statement of its affairs, and shall from time to time report to the
Board all matters within his knowledge which the interests of the corporation
may require to be brought to its notice. The President shall perform such duties
and have such powers additional to the foregoing as the Board shall designate.
Section 4. Vice President. In the absence or disability of the President,
his powers and duties shall be performed by the Vice President, if only one, or,
if more than one, by the Vice President designated for the purpose by the Board.
Each Vice President shall have such other powers and perform such other duties
as the Board shall from time to time designate.
Section 5. Treasurer. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as shall be designated by the Board or in
the absence of such designation in such depositories as he shall from time to
time deem proper. He shall disburse the funds of the corporation as ordered by
the Board, taking proper vouchers for such disbursements. He shall promptly
render to the President and to the Board such statements of his transactions and
accounts as the President and Board
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respectively may from time to time require. If required by the Board he shall
give bond in such amount, with such security and in such form as the Board shall
determine. The Treasurer shall perform such duties and have such powers
additional to the foregoing as the Board may designate.
Section 6. Assistant Treasurer. In the absence or disability of the
Treasurer, his powers and duties shall be performed by the Assistant Treasurer,
if only one, or, if more than one, by the one designated for the purpose by the
Board. Each Assistant Treasurer shall have such other powers and perform such
other duties as the Board shall from time to time designate.
Section 7. Clerk. The Clerk shall, unless the corporation has designated a
Resident Agent in the manner provided by law, be a resident of the Commonwealth
of Massachusetts. It shall be his duty to record in books kept for the purpose
all votes and proceedings of the stockholders and, if there be no Secretary, of
the Board of Directors. Unless the Board of Directors shall appoint a transfer
agent and/or registrar or other officer or officers for the purpose, the Clerk
shall be charged with the duty of keeping, or causing to be kept, accurate
records of all stock outstanding, stock certificates issued, and stock
transfers; subject to such other or different rules as shall be adopted from
time to time by the Board, such records may be kept solely in the stock
certificate books. The Clerk shall perform such duties and have such powers
additional to the foregoing as the Board shall designate. The Assistant Clerk,
if one be elected or appointed shall perform the duties of the Clerk during the
Clerk's absence as well as such other duties as may be assigned to him by the
Board. In the absence of the Clerk or Assistant Clerk at any meeting of
stockholders or, if there be no Secretary, of the directors, a Clerk pro tempore
shall be chosen by the meeting to perform the duties of the Clerk thereat.
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Section 8. Secretary. The Secretary, if there be one, shall attend all
meetings of the Board of Directors and shall record the proceedings thereat in
books provided for the purpose.
Section 9. Resignation. Any officer and any director may resign at any
time by delivering his resignation to the corporation at its principal office or
to the President, Clerk or Secretary. Such resignation shall be effective at the
time or upon the happening of the condition, if any, specified therein or, if no
such time or condition shall be specified, upon its receipt.
Section 10. Voting of Corporation Securities. Unless otherwise ordered by
the Board of Directors, the President, or in the event of his inability to act,
the Vice President designated by the Board of Directors to act in the absence of
the President, shall have full power and authority on behalf of the corporation
to attend and to act and to vote at any meeting of security holders of
corporations in which the corporation may hold securities, and at such meetings
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities, which, as the owner thereof the corporation may
possess and exercise. The Board of Directors by resolution from time to time may
confer like powers upon any other person or persons.
ARTICLE THIRD
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each director or officer, present or former, of the corporation or of any
other corporation a majority of the stock of which is owned by the corporation,
shall be indemnified by the corporation against all costs and expenses
reasonably incurred by or imposed upon him in connection with or arising out of
any action, suit, or proceeding in which he may be involved by reason of his
being or having been such director or officer, such expenses to include the cost
of reasonable settlements (other than amounts paid to the corporation itself)
made with a view to
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curtailing costs of litigation. The corporation shall not, however, indemnify
any director or officer with respect to matters as to which he shall be finally
adjudged in any such action, suit, or proceeding to have been derelict in the
performance of his duty as such director or officer, nor in respect of any
matter on which any settlement or compromise is effected, if the total expense,
including the cost of such settlement, shall substantially exceed the expense
which might reasonably be incurred by such director or officer in conducting
such litigation to a final conclusion. The foregoing right of indemnification
shall not be exclusive of other rights to which any director or officer may be
entitled as a matter of law. In determining the reasonableness of any
settlement, the judgment of the Board of Directors shall be final.
ARTICLE FOURTH
STOCKHOLDERS
Section 1. Meetings. The annual meeting of the stockholders of the
corporation shall be held at North Grafton, Massachusetts, or elsewhere within
the United States of America as the Board of Directors shall fix, or in the
absence of any such designation, such place as may be designated by the Clerk in
the notice of the meeting or the place to which any annual meeting shall be
adjourned, on the thirty-first of May at ten o'clock in the forenoon in each
year to elect a Board of Directors, to hear the reports of the officers, and to
transact other business. If the day fixed for the annual meeting shall fall upon
a legal holiday, the meeting shall be held on the next succeeding business day
not a legal holiday. No change may be made in the date fixed herein for the
annual meeting within sixty (60) days of such date and notice of any such change
shall be given the stockholders entitled to notice of the meeting at least
twenty (20) days before the new date fixed for such meeting. If the election of
Directors shall not be held on the day herein designated for an annual meeting,
or at an adjournment thereof, the Board of Directors shall
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cause the election to be held at a special meeting of the stockholders as soon
thereafter as conveniently may be. At such special meeting the stockholders may
elect the directors and transact other business with the same force and effect
as at an annual meeting duly called and held.
Section 2. Closing of Transfer Books. The Board of Directors may in its
discretion fix a date not less than ten (10) days nor more than sixty (60) days
prior to the date of any annual or special meeting of stockholders or prior to
the payment of any dividend or the making of any other distribution as the
record date for determining stockholders having the right to notice of and to
vote at such meeting or any adjournment thereof, or the right to receive such
dividend or distribution. In lieu of fixing such record date, the Board may,
subject to the limitations herein provided, order the closing of the stock
transfer records of the corporation for such purposes. The holders of record of
shares of the corporation on such record date or on the date of closing the
stock transfer records shall, if a dividend or distribution be declared, have
the sole right to receive such dividend or distribution, or, if such shares have
a voting right, the sole right to receive notice of, attend and vote at such
meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
called by the President or by the directors, and shall be called by the Clerk,
or in the event of his death, absence, incapacity or refusal by any other
officer, upon the written application of one or more stockholders who hold at
least one tenth (1/10) in interest of the stock entitled to vote thereat. Notice
shall be given in the manner set forth in Section 4 below and shall state the
time, place and purpose of the meeting. Special meetings shall be held at the
office of the corporation in North Grafton, County of Worcester, Commonwealth of
Massachusetts, or at such other place within the Commonwealth of Massachusetts
or elsewhere within the United States of America,
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as the directors may fix, or, if the meeting is called upon the application of
stockholders, at such place as shall be stated in the application therefor, or
the place to which such meeting may be adjourned; provided, however, that a
special meeting may be held at any place approved in writing by every
stockholder entitled to notice of the meeting or at which every stockholder
entitled to such notice shall be present and represented at the date and time of
the meeting.
Section 4. Notice of Meetings. Written notice of the place, date and hour,
and specifying the purpose of every meeting of stockholders, shall be given by
the Clerk or by any other officer designated by the directors or these Bylaws,
at least seven (7) days before the meeting, to each stockholder entitled to vote
thereat. If a special meeting is called upon written stockholder application and
the Clerk shall be unable or shall refuse to give notice thereof, notice may be
given by any other officer of the corporation. Such notice may be delivered in
hand to each stockholder entitled to notice, at his residence or usual place of
business or mailed to him, postage prepaid, addressed to his address as it
appears in the records of the corporation. No notice of any meeting need be
given a stockholder if a written waiver of notice executed before or after the
meeting by the stockholder, or his attorney thereunto authorized, is filed with
the records of the meeting, and, if notice of a special meeting shall be waived
by all stockholders entitled to notice thereof, no call of such special meeting
shall be required.
Section 5. Quorum. At all meetings of stockholders a quorum for the
transaction of business shall consist of the holders of record, present in
person or by proxy, of a majority in interest of all of the issued and
outstanding shares of the stock of the corporation entitled to vote on any
matter.
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Section 6. Action Without Meeting. Any action required or permitted at any
meeting of the stockholders, including the election of directors or officers,
may be taken without a meeting if prior to such action a written consent thereto
is signed by the holders of all of the issued and outstanding capital stock
entitled to vote at such meeting and such written consent is filed with the
minutes of the meetings of stockholders.
Section 7. Voting. Except as otherwise provided by law or by the Articles
of Organization or these Bylaws, every stockholder entitled to vote at a meeting
of stockholders shall have one vote for each share of stock having the right to
vote at such meeting held by him and registered in his name on the books of the
corporation at the time of the meeting or at the record date fixed by the
directors for the determination of stockholders entitled to vote thereat, if
such date be fixed. Stockholders may vote in person or by proxy in writing filed
with the Clerk at the meeting. No proxy dated more than six months before the
meeting named therein shall be accepted, and no such proxy shall be valid after
the adjournment of the meeting. Except as otherwise required by law, by the
Articles of Organization or these Bylaws, any matter coming before any meeting
of the stockholders shall be adopted as the act and deed of the stockholders if
approved by a majority in interest of the stock issued, outstanding and entitled
to vote thereon, present or represented at the meeting, a quorum being present;
provided, however, that all elections of directors and officers a plurality of
the votes cast for any nominee or nominees shall elect. No ballot shall be
required for election of a director or officer unless requested by the holder of
one or more shares entitled to vote thereon or his representative.
Section 8. Class Voting. Unless the Articles of Organization shall
otherwise provide, whenever the issued and outstanding shares of the corporation
shall consist of shares of two or more classes having a voting right, a quorum
at all meetings of stockholders shall, Section 5
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above notwithstanding, with respect to any matter, including the election of
directors, on which such two or more classes shall be entitled to vote as a
separate class, consist of a majority in interest of the issued and outstanding
stock of each such class; voting on such matter shall be had by class, and
approval of action thereon as the act of the stockholders of the corporation
shall require the vote of a majority in interest of the issued and outstanding
stock of each class present or represented at the meeting and entitled to vote
thereat; provided, however, that in the matter of election of directors elected
by a particular class of shares a quorum shall consist of a majority in interest
of the issued and outstanding stock of that class and a plurality of the votes
cast by the holders of such stock at a meeting at which such quorum is present
shall elect.
ARTICLE FIFTH
CAPITAL STOCK
Section 1. Stock Certificates. Each stockholder shall be entitled to a
certificate or certificates in such form as the Board shall adopt, stating the
number of shares and the class thereof held by him, and the designation of the
series thereof, if any. Each certificate of stock shall be signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer;
the signatures of such officers may be facsimiles if the certificate is signed
by a transfer agent or registrar, other than a director, officer or employee of
the corporation. If any officer who has signed or whose facsimile signature has
been placed on any such certificate shall have ceased to be such officer before
such certificate is issued, the certificate may be issued by the corporation
with the same effect as if he were such officer at the time of issue. Every
certificate issued for shares of stock subject to a restriction on transfer
pursuant to the Articles of Organization, these Bylaws or any agreement to which
the corporation is a party, or issued while the corporation is authorized to
issue more than one class of stock, shall have the full text of such
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restriction or the full text of the preferences, voting powers, qualifications
and special and relative rights of the stock of each class and series authorized
to be issued, as the case may be, set forth on the face or back of the
certificate or, alternatively shall contain the statement that the corporation
will furnish a copy thereof to the holder of the certificate without charge upon
written request.
Section 2. Transfer. The stock of the corporation shall be transferable,
so as to affect the rights of the corporation, after satisfaction of the
provisions of the Articles of Organization, or other lawful provisions to which
the corporation is a party, imposing a restriction upon transfer unless the same
shall be waived by the Board of Directors by transfer recorded on the books of
the corporation, in person or by duly authorized attorney, upon the surrender of
the certificate or certificates properly endorsed or assigned.
Section 3. Fractional Shares. Fractional shares of stock of any class may
be issued. Fractional shares shall entitle the holder thereof to the voting and
dividend rights and the right to participate in assets upon liquidation, and
shall have and be subject to the preferences, qualifications, restrictions and
special and relative rights, of the class of stock or series in which issued. In
lieu of fractional shares, the corporation may issue scrip in registered or
bearer form entitling the holder thereof to receive a certificate for a full
share upon the surrender of scrip aggregating a full share. Any scrip issued by
the corporation may be issued upon such terms and conditions and in such manner
as the directors shall fix.
Section 4. Equitable Interests. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and shall not be bound to
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recognize any equitable or other claim to or interest in such share or shares on
the part of any other person except as may be otherwise expressly provided by
law.
Section 5. Lost Certificates. The directors of the corporation may, from
time to time, determine the conditions upon which a new certificate of stock may
be issued in place of any certificate alleged to have been lost or destroyed.
They may in their discretion require the owner of a lost or destroyed
certificate, or his legal representative, to give a bond to the corporation with
or without surety; surety if required shall be such as the directors deem
sufficient to indemnify the corporation against any loss or claim which may
arise by reason of the issue of a certificate in place of such lost or destroyed
stock certificate.
ARTICLE SIXTH
MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall maintain in the Commonwealth of Massachusetts the
original or attested copies of its Articles of Organization, Bylaws and records
of all meetings of incorporators and stockholders, as well as its stock and
transfer records which shall contain the names of all stockholders and the
record address and amount of stock held by each. Such copies and records may be
maintained at the principal office of the corporation or an office of its
transfer agent or the office of the Clerk and shall be open at all reasonable
times to the inspection of any stockholder for a proper purpose. The directors
may from time to time make reasonable regulations as to the time, place and
manner of inspection by the stockholder of such copies and records and the
books, accounts documents and other records of the corporation. All records of
the corporation shall be open to inspection by any member of the Board at all
times during the usual hours of business.
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ARTICLE SEVENTH
CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the corporation may be signed by any officer or
officers or person or persons authorized by the Board of Directors to sign the
same. No officer or person shall sign any such instrument as aforesaid unless
authorized by said Board to do so.
ARTICLE EIGHTH
SEAL
The seal of the corporation shall be circular in form, bearing the
inscription - INTRINSIX CORP. - Corporate Seal - Commonwealth of Massachusetts,
1985. The Treasurer shall have custody of the seal and may affix it (as may any
other officer if authorized by the directors) to any instrument requiring the
corporate seal.
ARTICLE NINTH
FISCAL YEAR
The fiscal year of the corporation shall be the year ending with the
thirty-first day of December in each year.
ARTICLE TENTH
CONTROL OVER BYLAWS
These Bylaws may be amended and any new Bylaws adopted by affirmative vote
of the stockholders entitled to vote or to the extent permitted by law and as
conferred by the Articles of Organization, by the Board of Directors; provided,
however, that notice of a proposal to amend these Bylaws or adopt new Bylaws
shall be included in the notice of any meeting at which such
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amendment or adoption will be considered. Any amendment of these Bylaws or any
new Bylaws adopted by the Board of Directors may be amended or repealed by the
stockholders.
ARTICLE ELEVENTH
EFFECT OF PROVISIONS OF LAW AND
ARTICLES OF ORGANIZATION
Each of the provisions of these Bylaws shall be subject to and controlled
by any specific provisions of law or the Articles or Organization which relate
to their subject matters, and shall also be subject to any exception, or more
specific provisions, dealing with the subject matter, appearing elsewhere in
these Bylaws as amended from time to time.
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Exhibit 10.1
INTRINSIX CORP.
INCENTIVE STOCK OPTION PLAN
1. PURPOSE AND SCOPE.
The purposes of this Plan are to encourage stock ownership by key
employees of Intrinsix Corp. (herein called the "Company"), to provide an
incentive for such employees to expand and improve the profits and prosperity of
the Company and to assist the Company in attracting and retaining key personnel
through the grant of Options to purchase shares of the Company's common stock.
The stock Options granted under this Intrinsix Corp. Incentive Stock
Option Plan are intended to be Incentive Stock Options ("ISOS") under section
422 of the Internal Revenue Code of 1986, as amended, and in furtherance
thereof, the terms used in section 422 and valid Treasury Regulations
promulgated thereunder are hereby incorporated by reference. In addition,
interpretation as to the meaning of terms of this Agreement shall not conflict
with similar or identical terms as used and defined in section 422 of the
Internal Revenue Code of 1986, as amended.
2. DEFINITIONS.
(a) "Adoption Date" means the earlier of the date this Intrinsix Corp.
Incentive Stock Option Plan is approved by the Board of Directors or ratified by
a vote of the majority of the outstanding voting common stock at the time of
such vote.
(b) "Aggregate Optionable Shares" shall mean the total number of shares of
Stock of the Company which may be acquired by Participants under this Plan.
<PAGE>
(c) "Board" shall mean the Board of Directors of the Company, from time to
time serving.
(d) "Committee" shall mean the Incentive Stock Option Committee, appointed
by the Board and consisting of not less than two members of the Board.
(e) "Company" shall mean Intrinsix Corp., a Massachusetts corporation.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Disabled Participant" shall mean a Participant who is disabled within
the meaning of section 22(e)(3) of the Code.
(h) "Excess Options" are non-ISO Stock Options governed by the terms of
Section 11.
(i) "Exercise" shall mean the act of providing to the Company's Treasurer
written notice of intent to exercise Options by paying the Exercise Price and to
receive Stock represented thereby in exchange. Participant shall have up to
thirty (30) days from date of written notice to deliver full payment at the
office of Intrinsix Corp. Failure will result in the immediate cancellation of
the option. Company will issue stock certificates within fifteen (15) days of
receipt of payment for exercised stock.
(j) "Exercise Price" shall mean the dollar price at which Stock may be
acquired by a Participant by the exercise of an Option as provided in Section 5.
(k) "ISO Option" is an option to acquire to Stock which is an incentive
stock option and not an Excess Option.
(l) "Option" shall mean the right to acquire one (1) share of Stock of the
Company by payment of the per share Exercise Price.
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(m) "Option Agreement" means the written agreement between the Company and
a Participant granting the Participant an Option or Options to acquire Stock.
(n) "Option Exercise Date" shall mean the first day an Option to acquire
Stock becomes exercisable.
(o) "Option Grant Date" shall mean the date an Option is deemed granted to
a Participant pursuant to Section 4.
(p) "Option Grant Period" shall mean the period during which Options may
be granted under the Plan.
(q) "Plan" shall mean this Intrinsix Corp. Incentive Stock Option Plan.
(r) "Participant" shall mean each key employee of the Company to whom an
Option or Options to acquire Stock may be granted by the Committee, as
designated by the Committee from time to time.
(s) "Stock" shall mean the voting common stock of the Company.
(t) "Ten Percent Stockholder" shall mean a Participant who owns voting
common or other voting stock of the Company which, in the aggregate, represents
more than ten (10%) of the combined voting power of all classes of stock of the
Company entitled to vote.
(u) "Valuation" shall mean the price per share of Stock of the Company as
established under the valuation method then in effect and approved by the
Committee and if applicable by the Board.
3. AGGREGATE OPTIONABLE SHARES; CAPITALIZATION CHANGES
A. Pursuant to section 422(b)(1) of the Code, the total number of shares
of Stock which may be issued by the Company under this Plan is Four Hundred
Thousand (400,000).
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B. The number of Optionable Shares under the Plan and the number of shares
of stock which may be acquired by the Exercise of Options shall be increased or
decreased to properly reflect changes in the capitalization of the Company. At
the present time, there are Two Million (2,000,000) voting common shares
authorized and One Million One Hundred Fifty Nine Thousand Five Hundred Ninety
(1,159,590) voting common shares issued and outstanding. The Company has but one
(1) class of stock authorized and issued and outstanding.
4. GRANT OF OPTIONS TO ACQUIRE STOCK; VESTING FOR EXERCISE; TEN YEAR
EXERCISE LIMITATION.
A. The Committee shall, in its sole discretion, allocate Options to
acquire Stock to the Participant in such amounts, including none, as it may
determine.
B. The Committee shall determine the Option Exercise Date as to the one or
more Options to acquire Stock which it may grant. Each such determination of the
Option Exercise Date shall be reflected in the written Option Agreement.
C. No Option granted under this Plan may be exercised more than ten (10)
years from the Option Grant Date.
D. No Option may be granted under this Plan more than ten (10) years from
the Adoption Date.
5. DETERMINATION OF EXERCISE PRICE; SPECIAL RULE FOR CERTAIN STOCKHOLDERS.
A. The Exercise Price as to an Option shall be determined by the
Committee. The Exercise Price as to each share of Stock which may be acquired by
a Participant through the exercise of an underlying Option shall be the fair
market value of the Stock on the date the
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underlying Option is deemed granted. The Exercise Price will be stated in the
Option Agreement.
B. The Exercise Price for ISO Options granted to a Participant who is at
the Option Grant Date the owner of voting securities issued by the Company or
any of its subsidiaries or its parent which in the aggregate represent over more
than Ten Percent (10%) of the combined voting power of all such classes of
securities entitled to vote shall be One Hundred Ten Percent (110%) of the
Exercise Price determined by the method described in Section 5.A.
6. $100,000 LIMITATION; ORDERING RULES
A. If the Exercise Price of all Options exercisable by the Participant in
any single year is more than One Hundred Thousand Dollars ($100,000 US), then
notwithstanding any other provisions of this Plan, those Options which are for
the first time exercisable in that particular year which cause the aggregate of
the Exercise Price for Options exercisable in that year to exceed One Hundred
Thousand Dollars ($100,000 US) shall become Excess Options, which Excess Options
are separately treated under this Plan and are not ISO Options. For purposes of
this section and application of this $100,000 Rule, the Exercise Price of an
Option is determined under Section 5.A., notwithstanding the provisions of
Section 5.B. Excess Options are not ISO Options and the income tax treatment of
them to the Participant are to be governed by section 83 of the Code. B. For the
purposes of this section, Options shall be taken into account in the order in
which they were granted.
7. ACCELERATION OF VESTING AND EXERCISABILITY
A. Notwithstanding any provision to the contrary contained in any Option
Agreement, all outstanding ISO Options and Excess Options shall vest and become
immediately
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exercisable if a Participant shall die or become a Disabled Participant while
employed by the Company.
B. Notwithstanding any other provision to the contrary or contained in any
Option Agreement, if the corporation shall be a party to any merger or
consolidation where it is not the surviving corporation, all then outstanding
ISO Options and Excess Options shall vest and become immediately exercisable,
notwithstanding that a different schedule of vesting for exercise may exist in
any Option Agreement.
C. Notwithstanding any provision to the contrary or contained in any
Option Agreement, if in any period measuring twelve (12) calendar months, issued
and outstanding Stock of the Company representing at least fifty percent (50%)
of the combined voting power of all classes of stock of the Company issued and
outstanding at the commencement of any such period is transferred upon the books
of the Company to Stockholders who were not Stockholders at the commencement of
such twelve (12) month period, then all outstanding ISO Options and Excess
Options shall vest and become immediately exercisable, notwithstanding that a
different schedule of vesting for exercise may exist in any Option Agreement.
8. EXERCISE AND EXPIRATION OF OPTIONS.
A. No ISO Option or Excess Option granted under this Plan shall be
exercisable after ten (10) years from the Option Grant Date.
B. The Committee shall determine whether and upon what circumstances a
leave of absence due to service of the Participant in the Armed Forces of the
United States or its allies or government service shall constitute termination
of employment.
C. ISO Options and Excess Options may be canceled by the Company if in the
sole determination of the Board the Participant has engaged in any act deemed by
the Board to be or
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have been deleterious to the best interests of the Company or the Participant's
employment with the Company shall have been terminated for cause. Termination
for cause shall include the material breach of or continuing neglect of duties
as an employee or the willful misconduct or misfeasance in the performance of
those duties, or, the commission of any act deleterious to the best interests of
the Company. Participant agrees that by accepting Options as evidenced by the
execution of any Option Agreement he or she waives any right to contest the
determination of the Board as to whether any act was, in fact, deleterious to
the best interests of the Company. Further, Participant agrees that by accepting
Options neither Participant nor any person or persons claiming under Participant
shall institute any action, in law or in equity, to challenge any decision by
the Board, and if any action is instituted, Participant and/or each person
claiming under Participant shall be jointly and severally liable to the Company
for double costs and double attorneys fees incurred by the Company in defense
thereof if the Company is the prevailing party.
D. Notwithstanding any other provision of this Plan, no ISO Option granted
under this Plan where the Exercise Price is required to be calculated under
Section 5.B. shall be exercisable after five (5) years from the Option Grant
Date. After five (5) years from the Option Grant Date of an ISO Option where the
Exercise Price of an Option is required to be calculated under Section 5.B.,
such Option if unexercised shall expire.
E. A Participant may exercise an Option only if at the Exercise Date the
Participant is an employee of the Company except the following exceptions shall
apply:
1. If termination of employment of the Participant was caused by the death
or disability, the Participant or those claiming under him or her shall have one
(1) year from the termination of employment to exercise Options.
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2. If termination of employment of the Participant was for cause, or in
the case of voluntary termination by the Participant without the Company's
consent, all Options terminate and become unexercisable upon termination of
employment with the Company.
3. If termination of employment of the Participant was for any reason
other than those described in clauses 1. and 2., immediately above, Options may
be exercised for a period of three (3) months from the termination of employment
with the Company.
9. TRANSFER OF OPTIONS.
A. Transferability of Options. Notwithstanding any other provision of this
Plan, no Option granted under this Plan shall be transferable by a Participant
other than by Will or under the applicable laws of descent and distribution.
B. Exercise by Participant Only. Options granted under this Plan may be
exercised during the life of the Participant by the Participant or his guardian
or other personal representative, including the holder of a durable power of
attorney.
10. FRACTIONAL SHARES; VOTING; NO ENTITLEMENT TO EMPLOYMENT
A. Fractional Shares. No Options may be exercised for fractional shares
and all fractions shall be rounded down to the next lowest whole number.
B. Voting. No Participant may vote any share of Stock until such Stock has
been transferred to the Participant upon the books of the Company.
C. No Entitlement to Continued Employment. The holding of an Option vests
in the Participant no right to continued employment with the Company.
11. ORDERING RULE FOR EXERCISE OF ISO OPTIONS.
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ISO Options granted under this Plan shall be exercisable only in
chronological order commencing with the first ISO Option or ISO Options granted.
Cancellation of a prior ISO Option or ISO Options shall not affect this Ordering
Rule, but an ISO Option which becomes unexercisable due to lapse of time shall
be exempt from sequential exercise restrictions.
12. RESTRICTIONS AS TO EXERCISE PRICE PAID IN INSTALLMENTS.
If the Company agrees to accept payment of the Exercise Price for Stock in
cash installments and a Promissory Note for any unpaid future installments,
interest shall be charged by the Company and paid by the Participant and shall
not be less than the Applicable Federal Rate then in effect as of the date of
the Exercise of the Option, as to such installments.
13. TERMS OF EXCESS OPTIONS.
Excess Options shall be governed by the following special rules:
A. Exercise Price. If and to the extent that an Option shall be determined
to be an Excess Option, if such Option's Exercise Price shall originally have
been established under Section 5.B. the Committee shall reestablish the Exercise
Price of such Option in accordance with the provisions of Section 5.A., using
the fair market value of the corresponding Stock as of the original Option Grant
Date.
B. Income Tax Effect Upon Exercise. Exercise of an Excess Option will
result in ordinary income to the Participant in an amount equal to the
difference between the fair market value of the Stock on the date of exercise
and the Exercise Price, as described in section 83 of the Code. The Company may
be obligated to make income tax, FICA and other withholding deductions as to the
Participant for the taxable year of exercise as if such amount of ordinary
income was paid in cash to the Participant by the Company as wages. Such
withholding taxes will be debited from the wages due to the Participant as the
Participant and the Committee shall agree, or such other arrangement between the
Participant and the Company shall
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be made for depositing such required withholding if the Company shall so
determine, and the satisfaction of the Company shall be a condition precedent to
delivery.
14. INCOME TAX EFFECTS OF EXERCISE; HOLDING PERIOD.
Stock acquired by the exercise of an ISO Option granted under this Plan
shall not result in income to the Participant upon such exercise and delivery
provided:
A. No disposition of Stock so acquired by the Participant is made by
the Participant within two (2) years from the Option Grant Date of the exercised
underlying ISO Option nor within one (1) year after the date the Stock so
acquired is transferred to the Participant, as determined by the records of the
Company.
B. At all times during the period beginning on the Option Grant Date and
ending on the day three (3) months before the date of such exercise, the
Participant was an employee of either the corporation granting such ISO Option,
a parent or subsidiary corporation of such corporation issuing or assuming an
ISO Option in a transaction to which section 424(a) of the Code applies.
C. The holding period provisions are waived if any Participant dies while
employed by the Company.
15. INCOME TAX EFFECTS OF EXERCISE; SPECIAL RULE FOR DISABLED
PARTICIPANTS.
Stock acquired by the exercise of an ISO Option granted under this Plan
shall not result in income to the Disabled Participant provided:
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A. No disposition of such share is made by the Participant within two (2)
years from the date of the granting of the ISO Option nor within one (1) year
after the stock so acquired is transferred to the Participant; and
B. At all times during the period beginning on the date of the granting of
the ISO Option and ending on the day one (1) year before the date of such
exercise, the Participant was an employee of either the corporation granting
such ISO Option, a parent or subsidiary corporation of such corporation, or a
corporation or a parent or subsidiary corporation of such corporation issuing or
assuming an ISO Option in a transaction to which Section 424(a) of the Code
applies.
16. SEVERABILITY.
If any provision of this Plan is determined by a court of competent
jurisdiction, in a judgment which is final, to be ineffective, those remaining
parts of the Plan shall remain in full force and effect; provided, however, that
if such judgment is that the Plan is not qualified as an Incentive Stock Option
Plan under Section 422 of the Code, then the Plan is, in accordance with such
judgment, canceled as of such date, and Options vested under the Plan shall
remain exercisable notwithstanding such judgment but such Options shall be
Excess Options.
17. SECURITIES LAW REPRESENTATIONS.
As a condition to the exercise of any Option, the Company may require the
Participant to represent and warrant at the time of such exercise that any
shares of Stock acquired at exercise are being acquired only for investment and
without any present intention to sell or distribute such shares, if, in the
opinion of counsel for the Company, such a representation is required under the
Securities Act of 1933 or any other applicable law, regulation, or rule of any
governmental agency.
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Stock which may be acquired by a Participant pursuant to the exercise of
an Option will be issued by the Company in reliance upon an exemption from
registration of such Stock under Rule 701 of the Securities Act of 1933, as
amended.
As described in the Company bylaws, the Company maintains right of first
refusal on any stock transactions.
The Company is under no obligation to establish or maintain a market for
any shares exercised under this plan.
18. GOVERNING LAW.
This Plan and determination of rights under this Plan shall be determined
in accordance with the laws of the Commonwealth of Massachusetts. 19.
NON-COMPETITION AGREEMENTS. Participation in this plan is subject to all new
employees signing a non-compete agreement in exchange for the grant of an Option
or Options. Employees whose date of hire precedes the effective date shall be
exempt from the requirement of executing a non-competition agreement.
20. EFFECTIVE DATE.
The effective date of this Plan is Adoption Date.
ADOPTED, after Resolution of the Board of Directors this 26 March, 1997.
-----------------------------------
Chairman
ATTEST:
/s/ Brian Meeks
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Clerk
SEAL IMPRINT
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Exhibit 10.2
INTRINSIX CORP.
2000 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 2000 Stock Incentive Plan (the "Plan") of Intrinsix
Corp., a Massachusetts corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any of the
Company's present or future subsidiary corporations as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
(a) Administration by Board of Directors. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
(b) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b)
<PAGE>
to the extent that the Board's powers or authority under the Plan have been
delegated to such Committee or executive officer.
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
made under the Plan for up to 2,000,000 shares of common stock, no par value per
share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which Awards may be granted to any Participant
under the Plan shall be 200,000 per calendar year. The per-Participant limit
described in this Section 4(b) shall be construed and applied consistently with
Section 162(m) of the Code ("Section 162(m)").
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
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(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise
provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their fair
market value as determined by (or in a manner approved by) the Board in good
faith ("Fair Market Value"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock was owned by the
Participant at least six months prior to such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on terms
determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(g) Substitute Options. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5.
6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board,
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by a Participant to receive amounts due or exercise rights of the Participant in
the event of the Participant's death (the "Designated Beneficiary"). In the
absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
7. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. Adjustments for Changes in Common Stock and Certain Other Events
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) Acquisition Events
(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) Consequences of an Acquisition Event on Options. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the Option confers the right to
purchase, for each share
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of Common Stock subject to the Option immediately prior to the consummation of
the Acquisition Event, the consideration (whether cash, securities or other
property) received as a result of the Acquisition Event by holders of Common
Stock for each share of Common Stock held immediately prior to the consummation
of the Acquisition Event (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if the consideration received
as a result of the Acquisition Event is not solely common stock of the acquiring
or succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Options to consist solely of
common stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding shares of Common Stock as a result of the Acquisition
Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised Options will become exercisable in full as of a
specified time prior to the Acquisition Event and will terminate immediately
prior to the consummation of such Acquisition Event, except to the extent
exercised by the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the terms of
which holders of Common Stock will receive upon consummation thereof a cash
payment for each share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (A) the Acquisition Price multiplied by
the number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price of
such Options.
(3) Consequences of an Acquisition Event on Restricted Stock Awards.
Upon the occurrence of an Acquisition Event, the repurchase and other rights of
the Company under each outstanding Restricted Stock Award shall inure to the
benefit of the Company's successor and shall apply to the cash, securities or
other property which the Common Stock was converted into or exchanged for
pursuant to such Acquisition Event in the same manner and to the same extent as
they applied to the Common Stock subject to such Restricted Stock Award.
(4) Consequences of an Acquisition Event on Other Awards. The Board
shall specify the effect of an Acquisition Event on any other Award granted
under the Plan at the time of the grant of such Award.
9. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
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(b) Documentation. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
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10. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to any applicable conflicts of
law.
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Exhibit 10.3
INTRINSIX CORP.
2000 Outside Director Stock Option Plan
1. Purpose
The purpose of this 2000 Outside Director Stock Option Plan (the "Plan")
of Intrinsix Corp. a Massachusetts corporation (the "Company"), is to advance
the interests of the Company's stockholders by enhancing the Company's ability
to attract, retain and motivate outside directors of the Company by providing
such directors with equity ownership opportunities and performance-based
incentives and thereby better aligning the interests of such persons with those
of the Company's stockholders.
2. Eligibility
Each director of the Company who is not an employee of the Company (an
"Eligible Director") is eligible to be granted options (an "Option") under the
Plan. Any person who has been granted an Option under the Plan shall be deemed a
"Participant."
3. Administration, Delegation
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have authority to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. All decisions by the Board shall be
made in the Board's sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan or in any Option. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
4. Stock Available for Options
a. Number of Shares. Subject to adjustment under Section 4(b), Options may
be made under the Plan for up to 200,000 shares of Common Stock of the Company
(the "Common Stock"), after giving effect to the three-for-two split approved by
the Board of Directors on March 27, 2000, subject to stockholder approval of the
Plan. If any Option expires or is terminated, surrendered or canceled without
having been fully exercised or is forfeited in whole or in part or results in
any Common Stock not being issued, the unused Common Stock covered by such
Option shall again be available for the grant of Options under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
b. Adjustment to Common Stock. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to
<PAGE>
holders of Common Stock other than a normal cash dividend, (i) the number and
class of securities available under this Plan, (ii) the number and class of
securities and exercise price per share subject to each outstanding Option, and
(iii) the number and class of securities available for automatic grants shall be
appropriately adjusted by the Company (or substituted Options may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 4(b)
applies and Section 6(c) also applies to any event, Section 6(c) shall be
applicable to such event, and this Section 4(b) shall not be applicable.
5. Stock Options
a. Automatic Grants.
(i) Each Eligible Director who is serving on the Board on the
effective date (the "Effective Date") of the initial public
offering (the "IPO") of the Common Stock and who continues to
serve after the closing of the IPO (each, an "IPO Director")
shall be granted an Option, as of the Effective Date, to
purchase 5,000 shares of Common Stock, after giving effect to
the three-for-two split approved by the Board of Directors on
March 27, 2000.
(ii) Each Eligible Director who is not an IPO Director shall be
granted an Option to purchase 5,000 shares of Common Stock at
the close of business on the date such Eligible Director is
first elected to serve on the Board.
(iii) Each Eligible Director who is serving on the Board at the
adjournment of any annual meeting which begins after the date
of his or her election shall be granted an Option to purchase
2,500 shares of Common Stock, at the close of business on the
date of each such adjournment.
b. Option Exercise Price. The option exercise price per share for each
Option granted under the Plan shall equal (i) the last reported sales price per
share of the Company's Common Stock as listed on a nationally recognized
securities exchange or the Nasdaq National Market, as the case may be, on the
date of grant (or, if no such price is reported on such date, such price as
reported on the nearest preceding day); or (ii) the fair market value of the
stock on the date of grant, as determined by the Board of Directors, if the
Common Stock is not publicly traded. Notwithstanding the preceding sentence, the
option exercise price per share for each Option granted on the Effective Date
shall be the price per share for which the Common Stock was offered to the
public.
c. Exercise Period. Each Option shall immediately vest and be exercisable.
In addition, no Option may be exercised more than one year after the Participant
ceases to serve as a director of the Company. No Option shall be exercisable
after the expiration of ten (10) years from the date of grant or prior to
approval of the Plan by the stockholders of the Company.
d. Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
i. in cash or by check, payable to the order of the Company;
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ii. except as the Board may otherwise provide in an Option
Agreement, by delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or by delivery by the Participant to the Company of a copy
of irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price;
iii. to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or
iv. by any combination of the above permitted forms of payment.
6. General Provisions Applicable to Options
a. Transferability of Options. Except as the Board may otherwise determine
or provide in an Option, Options shall not be sold, assigned, transferred,
pledged or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
b. Documentation. Each Option under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Option may
contain terms and conditions in addition to those set forth in the Plan.
c. Acquisition Events. The Company shall give the Participant ten (10)
days notice of an Acquisition Event (as defined below), and the Option shall
expire upon the Acquisition Event. An "Acquisition Event" shall mean: (a) any
merger or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing immediately thereafter
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 50% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (b) any sale of all
or substantially all of the assets of the Company; or (c) the complete
liquidation of the Company.
d. Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Option have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company
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such representations or agreements as the Company may consider appropriate to
satisfy the requirements of any applicable laws, rules or regulations.
7. Miscellaneous
a. No Right To Board Membership or Other Status. Neither the Plan nor the
granting of an Option shall be construed as giving a Participant the right to
continue as a director of the Company.
b. No Rights As Stockholder. Subject to the provisions of the applicable
Options, no Participant or beneficiary designated by the Participant shall have
any rights as a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Option until becoming the record holder of such
shares.
c. Effective Date and Term of Plan. The Plan shall become effective on the
date on which it is adopted by the Board. No Options shall be granted under the
Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Options previously granted may extend beyond that
date.
d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time; provided however, that any increase in the
number of shares available for issuance under the Plan as set forth in Section
4.a above shall be subject to stockholder approval.
e. Governing Law. The provisions of the Plan and all Options made
hereunder shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to any applicable conflicts of
law.
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Exhibit 10.4
INTRINSIX CORP.
2000 Employee Stock Purchase Plan
The purpose of this Plan is to provide eligible employees of Intrinsix
Corp. (the "Company") and certain of its subsidiaries with opportunities to
purchase shares of the Company's Common Stock (the "Common Stock") commencing on
June 1, 2000. One million (1,000,000) shares of Common Stock in the aggregate,
after giving effect to the three-for-two split approved by the Board of
Directors on March 27, 2000, have been approved for this purpose, subject to
stockholder approval. This Plan is intended to qualify as an "employee stock
purchase plan" as defined in Section 423 of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations promulgated thereunder, and shall
be interpreted consistent therewith.
1. Administration. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. All employees of the Company, including Directors who are
employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in
a calendar year; and
(b) they have been employed by the Company or a Designated
Subsidiary for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee, immediately
after the option is granted, owns 5% or more of the total combined voting power
or value of the stock of the Company or any subsidiary. For purposes of the
preceding sentence, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. Offerings. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan. Offerings will begin each April 1
and October 1, or the first business day thereafter (the "Offering Commencement
Dates"). Each Offering Commencement Date will begin a six month period (a "Plan
Period") during which payroll
<PAGE>
deductions will be made and held for the purchase of Common Stock at the end of
the Plan Period. The Board or the Committee may, at its discretion, choose a
different Plan Period of twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement Date
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 10 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 10% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made. Payroll
deductions may be at the rate of any whole number percentage (up to 10%) of
Compensation with any change in compensation during the Plan Period to result in
an automatic corresponding change in the dollar amount withheld.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his payroll
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
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8. Withdrawal of Funds. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083.33 by
the number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market as published by Nasdaq (without giving effect to any
after-hours trading) or (c) the average of the closing bid and asked prices in
the over-the-counter-market, whichever is applicable, as published in The Wall
Street Journal. If no sales of Common Stock were made on such a day, the price
of the Common Stock for purposes of clauses (a) and (b) above shall be the
reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date and shall be deemed to have purchased from the Company the number
of full shares of Common Stock reserved for the purpose of the Plan that his
accumulated payroll deductions on such date will pay for, but not in excess of
the maximum number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the
end of a Plan Period will be automatically refunded to the employee, except that
any balance which is less than the purchase price of one share of Common Stock
will be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, in the name of the employee and another person of
legal age as tenants in common, or (in the Company's sole discretion) in the
name of a brokerage firm, bank or other nominee holder designated by the
employee. The Company may, in its sole discretion and in compliance with
applicable laws, authorize the use of book entry registration of shares in lieu
of issuing stock certificates.
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11. Rights on Retirement, Death or Termination of Employment. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
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In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market (to the extent the Common Stock is
then so listed or quoted) and the approval of all governmental authorities
required in connection with the authorization, issuance or sale of such stock.
21. Governing Law. The Plan shall be governed by Massachusetts law except
to the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where
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such disposition occurs within two years after the date of grant of the Option
pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
effect on June 1, 2000 subject to approval by the shareholders of the Company as
required by Section 423 of the Code, which approval must occur within twelve
months of the adoption of the Plan by the Board.
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Exhibit 10.5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of January 13, 2000 and is between
INTRINSIX CORP., a Massachusetts corporation having its principal place of
business at 33 Lyman Street, Westborough, Massachusetts 01581 (the "Borrower")
and BANKBOSTON, N.A., a national bank having an office at 100 Front Street,
Worcester, Massachusetts 01608 (the "Lender").
WITNESSETH:
BACKGROUND. The Borrower has requested certain financial accommodations from the
Lender (the "Loans") and the Lender is willing to grant such financial
accommodations upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein:
1.1 "Accounts," "Chattel Paper," "Contracts," "Documents," "Equipment,"
"Financial Assets," "Fixtures," "General Intangibles," "Goods," "Instruments,"
"Inventory," "Securities," "Securities Accounts," "Security Certificates," and
"Security Entitlements" will have the same respective meanings as are given to
those terms in the Uniform Commercial Code as presently adopted and in effect in
the Commonwealth of Massachusetts.
1.2 "Affiliate" means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.
1.3 "Agreement" means this Loan and Security Agreement, as the same may from
time to time be amended or supplemented.
1.4 "Assets" means all assets of the Borrower, including without limitation, all
assets that should be classified as assets on a balance sheet of the Borrower or
the Guarantor prepared in accordance with GAAP.
1.5 "Borrowing Base" means, at any time, the amount computed on the Borrowing
Base Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:
(a) $1,500,000.00; or
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(b) Seventy percent (70%) of Eligible Accounts of the Borrower.
1.6 "Borrowing Base Certificate" means a fully-completed certificate prepared by
the Borrower in a form acceptable to the Lender which certifies, among other
things, the various components of the Borrowing Base as set forth in the
definition thereof, and which is certified to be correct and executed by the
President or Chief Financial Officer of the Borrower and delivered to and
accepted by the Lender pursuant to this Agreement.
1.7 "Business Day" means, in respect to any date that is specified in the
Agreement or the Notes to be subject to adjustment in accordance with applicable
Modified Following Business Day Convention, a day on which commercial banks
settle payments in New York.
1.8 "Capital Leases" means capital leases, conditional sales contracts and other
title retention agreements relating to the purchase or acquisition of
Consolidated Capital Assets.
1.9 "Closing" has the meaning given to such term in Section 3.1.
1.10 "Collateral" has the meaning given to such term in Section 4.1.
1.11 "Collateral Documents" means the documents, whether deliverable at or after
the Closing, required under Article 4 and/or requested or required hereafter by
the Lender.
1.12 "Consolidated Assets" means all assets of the Borrower and the Guarantor
including without limitation, all assets that should be classified as assets on
a consolidated balance sheet of the Borrower and the Guarantor prepared in
accordance with GAAP.
1.13 "Consolidated Capital Assets" means Consolidated Assets of the Borrower and
the Guarantor that are required or permitted to be depreciated or amortized in
accordance with GAAP.
1.14 "Consolidated Capital Expenditures" means, for the applicable period, the
aggregate amount of the Borrower's and the Guarantor's expenditures for the
acquisition, construction, improvement, replacement or purchase of Consolidated
Capital Assets, including but not limited to, expenditures under Capital Leases.
1.15 "Consolidated Cash Flow Coverage Ratio" means, for a fiscal year, the ratio
of Consolidated EBITDA minus cash income tax payments minus cash dividends minus
non-financed Consolidated Capital Expenditures to Consolidated Interest Expense
plus Consolidated Current Maturities of Long Term Indebtedness.
1.16 "Consolidated Cash Flow/Leverage Ratio" means, for a fiscal year, the ratio
of Consolidated Liabilities to Consolidated EBITDA.
1.17 "Consolidated Current Maturities of Long Term Indebtedness" means the
principal amount of long term Consolidated Indebtedness maturing within twelve
(12) months from the date of calculation, including but not limited to, amounts
required to be paid during such period under Capital Leases.
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1.18 "Consolidated Earnings" means, at any time, consolidated revenue of the
Borrower and the Guarantor for any fiscal period minus the sum of (i) all
expenses, including without limitation, depreciation, amortization, income taxes
and dividends to shareholders, (ii) extraordinary and non-recurring income and
(iii) income from the sale of Consolidated Capital Assets.
1.19 "Consolidated EBITDA" means, at any time, Consolidated Earnings before
interest and taxes plus the sum of depreciation and amortization each to be
determined on a rolling four (4) quarter basis in accordance with GAAP.
1.20 "Consolidated Indebtedness" means, as to each of the Borrower and the
Guarantor without duplication:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of the
Borrower's or the Guarantor's business payable on terms customary in the trade);
(c) obligations, whether or not assumed, secured by liens;
(d) obligations which are evidenced by notes, acceptances, letters of
credit, guarantees or other instruments;
(e) obligations under any Capital Leases; and
(f) all Obligations.
1.21 "Consolidated Interest Expense" means, for the applicable period, interest
paid or payable by the Borrower and the Guarantor, including but not limited to,
interest paid or payable on Consolidated Indebtedness determined in accordance
with GAAP.
1.22 "Consolidated Liabilities" means, all liabilities of each of the Borrower
and the Guarantor, including without limitation, all liabilities that should be
classified as liabilities on a consolidated balance sheet of the Borrower and
the Guarantor prepared in accordance with GAAP.
1.23 "Consolidated Net Profit" means, for each of the Borrower and the
Guarantor, net profit to be determined in accordance with GAAP.
1.24 "Eligible Account" means, at any time, an Account that conforms and
continues to conform to the following conditions:
(a) The Account arose from a bona fide outright sale of Goods by the
Borrower or from services performed by the Borrower, and such Goods have been
shipped to the appropriate account debtors or their designees (or the sale has
otherwise been consummated), or the services have been performed for the
appropriate account debtors;
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(b) The Account is based upon an enforceable order or contract, written or
oral, for Goods shipped or held or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;
(c) The title of the Borrower to the Account and, except as to the account
debtor, to any Goods is absolute and is not subject to any prior assignment,
claim, lien, or security interest, except in favor of the Lender or a Permitted
Lien;
(d) The amount shown on the books of the Borrower and on any invoice or
statement delivered to the Lender is owing to the Borrower, less any partial
payment that has been made thereon by anyone;
(e) The Account shall be eligible only to the extent that it is not
subject to any claim of reduction, counterclaim, setoff, recoupment, or any
claim for credits, allowances, or adjustments by the account debtor because of
returned, inferior, or damaged Goods or unsatisfactory services, or for any
other reason;
(f) The account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the Goods or services from the sale of which the Account arose;
(g) The Account is not outstanding more than sixty (60) days from the date
of the invoice therefor;
(h) The Account does not arise out of a contract with, or order from, all
account debtor that, by its terms, forbids or makes void or unenforceable the
assignment by the Borrower to the Lender of the Account arising with respect
thereto;
(i) The Borrower has not received any note, trade acceptance, draft, or
other Instrument with respect to, or in payment of, the Account, nor any Chattel
Paper with respect to the Goods giving rise to the Account, unless, if any such
Instrument or Chattel Paper has been received, the Borrower immediately notifies
the Lender and, at the Lender's request, endorses or assigns and delivers the
same to the Lender;
(j) The Borrower has not received any notice of the death of the account
debtor or a partner thereof; nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against, the account debtor. Upon the
receipt by the Borrower of any such notice, it will immediately give the Lender
written advice thereof;
(k) The account debtor is not a Subsidiary or other Affiliate of the
Borrower; and
(l) The Lender has not deemed such account ineligible in its reasonable
discretion.
In the event of any dispute, under the foregoing criteria, about whether
an Account is or has ceased to be an Eligible Account, the reasonable decision
of the Lender shall control.
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1.25 "Event of Default" has the meaning provided in Section 7.1.
1.26 "Excess Cash Flow" means the amount by which (i) Consolidated EBITDA minus
cash income tax payments minus cash dividends minus non-financed Consolidated
Capital Expenditures exceeds (ii) Consolidated Interest Expense plus
Consolidated Current Maturities of Long Term Indebtedness.
1.27 "Financial Statements" means the balance sheets of the Borrower as of
December 31, 1996, December 31, 1997, and December 31, 1998 and statements of
cash flows and income and notes thereto, of the Borrower for such dates,
prepared by Deloitte and Touche to present fairly the financial position and
results of operations of the Borrower at such dates and for such periods in
accordance with GAAP.
1.28 "GAAP" means generally accepted accounting principles applied consistently
with such changes or modifications thereto as may be approved in writing by the
Lender.
1.29 "Guarantor" means Intrinsix Canada Co., a Nova Scotia unlimited company
having its principal place of business at 555 Legget Drive, Tower B, Kanata,
Ontario K2K 2X3.
1.30 "Guaranty" means the Guaranty (Unlimited) dated of even date from the
Guarantor in favor of the Lender relating to the Obligations.
1.31 "Intellectual Property" means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, and licenses acquired under any
statutory, common law or registration process in any state or nation at any
time, or under any agreement executed with any person or entity at any time. The
term "license" refers not only to rights granted by agreement from the owner of
patents, trade marks, service marks and the like, but also to rights granted by
a franchisor under a franchise or similar agreement. The foregoing enumeration
is not intended as a limitation of the meaning of the word "license".
1.32 "Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or of any court or similar entity established by any thereof.
1.33 "Liabilities" means, all liabilities of the Borrower, including without
limitation, all liabilities that should be classified as liabilities on a
balance sheet of the Borrower prepared in accordance with GAAP.
1.34 "Modified Following Business Day Convention" means the convention for
adjusting any relevant date if it would otherwise fall on a day that is not a
Business Day to the date that will be the first following day that is a Business
Day.
1.35 "Notes" means the Revolving Line of Credit Note and the Term Note.
1.36 "Obligations" is intended to be used in its most comprehensive sense and
means the obligation of the Borrower and the Guarantor:
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(a) to pay the principal of, and interest on, the Notes in accordance with
the terms thereof and to satisfy all other liabilities to the Lender, whether
hereunder or otherwise (including without limitation existing notes or any one
or both of the Borrower or the Guarantor), whether now existing or hereafter
incurred, matured or umatured, direct or contingent, joint or several, including
any extensions, modifications and renewals thereof and substitutions therefor,
including without limitation;
(b) to repay to the Lender all amounts advanced by the Lender hereunder or
otherwise on behalf of the Borrower or the Guarantor, including, but without
limitation, advances under other notes, advances for principal or interest
payments to prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, or repairs to, or maintenance or storage of, any of the
Collateral; and
(c) to reimburse the Lender, on demand, for all of the Lender's reasonable
expenses and costs, including without limitation the reasonable fees and
expenses of its counsel, in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder, including, without limitation, any proceeding brought, or
threatened, to enforce payment of any of the Obligations referred to in the
foregoing paragraphs (a) and (b).
1.37 "Permitted Liens" means:
(a) liens for taxes, assessments, or similar charges, incurred by the
Borrower or the Guarantor in the ordinary course of business, that are not yet
due and payable;
(b) liens of mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred by the Borrower or the Guarantor in the
ordinary course of business that are not yet due and payable;
(c) purchase money liens;
(d) liens created to secure Capital Leases;
(e) liens in favor of the Lender; and
(f) liens set forth on Exhibit 1.37.
1.38 "Person" means any individual, corporation, limited liability company,
partnership, limited liability partnership, association, joint-stock company,
trust, unincorporated organization, joint venture, court, or government or
political subdivision or agency thereof.
1.39 "Records" means correspondence, memoranda, tapes, discs, papers, books and
other documents, or transcribed information of any type, whether expressed in
ordinary or machine readable language.
1.40 "Revolving Line of Credit Note" means the Revolving Line of Credit Note of
the Borrower, of even date, in the original principal amount of $1,500,000.00,
referred to in Section 2.2 hereof.
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1.41 "Subsidiary" means any Affiliate that is directly, or indirectly through
one or more intermediaries, controlled by the Borrower or not less than 50% of
the voting capital stock of which is owned, directly or through one or more
intermediaries, by the Borrower.
1.42 "Term Note" means the Term Note of the Borrower, of even date, in the
original principal amount of $1,200,000.00, referred to in Section 2.3 hereof.
1.43 Accounting terms used and not otherwise defined in this Agreement have the
meanings determined by, and all calculations with respect to accounting or
financial matters unless otherwise provided herein will be computed in
accordance with, GAAP.
ARTICLE 2
THE LOANS
2.1 Disbursement of the Loans.
The Lender will credit the proceeds of the Loans hereunder to the
Borrower's deposit account with the Lender or in accordance with the Borrower's
acceptable instructions from time to time.
2.2 Revolving Line of Credit Note.
Subject to the terms hereof, the Lender agrees to lend the Borrower, from
time to time unti1 May 31, 2001 or the occurrence of an Event of Default,
whichever occurs first, such sums in integral multiples of $1,000.00 as the
Borrower may request, and the Lender may approve, by reasonable same day notice
to the Lender, received by the Lender not later than 2:00 P.M. of such day, but
which shall not exceed, in the aggregate principal amount at any one time
outstanding, the Borrowing Base. The Borrower may borrow, repay without penalty
or premium and reborrow hereunder, from the date of this Agreement until May 31,
2001 or the occurrence of an Event of Default, whichever occurs first. It is the
intention of the parties that the outstanding principal amount of the Note shall
at no time exceed the then existing Borrowing Base, and if, at any time, an
excess shall for any reason exist, the full amount of such excess, together with
accrued and unpaid interest thereon as herein provided, shall be immediately due
and payable in full, except if an excess shall exist due to an adjustment in the
Borrowing Base made by the Lender pursuant to Section 1.24(l), in which case
such excess together with accrued and unpaid interest shall be due and payable
five (5) days after written notice from the Lender.
2.3 Term Note.
(a) Subject to the terms hereof, the Lender agrees to lend to the Borrower
on a term loan basis the amount of $1,200,000.00, the payment terms to be in
accordance with the provisions of the Term Note. The outstanding principal
balance of the Term Note is to be paid in equal monthly installments of
$25,000.00 plus interest. In addition to the monthly payments of principal and
interest required by this Section 2.3(a), the Borrower shall make the payments
required by Section 2.3(b) below. All outstanding indebtedness evidenced by the
Term Note, if not earlier paid, is due and payable on January 15, 2004.
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(b) Commencing forty-five (45) days after the quarterly accounting period
ending on March 31, 2000 and forty-five (45) days after each quarterly
accounting period thereafter (June 30, September 30, December 31 and March 31 of
each year) the Borrower shall pay to the Lender an amount equal to ten percent
(10%) of any Excess Cash Flow.
2.4 Interest Rate and Payments of Interest.
Interest on the principal balance of the Notes from time to time
outstanding will accrue at the rates and in the manner set forth in the Notes,
including that after the occurrence of an Event of Default, the interest rate
under the Notes will be four percent (4.0%) above that which would otherwise be
applicable.
2.5 Payment to the Lender.
The Lender may charge against any deposit account of the Borrower all or
any part of any amount due hereunder, including all payments due under the
Notes.
2.6 Payment Due Dates.
The due dates of all payments required hereunder or under the Notes are
subject to adjustment in accordance with the Modified Following Business Day
Convention.
ARTICLE 3
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loans is subject to the following
conditions precedent:
3.1 Documents Required for the Closing.
The Borrower will have delivered or caused to be delivered to the Lender,
prior to the initial disbursement of Loans (the "Closing"), the following:
(a) The Notes duly executed by the Borrower;
(b) The Guaranty duly executed by the Guarantor;
(c) The Security Agreement between the Lender and the Guarantor of even
date, duly executed by the Guarantor;
(d) The Subordination Agreement (Liens) between the Lender and Gintaris
Subatis, of even date, duly executed by Gintaris Subatis;
(e) The Subordination Agreement (Debt) between the Lender and Gintaris
Subatis, of even date, duly executed by Gintaris Subatis;
(f) The Financial Statements;
(g) The Collateral Documents duly executed by the Borrower;
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(h) The financing statements and other instruments required by Article 4;
(i) A copy, certified as of the date of the Closing, of votes and
resolutions of the board of directors of the Borrower, authorizing the
execution, delivery, and performance of this Agreement, the Notes, the
Collateral Documents, and each other document to be delivered pursuant hereto;
(j) A copy, certified as of the date of the Closing, of votes and
resolutions of the board of directors of the Guarantor, authorizing the
execution, delivery, and performance of the Guaranty and each other document to
be delivered by the Guarantor;
(k) A copy, certified as of the date of the Closing, of the bylaws and/or
memorandum of association for each of the Borrower and the Guarantor;
(l) A certificate (dated the date of the Closing) of the clerk or
secretary of the Borrower as to the incumbency and signatures of the officers of
the Borrower signing this Agreement, the Notes, the Collateral Documents, and
each other document to be delivered pursuant hereto;
(m) A certificate (dated the date of the Closing) of the clerk or
secretary of the Guarantor as to the incumbency and signatures of the officers
of the Guarantor signing the Guaranty and each other document to be delivered by
the Guarantor;
(n) A copy, certified as of the most recent date practicable by the
Secretary of the Commonwealth of Massachusetts, of the Articles of Organization
of the Borrower, and all amendments thereto, together with a certificate (dated
the date of the Closing) of the clerk of the Borrower to the effect that such
Articles of Organization have not been further amended since the date of the
aforesaid certification of the Secretary of the Commonwealth of Massachusetts;
(o) A copy, certified as of the most recent date practicable by the
Province of Nova Scotia, of the Articles of Association of the Guarantor, and
all amendments thereto, together with a certificate (dated the date of the
Closing) of the secretary of the Guarantor to the effect that such Articles of
Association have not been further amended since the date of the aforesaid
certification of the Province of Nova Scotia;
(p) A certificate dated as of the most recent date practicable, issued by
the Secretary of the Commonwealth of Massachusetts as to the legal existence,
Articles of Organization and good legal standing of the Borrower;
(q) A certificate of Industry Canada dated as of the most recent date
practicable, issued by the Province of Nova Scotia as to the legal existence,
Articles of Association and good legal standing of the Guarantor;
(r) Certificates, as of the most recent dates practicable, of the
Secretary of the Commonwealth of Massachusetts and of the secretary of state of
each state in which the Borrower is qualified as a foreign corporation and, if
applicable, of the department of revenue or taxation of each of the foregoing
states, as to the good standing of the Borrower;
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(s) Certificates, as of the most recent dates practicable, of appropriate
authority of each state, province or country in which the Guarantor is qualified
as a foreign corporation and, if applicable, of the department of revenue or
taxation of each of the foregoing states, as to the good standing of the
Guarantor;
(t) A written opinion of Hale and Dorr LLP, legal counsel for the
Borrower, dated the date of the Closing and addressed to the Lender, in form
satisfactory to the Lender; and
(u) A written opinion of legal counsel for the Guarantor, dated the date
of the Closing and addressed to the Lender, in form satisfactory to the Lender.
3.2 Documents Required for Subsequent Disbursements.
At the time of, and as a condition to, any disbursement of any part of the
Loans to be made by the Lender subsequent to the Closing, the Lender may require
the Borrower to deliver to the Lender a certificate, dated the date on which any
such disbursement is to be made, signed by the president of the Borrower, and to
the effect that:
(a) As of the date thereof, no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, but for the giving
of notice or passage of time or both, would be an Event of Default;
(b) No material adverse change has occurred in the business prospects,
financial condition, or results of operations of the Borrower since the date of
the Financial Statements; and
(c) Each of the representations and warranties contained in Article 5 is
true and correct in all respects as if made on and as of the date of such
disbursement unless it relates to specific date.
3.3 Certain Events.
At the time of, and as a condition to, the Closing and each disbursement
of any part of the Loans to be made by the Lender at or subsequent to the
Closing:
(a) No Event of Default will have occurred and be continuing, and no event
will have occurred and be continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
(b) No material adverse change will have occurred in the financial
condition, or results of operations of the Borrower since the dates of the
Financial Statements delivered to the Lender; and
(c) All of the Collateral Documents will have remained in full force and
effect.
3.4 Legal Matters.
At the time of the Closing and each subsequent disbursement, all legal
matters incidental thereto will be reasonably satisfactory to Mirick O'Connell,
legal counsel to the Lender.
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ARTICLE 4
COLLATERAL SECURITY
4.1 Composition of the Collateral.
The property in which a security interest is granted pursuant to the
provisions of Sections 4.2 and 4.3 is herein collectively called the
"Collateral". The Collateral, together with all other property of the Borrower
of any kind held by the Lender, will stand as one general, continuing collateral
security for all Obligations until all Obligations have been satisfied in full.
4.2 Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, the Borrower
hereby grants the Lender a lien on and a security interest in, all amounts that
may be owing, from time to time, by the Lender to the Borrower in any capacity,
including, but without limitation, any balance or share belonging to the
Borrower, or any deposit or other account with the Lender, which lien and
security interest will be independent of, and in addition to, any right of
set-off that the Lender has hereunder or otherwise.
4.3 Rights in Property Held Either by the Borrower or by the Lender.
As further security for the prompt satisfaction of all of the Obligations,
the Borrower hereby grants the Lender a lien upon and a continuing security
interest in, all of the following, wherever located, whether now owned or
hereafter acquired, together with all replacements therefor and proceeds
(including, but without limitation, insurance proceeds) and products thereof.
(a) All Inventory;
(b) All Accounts, Contracts, accounts receivable, contract rights, and
Chattel Paper, regardless of whether or not they constitute proceeds of other
Collateral;
(c) All General Intangibles, regardless of whether or not they constitute
proceeds of other Collateral, including, without limitation, all the Borrower's
rights (which the Lender may exercise or not as it in its sole discretion may
determine) to acquire or obtain Goods and/or services with respect to the
manufacture, processing, storage, sale, shipment, delivery or installation of
any of the Collateral;
(d) All rights to payment of any insurance proceeds or awards for damages
in connection with any condemnations or takings of any interest in and to any
real or personal property, wherever located, or any conveyance in lieu thereof;
(e) All products of and accessions to any of the Collateral;
(f) All liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the Collateral, including the right of stoppage in transit;
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(g) All obligations owing to the Borrower of every kind and nature, and
all choses in action;
(h) All tax refunds of every kind and nature to which the Borrower is now
or hereafter may become entitled no matter however arising, including, without
limitation, loss carry back refunds;
(i) All Intellectual Property, goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents;
(j) All Chattel Paper, Documents and Instruments (whether negotiable or
non-negotiable, and regardless of their being attached to Chattel Paper);
(k) All Equipment, including without limitation machinery, furniture,
motor vehicles, Fixtures and all other goods used in the conduct of the business
of the Borrower;
(l) All Securities, Securities Entitlements, Financial Assets, Securities
Accounts and Security Certificates;
(m) All proceeds of Collateral of every kind and nature and in whatever
form, including, without limitation, both cash and non-cash proceeds resulting
or arising from the rendering of services by the Borrower or the sale or other
disposition by the Borrower of the Inventory or other Collateral;
(n) All books and records relating to the conduct of the Borrower's
business including, without in any way limiting the generality of the foregoing,
those relating to its Accounts; and
(o) All deposit accounts maintained by the Borrower with any bank, trust
company, investment firm or fund, or any similar institution or organization.
4.4 Priority of Liens.
The foregoing liens will be first and prior perfected liens, subject to
Permitted Liens.
4.5 Financing Statements.
(a) The Borrower will:
(i) Execute such financing statements (including amendments thereto
and continuation statements thereof) in form satisfactory to the Lender as the
Lender, from time to time, may reasonably request;
(ii) Pay, or reimburse the Lender for paying, all costs and taxes of
filing or recording the same in such public offices as the Lender may designate;
and
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(iii) Take such other steps as the Lender, from time to time, may
reasonably request, including the noting of the Lender's lien on the Collateral
and on any certificates of title therefor, all to perfect, to the satisfaction
of the Lender, the Lender's interest in the Collateral.
(b) In addition to the foregoing, and not in limitation thereof:
(i) A carbon, photographic, or other reproduction of this Agreement
will be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof; and
(ii) The Borrower hereby appoints the Lender as its attorney-in-fact
(without requiring the Lender to act as such) to execute any financing statement
in the name of the Borrower, and to perform all other acts that the Lender deems
appropriate to perfect and continue its security interest in, and to protect and
preserve, the Collateral. The Lender will provide the Borrower with copies of
all documents executed by the Lender pursuant to this Section.
4.6 Mortgagees', Landlords', and Warehousemen's Waivers.
The Borrower will, within twenty (20) days after any request of the
Lender, use reasonable efforts to cause any mortgagee of real estate owned by
the Borrower, the landlord of premises leased by the Borrower located at 33
Lyman Street, Westborough, Massachusetts, and any warehouseman or other bailee
on whose premises any of the Collateral may be located to execute and deliver to
the Lender instruments, in form and substance reasonably satisfactory to the
Lender, by which such mortgagee, landlord or warehouseman or other bailee waives
its rights, if any, in and to all of the Collateral, provided that the failure
to so obtain any such instruments shall not be a default or Event of Default
hereunder as long as the Borrower uses reasonable efforts to obtain such
instruments.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Original.
To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender as follows:
(a) The Borrower is a corporation duly organized, validly existing, and in
good standing under the Laws of the Commonwealth of Massachusetts; the Borrower
has no Subsidiaries except the Guarantor and Seva Technologies, Inc.; the
Borrower has the lawful power to own its properties and to engage in the
business it conducts, and is duly qualified and in good standing as a foreign
corporation in the jurisdictions wherein the failure to so qualify would have a
material adverse effect; the states in which the Borrower is qualified to do
business are set forth in Exhibit 5.1(a); and the addresses of all places of
business of the Borrower are as set forth in Exhibit 5.1(a), which may be
amended and/or supplemented from time to time;
(b) The Borrower is not directly or indirectly controlled by, or acting on
behalf of, any Person which is an "Investment Company", within the meaning of
the Investment Company Act of 1940, as amended;
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(c) The Borrower is not in default with respect to any of its existing
material Liabilities, and the making and performance of this Agreement, the
Notes, and the Collateral Documents will not (immediately or with the passage of
time, the giving of notice, or both):
(i) Violate the Articles of Organization or by-laws of the Borrower
or violate any Laws or result in a default under any material contract,
agreement, or instrument to which the Borrower is a party or by which the
Borrower or its property is bound;
(ii) Result in the creation or imposition of any security interest
in, or lien or encumbrance upon, any of the assets of the Borrower, except in
favor of the Lender;
(d) The Borrower has the power and authority to enter into and perform
this Agreement, the Notes, and the Collateral Documents, and to incur the
obligations herein and therein provided for, and has taken all actions necessary
to authorize the execution, delivery, and performance of this Agreement, the
Notes, and the Collateral Documents;
(e) This Agreement, the Notes, and the Collateral Documents are, or when
delivered will be, valid, binding, and enforceable in accordance with their
respective terms;
(f) Except as disclosed in Exhibit 5.1(f) hereto, there is no pending
order, notice, claim, litigation, proceeding, or investigation against or
affecting the Borrower, whether or not covered by insurance, that would
reasonably be expected to adversely affect the financial condition of the
Borrower if adversely determined;
(g) Except as disclosed in Exhibit 5.1(g), the Borrower has good and
marketable title to all of their assets, none of which is subject to any
security interest, encumbrance or lien, or claim of any third Person, except for
Permitted Liens and the liens and security interests created pursuant to Article
4 in favor of the Lender are in all cases first and prior perfected liens
subject to Permitted Liens;
(h) The Financial Statements, including any schedules and notes pertaining
thereto, have been prepared in accordance with GAAP, and fully and fairly
present the financial condition of the Borrower at the dates thereof and the
results of operations for the periods covered thereby, and there has been no
material adverse change in the financial condition or business of the Borrower
from December 31, 1998 to the date hereof;
(i) As of the date hereof, the Borrower has no material Liabilities of any
nature, including, but without limitation, liabilities for taxes and any
interest or penalties relating thereto, except for Indebtedness disclosed on
Exhibit 5.1(i);
(j) Except as otherwise permitted herein, the Borrower has filed all
federal, state, and local tax returns and other reports required by any
applicable Laws to have been filed prior to the date hereof, has paid or caused
to be paid all taxes, assessments, and other governmental charges that are due
and payable prior to the date hereof, and has made adequate provision for the
payment of such taxes, assessments, or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in connection with any taxes, assessments, or charges not provided
for on its books, unless contesting the same in good faith;
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(k) Except to the extent that the failure to comply would not interfere
with the conduct of the business of the Borrower, the Borrower has complied with
all applicable Laws with respect to (i) any restrictions, specifications, or
other requirements pertaining to products that it manufactures or sells or to
the services it performs; (ii) the conduct its business; and (iii) the use,
maintenance, and operation of the real and personal properties owned or leased
by it in the conduct of its business;
(l) No representation or warranty by or with respect to the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made;
(m) Each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by the
Borrower in connection with the execution and delivery of this Agreement, the
Notes, and the Collateral Documents or the undertaking or performance of any
obligation hereunder or thereunder has been duly obtained or effected, except
for filings with the Patent and Trademark Office and Copyright Office;
(n) Except as set forth in Exhibit 5.1(n), all parties to all material
leases, contracts, and other commitments to which the Borrower is a party have
complied with the provisions of such leases, contracts, and other commitments
and no party is in default under any thereof and no event has occurred which,
but for the giving of notice or the passage of time, or both, would constitute a
default;
(o) The Borrower has not made any agreement or taken any action which may
cause anyone to become entitled to a commission or finder's fee as a result of
or in connection with the making of the Loans;
(p) The federal tax returns for the Borrower for all years of operation,
including the year ended December 31, 1998, have been filed with the Internal
Revenue Service and have not been challenged; and
(q) Any Employee Pension Benefit Plan, as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), of the Borrower
meets, as of the date hereof, the minimum funding standards of 29 U.S.C.A. 1082
(Section 302 of ERISA), and no Reportable Event or Prohibited Transaction, as
defined in ERISA, has occurred with respect to any Employee Benefit Plans, as
defined in ERISA, of the Borrower.
5.2 Survival.
All of the representations and warranties set forth in Section 5.1 will
survive until all Obligations are satisfied in full and there remain no
outstanding commitments hereunder.
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ARTICLE 6
COVENANTS OF THE BORROWER
6.1 Affirmative Covenants.
The Borrower does hereby covenant and agree with the Lender that, so long
as any of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply at all times with the following affirmative
covenants:
(a) The Borrower will use the proceeds of the Loans only to pay
Indebtedness and for working capital;
(b) The Borrower will furnish the Lender:
(i) As soon as available, but in any event within forty-five (45)
days after the close of each quarterly accounting period in each fiscal year
(i.e. March 31, June 30, September 30 and December 31): (1) consolidated and
consolidating statements of cash flows of the Borrower and the Guarantor for
such quarter and year to date, (2) consolidated and consolidating income
statements of the Borrower and the Guarantor for such quarter and year to date,
and (3) consolidated and consolidating balance sheets of the Borrower and the
Guarantor as of the end of such quarter, all in reasonable detail, subject to
normal year-end audit adjustments, prepared by the Borrower and the Guarantor
and certified by each of the Borrower's and the Guarantor's Presidents to be
accurate and complete and in comparative form with the corresponding period of
the preceding fiscal year;
(ii) As soon as available, but in any event within one hundred
twenty (120) days after the close of each fiscal year: (1) consolidated and
consolidating statements of cash flows of the Borrower and the Guarantor for
such fiscal year, (2) consolidated and consolidating income statements of the
Borrower and the Guarantor for such fiscal year, and (3) consolidated and
consolidating balance sheets of the Borrower and the Guarantor as of the end of
such fiscal year, all such statements to be in reasonable detail, including all
supporting schedules and comments; the consolidated statements and balance
sheets to be audited by Deloitte and Touche or another independent certified
public accountant selected by the Borrower and the Guarantor and reasonably
acceptable to the Lender, and certified by such accountants to have been
prepared in accordance with GAAP and to present fairly the financial position
and results of operations of the Borrower and the Guarantor; in addition, the
Borrower will obtain from such independent certified public accountants and
deliver to the Lender, within ninety (90) days after the close of each fiscal
year, their written statement that in making the examination necessary to their
certification they have obtained no knowledge of any Event of Default by the
Borrower, or disclosing all Events of Default of which they have obtained
knowledge; the Lender will have the right, from time to time to discuss the
affairs of the Borrower and the Guarantor directly with such independent
certified public accountants after notice to the Borrower and the Guarantor and
opportunity of the Borrower and the Guarantor to be represented at any such
discussions;
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(iii) Contemporaneously with the year end financial report required
by the foregoing paragraph (ii) a copy of the management letters issued to the
Borrower and the Guarantor by Deloitte and Touche or another certified public
accountant selected by the Borrower and the Guarantor and reasonably acceptable
to the Lender;
(iv) Contemporaneously with the financial information required by
the foregoing paragraphs (i) and (ii), a certificate (in the form of Exhibit
6.1(b)(iv) attached hereto) of the chief financial officer or other appointed
officer of each of the Borrower and the Guarantor, reasonably acceptable to the
Lender, in such capacity, stating that they have reviewed the provisions of this
Agreement and that a review of the activities of the Borrower and the Guarantor
during such period, has been made by them or under their supervision, with a
view to determining whether the Borrower and the Guarantor have fulfilled all
their obligations under this Agreement, including all financial covenants, and
that the Borrower and the Guarantor have observed and performed each undertaking
contained in this Agreement and are not in default in the observance or
performance of any of the provisions hereof or, if the Borrower or the Guarantor
will be so in default, specifying all such defaults and events of which they may
have knowledge;
(v) Within fifteen (15) days after the end of each calendar month,
in such form and detail as shall be satisfactory to the Lender, an aging, as of
the end of such month, of (a) the then Eligible Accounts and (b) all other
Accounts of the Borrower certified by the chief financial officer or other
appointed officer of each of the Borrower and the Guarantor, reasonably
acceptable to the Lender, in such capacity, to be complete and correct;
(vi) Within fifteen (15) days after the end of each calendar month
in which any Loans are outstanding (and at any additional time in the discretion
of the Lender or if any material deterioration in the Borrowing Base would be
disclosed thereby), a Borrowing Base Certificate as of the end of such month (or
as of a date not more than three (3) days prior to the date of any such
additional Borrowing Base Certificate). Each Borrowing Base Certificate shall be
effective only as accepted by the Lender (and with such revisions, if any, as
the Lender may require as a condition to such acceptance); and
(vii) Such other financial information reasonably required by the
Lender from time to time;
(c) The Borrower will maintain its Inventory, Equipment, real estate, and
other properties in good condition and repair (normal wear and tear excepted),
and will pay and discharge or cause to be paid and discharged, when due, the
cost of repairs to, or maintenance of, the same, and will pay or cause to be
paid in a timely manner all rental or mortgage payments. The Borrower hereby
agrees that, in the event it fails to pay or cause to be paid any such payment,
it will promptly notify the Lender thereof, and the Lender may, in its
discretion, do so and on demand be reimbursed therefor by the Borrower;
(d) The Borrower will maintain, or cause to be maintained, public
liability insurance and fire and extended coverage insurance on all assets that
are of a character usually insured by corporations engaged in the same or
similar businesses, all in form and amount sufficient to indemnify the Borrower
for 100% of the appraised value of any such asset lost or damaged
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(subject to any deductible customary in the Borrower's industry) or in an amount
consistent with the amount of insurance generally carried on comparable assets
within the industry and with such insurers as may be satisfactory to the Lender.
The Borrower will cause all such insurance policies to be payable to the Lender
and will deliver the policies of insurance to the Lender. Such policies will
contain a provision whereby they cannot be cancelled except after thirty (30)
days' written notice to the Lender. The Borrower will furnish to the Lender such
evidence of insurance as the Lender may require. The Borrower hereby agrees
that, in the event it fails to pay or cause to be paid the premium on any such
insurance when due, the Lender, in its discretion, may do so and be reimbursed
by the Borrower therefor. The Borrower hereby assigns to the Lender any returned
or unearned premiums that may be due the Borrower upon cancellation by the
insurer of any such policy for any reason whatsoever and direct any such insurer
to pay the Lender any amounts so due. After the occurrence of an Event of
Default, after the Lender determines that the Collateral is at risk, the Lender
is hereby appointed the attorney-in-fact of the Borrower (without requiring the
Lender to act as such) to endorse any check which may be payable to the Borrower
to collect any premiums or the proceeds of such insurance (other than proceeds
of public liability insurance), and any amount so collected may be applied by
the Lender toward satisfaction of any of the Obligations;
(e) The Borrower will pay when due, all taxes, assessments, and charges or
levies imposed upon it or on any of its property or which it is required to
withhold and pay, except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on its books;
provided, however, that the Borrower will pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that may have attached (or security therefor) appears imminent;
(f) The Borrower and the Guarantor will maintain at all times a
Consolidated Cash Flow Coverage Ratio equal to or greater than 2.00:1.00 to be
tested on a rolling four (4) quarters basis as of March 31, June 30, September
30 and December 31 of each fiscal year;
(g) The Borrower and the Guarantor will maintain a Consolidated Net Profit
of $200,000.00 for each quarter to be tested quarterly as of March 31, June 30,
September 30 and December 31 of each fiscal year;
(h) The Borrower will, when requested to do so at reasonable times, make
available for inspection by duly authorized representatives of the Lender any of
its books and records and will furnish the Lender any information regarding its
business affairs and financial condition within a reasonable time after written
request therefor;
(i) The Borrower will take all necessary steps to preserve its corporate
existence and franchises which are necessary to the operation of the Borrower's
business and comply with all present and future Laws applicable to it in the
operation of its business, and all material agreements to which it is subject
when the failure to so comply could have a material adverse effect;
(j) The Borrower will collect its Accounts only in the ordinary course of
business;
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(k) The Borrower will keep accurate and complete Records of its Accounts,
Inventory, and Equipment consistently with sound business practices;
(l) The Borrower will give immediate notice to the Lender of any
litigation or proceeding in which it is a party which may reasonably be expected
to involve liability of the borrower in excess of $100,000.00;
(m) Upon the written request of the Lender, the Borrower will furnish the
Lender with copies of all tax returns filed by the Borrower.
(n) The Borrower will pay when due (or within applicable grace periods)
all of its Indebtedness, except when the amount thereof is being contested in
good faith by appropriate proceedings and with adequate reserves therefor being
set aside on its books. If default be made by the Borrower in the payment of any
principal (or installment thereof) of, or interest on, any such Indebtedness,
the Lender will have the right, in its discretion, to pay such interest or
principal for the account of the Borrower and be reimbursed by the Borrower
therefor;
(o) The Borrower will notify the Lender immediately if it becomes aware of
the occurrence of any Event of Default or of any fact, condition, or event that
only with the giving of notice or passage of time or both, could reasonably
expected to become an Event of Default or if it becomes aware of any material
adverse change in the business prospects, financial condition (including,
without limitation, proceedings in bankruptcy, insolvency, reorganization, or
the appointment of a receiver or trustee), or results of operations of the
Borrower or of the failure of the Borrower to observe any of its undertakings
hereunder or under the Collateral Documents;
(p) The Borrower will notify the Lender thirty (30) days in advance of any
change in the location of any of its places of business or of the establishment
of any new, or the discontinuance of any existing, place of business;
(q) The Borrower will not and will not cause, suffer or permit any
employee benefit plan (as defined in Section 3 of ERISA) of the Borrower to (i)
engage in any "prohibited transaction" or incur any "accumulated funding
deficiencies" as those terms are defined in Sections 302, 406, 1013 and 2003(a)
of ERISA, (ii) terminate any pension plan (as defined in Section 3 of ERISA) in
a manner which could reasonably be expected to result in the imposition of a
lien on its assets pursuant to Section 4068 of ERISA or in a material liability
of the Borrower to participants, beneficiaries or the PBGC or (iii) fail to make
payment when due of all amounts which, under the provisions of any pension plan
(as defined in Section 3 of ERISA) which it is required to pay as contributions
thereto. The Borrower will not establish any new pension or defined benefit plan
or modify any such existing plan for employees subject to ERISA, which plan or
modification provides any benefits based on past service, without the advance
consent of the Lender to the amount of the aggregate past service liability
thereby created; and
(r) The Borrower will maintain all of its primary depository accounts with
the Lender.
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6.2 Negative Covenants.
The Borrower does hereby covenant and agree with the Lender that during
the term of this Agreement, it will comply at all times with the following
negative covenants:
(a) The Borrower will not change its name, enter into any merger,
consolidation, reorganization or recapitalization, or reclassify its capital
stock;
(b) The Borrower will not sell, transfer, lease, or otherwise dispose of
all or (except in the ordinary course of business) any material part of its
Assets except for such Assets which are (i) obsolete or (ii) not useful to the
Borrower;
(c) The Borrower will not sell, lease, transfer, assign, or otherwise
dispose of any of the Collateral, except in the ordinary course of business,
except for Collateral which is (i) obsolete or (ii) not useful to the Borrower;
(d) The Borrower will not mortgage, pledge, grant, or permit to exist a
security interest in, or a lien upon, any of its assets of any kind, now owned
or hereafter acquired, except for Permitted Liens;
(e) The Borrower will not become liable, directly or indirectly, as
guarantor or otherwise for any obligation of any other Person, except (i) for
the endorsement of commercial paper for deposit or collection in the ordinary
course of business and (ii) as a guarantor on a sublease;
(f) The Borrower will not incur, create, assume, or permit to exist any
Liabilities except: (i) the Obligations; (ii) existing Consolidated Indebtedness
listed on Exhibit 5.1(n) to the extent shown on such Exhibit 5.1(n) to be
permitted to exist after the Closing; (iii) trade indebtedness incurred in the
ordinary course of business (provided, however, that the Borrower may not
acquire inventory other than for cash or on open account except as expressly
approved in writing and in advance by the Lender); (iv) obligations for lease
payments for personal property incurred in the ordinary course of business; and
(v) obligations in connection with Permitted Liens;
(g) The Borrower will not declare or pay any cash dividends, or make any
other payment or distribution on account of their capital stock except as
otherwise permitted herein;
(h) The Borrower will not make any assignment or transfer of Accounts;
(i) Except as otherwise permitted herein, the Borrower will not form any
subsidiary after the date hereof, make any investment in (including any
assignment of Inventory or other property), or make any loan in the nature of an
investment to, any Person, except for loans or advances to the Guarantor;
(j) The Borrower will not make any loan or advance to any officer,
shareholder, director, or employee of the Borrower, except for business travel
and similar temporary advances in the ordinary course of business;
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(k) The Borrower will not purchase or otherwise invest in or hold
securities, nonoperating real estate or other nonoperating assets, except (i) in
the Guarantor and Seva Technologies, Inc., (ii) direct obligations of the United
States of America or the Lender and (iii) investments in an account maintained
with the Lender;
(l) The Borrower will not acquire or agree to acquire any stock in, all or
substantially all of the assets of, any Person;
(m) The Borrower will not (i) issue, redeem, purchase, retire, substitute
or replace any of its capital stock or options pertaining thereto for
consideration in excess of $100,000.00 in the aggregate, or (ii) grant, issue,
purchase or retire for any consideration, any warrant or right pertaining
thereto or other security convertible into any of the foregoing, or permit any
transfer, sale, redemption, retirement, substitution, replacement or other
change in the ownership of the outstanding capital stock of the Borrower;
(n) The Borrower will not prepay any Consolidated Indebtedness, except the
Obligations, or enter into or modify any agreement as a result of which the
terms of payment of any of the foregoing Indebtedness are waived or modified;
(o) The Borrower will not enter into any sale-leaseback transaction;
(p) The Borrower will not furnish the Lender any certificate or other
document that will contain any untrue statement of material fact or that will
omit to state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished;
(q) The Borrower and the Guarantor will not permit the Consolidated Cash
Flow/Leverage Ratio to exceed 1.40:1.00 to be tested quarterly on a rolling four
(4) quarter basis on March 31, June 30, September 30 and December 31 of each
fiscal year; and
(r) The Borrower will not directly or indirectly apply any part of the
proceeds of the Loan to the purchasing or carrying of any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations, or rulings thereunder.
6.3 Modification of Covenants.
All the covenants set forth in Sections 6.1 and 6.2 of this Agreement are
subject to modification by the Lender if the Borrower completes an initial
public offering.
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ARTICLE 7
DEFAULT
7.1 Events of Default.
The occurrence of any one or more of the following events will constitute
an Event of Default hereunder:
(a) The Borrower shall fail to pay when due any of the Obligations to the
Lender;
(b) The Borrower shall fail to observe or perform any other obligation to
be observed or performed by it hereunder or under any of the Collateral
Documents which failure continues for fifteen (15) days after written notice
from the Lender;
(c) The Borrower shall fail to pay any Consolidated Indebtedness due any
third Persons, and such failure will continue beyond any applicable grace
period, or the Borrower will suffer to exist any other event of default under
any material agreement binding the Borrower;
(d) Any financial statement, representation, warranty, or certificate made
or furnished by or with respect to the Borrower to the Lender in connection with
this Agreement, or as inducement to the Lender to enter into this Agreement, or
in any separate statement or document to be delivered to the Lender hereunder,
shall be materially false, incorrect, or incomplete when made;
(e) The Borrower shall admit its inability to pay its debts as they mature
or will make an assignment for the benefit of itself or any of its creditors;
(f) Proceedings in bankruptcy, or for reorganization of the Borrower or
for the readjustment of any of its debts under the Bankruptcy Code, as amended,
or any part thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced against or by
the Borrower and, except with respect to any such proceedings instituted by the
Borrower, will not be discharged within sixty (60) days of their commencement;
(g) A receiver or trustee shall be appointed for the Borrower or for any
substantial part of its assets, or any proceedings will be instituted for the
dissolution or the full or partial liquidation of the Borrower, except with
respect to any such appointments requested or instituted by the Borrower, such
receiver or trustee will not be discharged within sixty (60) days of his
appointment, and except with respect to any such proceedings instituted by the
Borrower, such proceedings will not be discharged within sixty (60) days of
their commencement;
(h) The Borrower shall suffer final judgments for payment of money (in
excess of $100,000.00 in the aggregate) and will not discharge the same within a
period of sixty (60) days unless, pending further proceedings, execution has not
been commenced or, if commenced, has been effectively stayed;
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(i) A judgment creditor of the Borrower will obtain possession of any
material part of the assets of the Borrower by any means, including (without
implied limitation) levy, distraint, replevin, or self-help;
(j) A default or Event of Default shall have occurred under (i) the
Guaranty or (ii) that certain Security Agreement of even date between the
Guarantor and the Lender; or
(k) The Guarantor shall fail to ratify the Guaranty upon the request of
the Lender.
7.2 Acceleration.
At its option, and at any time, whether immediately or otherwise, the
Lender may, upon the occurrence of any Event of Default, declare all Obligations
immediately due and payable without further action of any kind without notice,
demand or presentment.
ARTICLE 8
THE LENDER'S RIGHTS AND REMEDIES
8.1 The Lender's Rights Upon Default
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender, without presentment, demand, notice, protest or advertisement of any
kind, will have the following rights.
8.2 Account Debtors
Upon the occurrence of an Event of Default and at any time thereafter, (i)
the Lender may notify account debtors, at the Borrower's expense, that the
Collateral has been assigned to the Lender and that payments will be made
directly to the Lender, (ii) upon request of the Lender, the Borrower will
notify such account debtors that their accounts must be paid to the Lender,
(iii) at the request of the Lender, the Borrower will hold all checks, drafts,
cash and other remittances in trust for the Lender and deliver them in kind to
the Lender, and (iv) the Lender will have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in its
own name or in the name of the Borrower.
8.3 Possession and Foreclosure of Collateral
Upon the occurrence of an Event of Default and at any time thereafter, to
the extent that the Borrower could legally do so, the Lender may, in the
Lender's sole discretion (i) enter onto, occupy and use any premises owned by
the Borrower or in which the Borrower has any interest, (ii) take possession of
all Collateral, (iii) operate and use the Equipment, complete work in process
and sell Inventory without being liable to the Borrower on account of any
losses, damage or depreciation that may occur as a result thereof (so long as
the Lender acts in good faith), and (iv) lease or license the Collateral to any
Person for such purposes. In any event, the Lender may sell, lease, assign and
deliver the whole or any part of the Collateral, at public or private sale, for
cash, upon credit or for future delivery, at such prices and upon such terms as
the Lender deems advisable. The Lender may sell or lease Collateral alone or in
conjunction with other property, real or personal, and allocate the sale
proceeds or leases among the items of Collateral sold
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without the necessity of the Collateral being present at any such sale, or in
view of prospective purchasers thereof. If notice of sale is legally required,
the Borrower agrees that ten (10) days written notice will be deemed reasonable.
Upon a public sale, the Lender may become the purchaser of the whole or any part
of the Collateral sold, discharged from all claims and free from any right of
redemption. In case of any such sale by the Lender of all or any of the
Collateral on credit, or for future delivery, such Collateral so sold may be
retained by the Lender until the selling price is paid by the purchaser. The
Lender will incur no liability in case of the failure of the purchaser to take
possession and pay for the Collateral so sold. In case of any such failure, the
said Collateral may be resold. Any Collateral remaining unsold after being
offered at public auction may be abandoned or disposed in a commercially
reasonable manner.
In any event, at any time and from time to time the Lender may abandon the
Collateral or any part thereof in a commercially reasonable manner. The Borrower
agrees immediately upon demand to take possession of any and all abandoned
Collateral and to remove it from any location in the possession of or under the
control of the Lender.
8.4 Use of Intellectual Property
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may (i) use all or any part of the Intellectual Property which the
Borrower now has or may hereafter acquire, and (ii) license such Intellectual
Property to third parties, seek registration of such Intellectual Property in
any state or nation or prosecute pending applications for patent, trademark, or
service marks in the Borrower's name in any state or nation.
8.5 Notification of Default to Third Parties
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may notify the Borrower's suppliers, account debtors and other third
parties of the default and of any and all decisions made and actions taken by
the Lender with respect to this Agreement, the Obligations or the Collateral,
without liability of any kind, except for actions taken by the Lender in bad
faith or in a grossly negligent manner.
8.6 Assembly of Collateral
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may require the Borrower to assemble the Collateral in a single location
at a place to be designated by the Lender and make the Collateral at all times
secure and available to the Lender.
8.7 Lien, Set-off.
The Borrower hereby grants to the Lender, a lien, security interest and
right of setoff as security for the Obligations, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Lender. At any time, without demand or notice, the
Lender may set off the same or any part thereof and apply the same to any of the
Obligations even though unmatured and regardless of the adequacy of any other
collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS
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RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
8.8 Exercise of Other Remedies
Upon the occurrence of any Event of Default and at any time thereafter,
the Lender may exercise the remedies of a Lender afforded by the Uniform
Commercial Code and other applicable law or by the terms of any agreement,
including the Collateral Documents, between the Borrower and the Lender.
8.9 Cumulative Rights and Remedies
All rights and remedies of the Lender, whether provided for herein or in
other agreements, instruments or documents or conferred by law, are cumulative
and may be exercised alone or simultaneously.
ARTICLE 9
ATTORNEY-IN-FACT
9.1 Attorney-In-Fact
After the occurrence of an Event of Default, after the Lender determines,
in a commercially reasonable manner, that the Collateral is at risk, the
Borrower hereby irrevocably appoints the Lender, or its designee, as the
Borrower's true and lawful attorney-in-fact, with full power, as follows: (i) to
endorse the name of the Borrower on any assignments, notes, checks, drafts,
money orders, or other instruments of payment for Collateral; (ii) to sign or
endorse the name of the Borrower on any negotiable instrument, invoice, freight
or express bill, bill of lading, storage or warehouse receipts, drafts,
assignments, verifications and notices in connection with accounts; (iii) to
obtain, adjust, settle and cancel, in the Borrower's name, insurance policies
and to sign the Borrower's name on settlement checks or drafts; (iv) in the
Borrower's name, to do any act which this Agreement requires Borrower to do,
and, (v) to give notice to the United States Post Office to effect changes of
address so that mail addressed to the Borrower may be delivered directly to the
Lender. In exercising this power-of-attorney, the Lender will not be liable to
the extent that it acts in good faith, and does not act in a grossly negligent
manner.
ARTICLE 10
MISCELLANEOUS
10.1 Construction.
The provisions of this Agreement will be in addition to those of the Note,
the Collateral Documents and any other guaranty, pledge or security agreement,
note, or other evidence of liability now or hereafter held by the Lender, all of
which will be construed as complementary to each other. Nothing herein contained
will prevent the Lender from enforcing any or all other guaranty, pledge or
security agreements, notes, or other evidences of liability in accordance with
their respective terms.
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10.2 Further Assurance.
From time to time, the Borrower will execute and deliver to the Lender
such additional documents and will provide such additional information as the
Lender may reasonably require to carry out the terms of this Agreement and be
informed of the status and affairs of the Borrower.
10.3 Enforcement and Waiver by the Lender.
The Lender will have the right at all times to enforce the provisions of
this Agreement and the Collateral Documents in strict accordance with the terms
hereof and thereof, notwithstanding any conduct or custom on the part of the
Lender in refraining from so doing at any time or times. The failure of the
Lender at any time or times to enforce its rights under such provisions,
strictly in accordance with the same, will not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
as having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy will not be deemed a waiver or release of any other right or
remedy.
10.4 Pledge to the Federal Reserve.
The Lender may at any time pledge all or any portion of its rights under
this Agreement, the Notes and the Collateral Documents to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof will release the
Lender from its obligations under such documents.
10.5 Usury Laws.
All agreements between the Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Obligations or otherwise, will the amount paid
or agreed to be paid to the Lender for the use or the forbearance of the
Obligations exceed the maximum permissible under applicable law. As used herein,
the term "applicable law" will mean the law in effect as of the date hereof
provided, however that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Obligations will be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of the Borrower and the Lender in the execution, delivery
and acceptance of the Notes to contract in strict compliance with the laws of
the Commonwealth of Massachusetts from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof or of any of
the loan documents at the time of performance of such provision will be due,
will involve transcending the limit of such validity prescribed by applicable
law, then the obligation to be fulfilled will automatically by reduced to the
limits of such validity, and if under or from circumstances whatsoever the
Lender should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest will be applied to
the reduction of principal balance of the Notes and not to the payment of
interest. This provision will control every other provision of all agreements
between the Borrower and the Lender.
10.6 Expenses of the Lender.
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The Borrower will, on demand, reimburse the Lender for all reasonable
expenses, including the reasonable fees and expenses of legal counsel for the
Lender, incurred by the Lender in connection with the preparation,
administration, amendment, modification, or enforcement of this Agreement and
the Collateral Documents and the collection or attempted collection of any of
the Obligations.
10.7 Payments.
All payments will be in lawful money of the United States in immediately
available funds.
10.8 Notices.
Any notices or consents required or permitted by this Agreement will be in
writing and will be deemed delivered if delivered in person or if sent by
certified mail, postage prepaid, return receipt requested, facsimile or
telegraph, as follows, unless such address is changed by written notice
hereunder:
(A) If to the Borrower:
Intrinsix Corp.
33 Lyman Street
Westborough, MA 01581
Attn: James Gobes, President
With a copy to:
Peter B. Tarr, Esquire
Hale & Dorr LLP
60 State Street
Boston, MA 02109
(B) If to the Lender:
BankBoston, N.A.
100 Front Street
Worcester, MA 01608
Attention: James P. Quitadamo, Asst. Vice President
With a copy to:
Glen M. Mair, Esquire
Mirick O'Connell
100 Front Street
Worcester, MA 01608-1477
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10.9 Waiver and Release by the Borrower.
To the maximum extent permitted by applicable Laws, the Borrower:
(a) Waives (i) protest of all commercial paper at any time held by the
Lender on which the Borrower is in any way liable; (ii) except as the same may
herein be specifically granted, notice of acceleration and of intention to
accelerate; and (iii) notice and opportunity to be heard, after acceleration in
the manner provided herein, before exercise by the Lender of the remedies of
self-help, set-off, or of other summary procedures permitted by any applicable
Laws or by any agreement with the Borrower, and, except where required hereby or
by any applicable Laws, notice of any other action taken by the Lender; and
(b) Releases the Lender and its officers, attorneys, agents, and employees
from all claims for loss or damage caused by any act or omission on the part of
any of them except willful misconduct and bad faith or gross negligence.
10.10 Sale to Third Party.
The Lender will have the unrestricted right at any time or from time to
time, and without any other party's consent, to assign all or any portion of its
rights and obligations hereunder to one or more banks or other financial
institutions (each, an "Assignee"), and the Borrower and each other party agree
that they will execute, or cause to be executed, such documents, including
without limitation, amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as the Lender will
deem necessary to effect the foregoing. In addition, at the request of the
Lender and any such Assignee, the Borrower will issue one or more new promissory
notes in the same form as the existing promissory notes, as applicable, to any
such Assignee and, if the Lender has retained any of its rights and obligations
hereunder following such assignment to the Lender, which new promissory notes
will be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by the Lender prior to such assignment and
will reflect the amount of the respective commitments and loans held by such
Assignee and the Lender after giving, effect to such assignment. Upon the
execution and delivery of appropriate assignment documentation, amendments and
any other documentation required by the Lender in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by the
Lender, and such Assignee, such Assignee will be a party to this Agreement and
will have all of the rights and obligations of the Lender hereunder (and under
any and all other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have been
assigned by the Lender pursuant to the assignment documentation between the
Lender and such Assignee, and the Lender will be released from its obligations
hereunder and thereunder to a corresponding extent. The Borrower will not be
required to pay for the preparation of such new documents. The Lender will use
reasonable efforts to provide copies to the Borrower of any such assignment.
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10.11 Participations.
The Lender will have the unrestricted right at any time and from time to
time, and without the consent of or notice to the Borrower or any other party,
to grant to one or more banks or other financial institutions (each a
"Participant") a participating interest in the Lender's obligation to lend
hereunder and/or any or all of the Loan held by the Lender hereunder. In the
event of any such grant by the Lender of a participating interest to a
Participant, whether or not upon notice to the Borrower or any other party, the
Lender will remain responsible for the performance of its obligations hereunder
and the Borrower will continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations hereunder. The Lender may
furnish any information concerning the Borrower in its possession from time to
time to prospective assignees and Participants, provided that the Lender will
require any such prospective assignee or Participant to agree in writing to
maintain the confidentiality of such information.
10.12 Applicable Law.
This Agreement is entered into and performable in the Commonwealth of
Massachusetts and will be subject to and construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
10.13 Binding Effect, Assignment, and Entire Agreement.
This Agreement will inure to the benefit of, and will be binding upon, the
respective successors and permitted assigns of the parties hereto. The Borrower
has no right to assign any of its rights or obligations hereunder without the
prior written consent of the Lender. This Agreement, including the Exhibits
hereto, all of which are hereby incorporated herein by reference, and the
documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed on
behalf of each party.
10.14 Severability.
If any provision of this Agreement will be held invalid under any
applicable Laws, such invalidity will not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.
10.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which will be deemed to be an original, but all of which together will
constitute but one and the same instrument.
10.16 Application of Proceeds
All proceeds received by the Lender hereunder, including without
limitation, insurance proceeds, condemnation proceeds and proceeds received
pursuant to the Lender's exercise of its rights hereunder may be applied to the
Obligations in such order as determined by the Lender.
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10.17 Appraisals/Audits
The Lender may perform, at the Borrower's expense, periodic appraisals of
any of the Assets and the cost of each appraisal will be bourne by the Borrower.
The Lender may perform, at the Borrower's expense, periodic field examinations
and/or audits of the Borrower at any time and the cost of each field examination
and/or audit will be bourne by the Borrower.
10.18 Replacement Documents.
Upon receipt of an affidavit of any officer of the Lender as to the loss,
theft, destruction or mutilation of this Agreement or any other security
document which is not a public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of this Agreement or other security
document, the Borrower will issue, in lieu thereof, a replacement agreement or
other security document of like tenor.
10.19 WAIVER OF JURY TRIAL.
THE LENDER AND THE BORROWER AGREE THAT THEY, INCLUDING ANY ASSIGNEE OR
SUCCESSOR, WILL NOT SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM,
OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT,
ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN THEM. NEITHER THE LENDER NOR THE BORROWER WILL SEEK TO CONSOLIDATE ANY
SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE
LENDER AND THE BORROWER AND THESE PROVISIONS WILL BE SUBJECT TO NO EXCEPTIONS.
THE LENDER AND THE BORROWER AGREE THAT THE PROVISIONS OF THIS SECTION WILL BE
FULLY ENFORCED IN ALL INSTANCES.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a
sealed instrument as of the day and year first above written.
INTRINSIX CORP.
/s/ Alison Kravice By: /s/ Jim Gobes
- -------------------------------- ----------------------------------
Witness James Gobes, President
/s/ Alison Kravice By: /s/ Brian Meeks
- -------------------------------- ----------------------------------
Witness Brian Meeks, Treasurer
BANKBOSTON, N.A.
/s/ Alison Kravice By: /s/ James P. Quitadamo
- -------------------------------- ----------------------------------
Witness Its Duly Authorized Officer
31
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Exhibit 10.6
REVOLVING LINE OF CREDIT NOTE
$1,500,000.00 January 13, 2000
Worcester, Massachusetts
FOR VALUE RECEIVED, INTRINSIX CORP., a Massachusetts corporation having
its principal place of business at 33 Lyman Street, Westborough, Massachusetts
01581 (the "Borrower") promises to pay to BANKBOSTON, N.A., a national bank
having an office at 100 Front Street, Worcester, Massachusetts 01608 (the
"Lender"), or order, at the Lender's place of business, the principal sum of ONE
MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000.00), or so much as
may have been advanced to the Borrower and remains unpaid, in lawful money of
the United States of America in immediately available funds, with interest on
the unpaid balance hereof at the rates and in the manner hereafter provided.
The unpaid principal of this Note from time to time outstanding shall bear
interest, payable monthly in arrears, computed on the basis of the actual number
of days elapsed over a year assumed to have 360 days, at a fluctuating annual
rate equal to the "Base Rate" plus one-half percent (0.50%). "Base Rate" means
the annual rate of interest announced from time to time by the Lender at its
head office as its Base Rate. Any change in the interest rate will become
effective without notice simultaneously with each change by the Lender in its
Base Rate. The Base Rate is a reference rate established by the Lender and does
not necessarily represent the lowest or best rate being charged to any customer.
Interest shall be payable monthly in arrears, the first such payment of
interest to be due and payable on February 29, 2000 and thereafter on the last
day of each succeeding month. The entire indebtedness evidenced by this Note is
payable immediately upon the occurrence of an Event of Default and in any event
no later than May 31, 2001.
The Borrower may borrow, repay (without penalty), and reborrow, the
principal hereunder from time to time in accordance with the terms of that
certain Loan and Security Agreement between the Borrower and the Lender of even
date herewith (the "Agreement"), provided that the outstanding principal balance
hereunder shall not exceed the Borrowing Base, as defined in the Agreement. The
proceeds of this Note will be disbursed, if at all, from time to time as set
forth in the Agreement. No advances will be made hereunder after the earlier to
occur of (i) May 31, 2001 or (ii) an Event of Default.
To the extent that any payment is due on a day which is not a Business
Day, an adjustment will be made in accordance with the Modified Following
Business Day Convention so that the due date will be the first following
Business Day. A "Business Day" means a day on which commercial banks settle
payments in New York.
Each payment made hereunder shall be applied first to interest then due on
the unpaid balance of principal and then to principal. If the entire amount of
any required principal and/or interest payment is not paid in full within ten
(10) days after the same is due, the Borrower shall
1
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pay to the Lender a late fee equal to five percent (5.00%) of the required
payment, excluding sums due after demand or upon acceleration.
This Note is issued pursuant to the Agreement and is subject to all of the
terms and conditions contained in the Agreement. A default or an Event of
Default under the Agreement shall also constitute an Event of Default hereunder.
At its option, and at any time, after an Event of Default has occurred under the
Agreement or this Note, the Lender may declare all obligations of the Borrower
to the Lender, including without limitation all amounts hereunder, due and
payable as provided herein without further action of any kind, including without
notice, demand or presentment.
Upon default, after demand, after maturity, after judgment has been
rendered on this Note, or upon the occurrence of an Event of Default, the unpaid
principal of all advances shall, at the option of the Lender, bear interest at a
rate which is four (4) percentage points per annum greater than that which would
otherwise be applicable.
Any deposits or other sums at any time credited by or due from the Lender
to the Borrower, any endorser or guarantor hereof, may at all times be held and
treated as collateral for the payment of this Note and any and all other
liabilities (direct or indirect, absolute or contingent, sole, joint or several,
secured or unsecured, due or to become due, now existing or hereafter arising)
of any such maker to the holder. The Lender may apply or set-off such deposits
or other sums against such liabilities at any time.
The Borrower and any guarantor hereby grant to the Lender, a lien,
security interest and right of setoff as security for this Note, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Lender. At any time, without
demand or notice, the Lender may set off the same or any part thereof and apply
the same to any of the Obligations (as defined in the Agreement), even though
unmatured and regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE BORROWER AND ANY GUARANTOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
The Borrower, guarantors, endorsers or other persons now or hereafter
liable for the payment of any of the indebtedness evidenced by this Note,
severally agree, by making, guaranteeing or endorsing this Note or by making any
agreement to pay any of the indebtedness evidenced by this Note, to waive
presentment for payment, protest and demand, notice of protest, demand and of
dishonor and nonpayment of this Note, and consent, on one or more occasions,
without notice of further assent (a) to the substitution, exchange or release of
the collateral securing this Note or any part thereof at any time, (b) to the
acceptance or release by the holder or holders hereof at any time of any
additional collateral or security for or other guarantors of this Note, (c) to
the modification or amendment, at any time and from time to time, of this Note,
the Agreement or any instrument securing this Note at the request of any person
liable thereon, (d) to the granting by the holder hereof of any extension of the
time for payment of this Note or for the performance of the agreements,
covenants and conditions contained in this Note, the
2
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Agreement or any other instrument securing this Note, at the request of any
person liable thereon, and (e) to any and all forbearances and indulgences
whatsoever. Such consent shall not alter or diminish the liability of any
person.
The Borrower agrees to pay all reasonable expenses or costs, including
attorneys' fees and costs of collection, which may be incurred by the holder
hereof in connection with the enforcement of any obligations hereunder or
representation with respect to bankruptcy or insolvency proceedings.
Upon receipt of an affidavit of any officer of the Lender as to the loss,
theft, destruction or mutilation of this Note or any other security document
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of this Note or other security
document, the Borrower will issue, in lieu thereof, a replacement note or other
security document in the same principal amount thereof and otherwise of like
tenor.
The Lender may at any time pledge or assign all or any portion of the
Lender's rights under this Note and the other loan documents to a Federal
Reserve Bank, provided, however, that no such pledge or assignment shall release
the Lender from the Lender's obligations hereunder or any other loan document.
The obligations of the Borrower hereunder are secured by all assets of the
Borrower as set forth in the Agreement.
THE LENDER (BY ITS ACCEPTANCE HEREOF) AND THE BORROWER AGREE THAT THEY,
INCLUDING ANY ASSIGNEE OR SUCCESSOR OF THEM, SHALL NOT SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON,
OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN THEM. THE LENDER AND THE BORROWER SHALL NOT
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE LENDER AND THE BORROWER AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. THE LENDER AND THE BORROWER AGREE THAT THE PROVISIONS
OF THIS PARAGRAPH WILL BE FULLY ENFORCED IN ALL INSTANCES.
Executed as a sealed instrument as of the 13th day of January, 2000.
INTRINSIX CORP.
/s/ James P. Quitadamo By: /s/ Jim Gobes
- ---------------------------------------- -------------------------------
Witness James Gobes, President
/s/ James P. Quitadamo By: /s/ Brian Meeks
- ---------------------------------------- ---------------------------------
Witness Brian Meeks, Treasurer
3
<PAGE>
Exhibit 10.7
TERM NOTE
January 13, 2000
$1,200,000.00 Worcester, Massachusetts
FOR VALUE RECEIVED, INTRINSIX CORP., a Massachusetts corporation having
its principal place of business at 33 Lyman Street, Westborough, Massachusetts
01581 (the "Borrower") promises to pay to BANKBOSTON, N.A., a national bank
having an office at 100 Front Street, Worcester, Massachusetts 01608 (the
"Lender"), or order, at the Lender's place of business, the principal sum of ONE
MILLION TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($1,200,000.00), in lawful money
of the United States of America in immediately available funds, with interest on
the unpaid balance hereof at the rates and in the manner hereafter provided.
The unpaid principal of this Note from time to time outstanding shall bear
interest, payable monthly in arrears, computed on the basis of the actual number
of days elapsed over a year assumed to have 360 days, at a fluctuating annual
rate equal to the "Base Rate" plus one- half percent (.50%). "Base Rate" means
the annual rate of interest announced from time to time by the Lender at its
head office as its Base Rate. Any change in the interest rate will become
effective without notice simultaneously with each change by the Lender in its
Base Rate. The Base Rate is a reference rate established by the Lender and does
not necessarily represent the lowest or best rate being charged to any customer.
Interest shall be payable monthly in arrears. The Borrower agrees to pay
principal in equal installments of $25,000.00 each plus accrued interest
beginning on February 15, 2000 and continuing on the same day of each month
thereafter. If not sooner paid, the Borrower agrees to pay the unpaid principal
and interest on January 15, 2004.
Commencing forty-five (45) days after the quarterly accounting period
ending on March 31, 2000 and forty-five (45) days after each quarterly
accounting period thereafter (June 30, September 30, December 31 and March 31 of
each year) the Borrower shall pay to the Lender an amount equal to ten percent
(10%) of each dollar of any Excess Cash Flow (as defined in the Agreement).
To the extent that any payment is due on a day which is not a Business
Day, an adjustment will be made in accordance with the Modified Following
Business Day Convention so that the due date will be the first following
Business Day. A "Business Day" means a day on which commercial banks settle
payments in New York.
This Note is issued pursuant to that certain Loan and Security Agreement
between the Borrower and the Lender of even date (the "Agreement") and is
subject to all of the terms and conditions contained in the Agreement. A default
or an Event of Default under the Agreement shall also constitute an Event of
Default hereunder. At its option, and at any time, after an Event of Default has
occurred under the Agreement or this Note, the Lender may declare all
obligations of the Borrower to the Lender, including without limitation all
amounts hereunder, due and payable as provided herein without further action of
any kind, including without notice, demand or presentment.
1
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While no Event of Default exists each payment under this Note will be
applied first to interest then due and then to principal. When an Event of
Default exists any payments will be applied to interest and/or principal as
determined by the Lender in its discretion. The Borrower may, at any time and
without penalty, prepay any part or all of the unpaid principal balance of this
Note in multiples of $1,000.00 unless this Note is being paid in full.
Each payment made hereunder shall be applied first to interest then due on
the unpaid balance of principal and then to principal. If the entire amount of
any required principal and/or interest payment is not paid in full within ten
(10) days after the same is due, the Borrower shall pay to the Lender a late fee
equal to five percent (5.00%) of the required payment, excluding sums due after
demand or upon acceleration.
Upon default, after demand, after maturity, after judgment has been
rendered on this Note, or upon the occurrence of an Event of Default, the unpaid
principal of all advances shall, at the option of the Lender, bear interest at a
rate which is four (4) percentage points per annum greater than that which would
otherwise be applicable.
Any deposits or other sums at any time credited by or due from the Lender
to the Borrower, any endorser or guarantor hereof, may at all times be held and
treated as collateral for the payment of this Note and any and all other
liabilities (direct or indirect, absolute or contingent, sole, joint or several,
secured or unsecured, due or to become due, now existing or hereafter arising)
of any such maker to the holder. The Lender may apply or set-off such deposits
or other sums against such liabilities at any time.
The Borrower and any guarantor hereby grant to the Lender, a lien,
security interest and right of setoff as security for this Note, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Lender. At any time, without
demand or notice, the Lender may set off the same or any part thereof and apply
the same to any of the Obligations (as defined in the Agreement), even though
unmatured and regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE BORROWER AND ANY GUARANTOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
The Borrower, guarantors, endorsers or other persons now or hereafter
liable for the payment of any of the indebtedness evidenced by this Note,
severally agree, by making, guaranteeing or endorsing this Note or by making any
agreement to pay any of the indebtedness evidenced by this Note, to waive
presentment for payment, protest and demand, notice of protest, demand and of
dishonor and nonpayment of this Note, and consent, on one or more occasions,
without notice of further assent (a) to the substitution, exchange or release of
the collateral securing this Note or any part thereof at any time, (b) to the
acceptance or release by the holder or holders hereof at any time of any
additional collateral or security for or other guarantors of this Note, (c) to
the modification or amendment, at any time and from time to time, of this Note,
the Agreement or any instrument securing this Note at the request of any person
liable thereon, (d) to the granting by the holder hereof of any extension of the
time for payment of this Note or
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<PAGE>
for the performance of the agreements, covenants and conditions contained in
this Note, the Agreement or any other instrument securing this Note, at the
request of any person liable thereon, and (e) to any and all forbearances and
indulgences whatsoever. Such consent shall not alter or diminish the liability
of any person.
The Borrower agrees to pay all reasonable expenses or costs, including
attorneys' fees and costs of collection, which may be incurred by the holder
hereof in connection with the enforcement of any obligations hereunder or
representation with respect to bankruptcy or insolvency proceedings.
Upon receipt of an affidavit of any officer of the Lender as to the loss,
theft, destruction or mutilation of this Note or any other security document
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of this Note or other security
document, the Borrower will issue, in lieu thereof, a replacement note or other
security document in the same principal amount thereof and otherwise of like
tenor.
The Lender may at any time pledge or assign all or any portion of the
Lender's rights under this Note and the other loan documents to a Federal
Reserve Bank, provided, however, that no such pledge or assignment shall release
the Lender from the Lender's obligations hereunder or any other loan document.
The obligations of the Borrower hereunder are secured by all assets of the
Borrower as set forth in the Agreement.
THE LENDER (BY ITS ACCEPTANCE HEREOF) AND THE BORROWER AGREE THAT THEY,
INCLUDING ANY ASSIGNEE OR SUCCESSOR OF THEM, SHALL NOT SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON,
OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN THEM. THE LENDER AND THE BORROWER SHALL NOT
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY DISCUSSED BY THE LENDER AND THE BORROWER AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. THE LENDER AND THE BORROWER AGREE THAT THE PROVISIONS
OF THIS PARAGRAPH WILL BE FULLY ENFORCED IN ALL INSTANCES.
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Executed as a sealed instrument as of the 13th day of January, 2000.
INTRINSIX CORP.
/s/ James P. Quitadamo By: /s/ Jim Gobes
- ------------------------------------ -------------------------
Witness James Gobes, President
/s/ James P. Quitadamo By: /s/ Brian Meeks
- ------------------------------------ -------------------------
Witness Brian Meeks, Treasurer
4
<PAGE>
Exhibit 10.8
SUBORDINATION AGREEMENT (Debts)
INTRINSIX CORP., a Massachusetts corporation having its principal place of
business at 33 Lyman Street, Westborough, Massachusetts 01581(herein called the
"Borrower") is indebted to the amount indicated to each of the following:
Gintaras Subatis, 10 Bald Hill Farm Road, Sharon, MA 02607 $174,901.43
- ---------------------------------------------------------- -------------
(herein called the "Creditors" whether there be one or more than one).
The Borrower and the Creditors have requested BANKBOSTON, N.A., a national
bank having offices at 100 Front Street, Worcester, Massachusetts 01608 (herein
called the "Bank") to grant financial accommodations to the Borrower, and the
Bank has indicated that it is unwilling to do so unless the Borrower and the
Creditors shall Join in this Agreement and the Creditors shall subordinate, to
the extent and in the manner hereinafter set forth, the indebtedness
hereinbefore referred to and also all other indebtedness (except for current or
future salaries or payments made as compensation for employment) of the Borrower
to the Creditors, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising (herein called the "Subordinated Debt")
to all indebtedness of the Borrower to the Bank, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising (herein
called the "Bank Debt") (for the purposes of this Agreement, the term "Bank
Debt" shall include all indebtedness of the Borrower to the Bank, direct or
indirect, absolute or contingent, due or to become due, non-existing or
hereafter arising).
NOW, THEREFORE, in consideration of the premises and as an inducement to
the Bank to grant financial accommodations to the Borrower, whether by loan or
advance or extension of time for the payment of Bank Debt or otherwise, and in
consideration of the granting thereof, the Borrower and the Creditors warrant to
and covenant with the Bank as follows:
1. Provided no event of default exists under any agreement or instrument
evidencing the Bank Debt (a "Default"), the Borrower may make regularly
scheduled payments of principal and interest to the Creditors. No prepayments of
any kind, including acceleration after a default, may bc made to the Creditors.
After a Default, the Borrower shall not, directly or indirectly, make any
payment of principal or interest on account of or transfer any collateral for
any part of the Subordinated Debt, the Creditors shall not demand or accept from
the Borrower or any other person any such payment or collateral nor cancel, set
off or otherwise discharge any part of the Subordinated Debt and neither the
Borrower nor the Creditors shall otherwise take or permit any action prejudicial
to or inconsistent with the Bank's priority position over the Creditors created
by this Agreement.
2. The Creditors hereby assign, transfer and set over to the Bank the
Subordinated Debt, whether evidenced by negotiable or non-negotiable
instruments, securities or other writings, book entries or otherwise, together
with any collateral therefor, and have endorsed or assigned to the Bank and
herewith deposit with it the following:
<PAGE>
3. The Creditors will not commence or join with any other creditor or
creditors of the Borrower in commencing any bankruptcy, reorganization or
insolvency proceedings against the Borrower. At any meeting of creditors of the
Borrower or in the event of any proceeding, voluntary or involuntary, for the
distribution, division or application of all or part of the assets of the
Borrower or the proceeds thereof, whether such proceeding be for the
liquidation, dissolution or winding up of the Borrower or its business, a
receivership, insolvency or bankruptcy proceeding, an assignment for the benefit
of creditors or a proceeding by or against the Borrower for relief under any
bankruptcy, reorganization or insolvency law or any law relating to the relief
of debtors, readjustment of indebtedness, reorganization, arrangement,
composition or extension or otherwise, if all Bank Debt has not been paid in
full at the time, the Bank is hereby irrevocably authorized at any such meeting
or in any such proceeding:
(a) To enforce claims comprising Subordinated Debt either in its own name
or the name or names of any Creditors, by proof of debt, proof of claim, suit
or otherwise;
(b) To collect, in accordance with this Agreement, any assets of the
Borrower distributed, divided or applied by way of dividend or payment, or
any such securities issued, on account of Subordinated Debt and apply the
same, or the proceeds of any realization upon the same that the Bank in its
discretion elects to effect, to Bank Debt until all Bank Debt shall have been
paid in full, rendering any surplus to the Creditors, pro rata;
(c) To vote claims comprising Subordinated Debt to accept or reject any
plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; and
(d) To take generally any action in connection with any such meeting or
proceeding which the Creditors might otherwise take.
4. Should any payment on account of or any collateral for any part of the
Subordinated Debt be received by the Creditors in violation hereof, such payment
or collateral shall be delivered forthwith to the Bank by the recipient for
application to Bank Debt, in the form received except for the addition of any
endorsement or assignment necessary to effect transfer of all rights therein to
the Bank. The Bank is irrevocably authorized to supply any required endorsement
or assignment which may have been omitted. Until so delivered any such payment
or collateral shall be held by the recipient in trust for the Bank and shall not
be commingled with other funds or property of the recipient.
5. No part of the Subordinated Debt is evidenced by any instrument, security
or other writing which has not previously been or is not concurrently being
deposited with the Bank; the Creditors are the lawful owners of the Subordinated
Debt and no part thereof has been assigned to or subordinated or subjected to
any other security interest in favor of anyone
<PAGE>
other than the Bank. Until all Bank Debt has been paid in full, the Borrower
shall not issue any instrument, security or other writing evidencing any part of
the Subordinated Debt except at the request of and in the manner requested by
the Bank; and the Creditors shall not assign or subordinate any part of the
Subordinated Debt except to or in favor of the Bank.
6. The Bank is hereby authorized to demand specific performance of this
Agreement, whether or not the Borrower shall have complied with the provisions
hereof applicable to it, at any time when the Creditors shall have failed to
comply with any provision hereof applicable to them. The Creditors hereby
irrevocably waive any defense based on the adequacy of a remedy at law which
might be asserted as a bar to the remedy of specific performance hereof in any
action brought therefor by the Bank. The Creditors further waive presentment,
notice and protest in connection with all negotiable instruments evidence Bank
Debt or Subordinated Debt to which they may be parties, notice of the acceptance
of this Agreement by the Bank, notice of any loan made, extension granted or
other action taken in reliance hereon and all demands and notices of every kind
in connection with this Agreement, Bank Debt or Subordinated Debt; assent to any
renewal, extension or postponement of the time of payment of Bank Debt or any
other indulgence with respect thereto, to any substitution, exchange or release
of collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon; and agree to the provisions of any instrument,
security or other writing evidencing Bank Debt.
7. The Borrower and the Creditors shall execute and deliver to the Bank such
further instruments and shall take such further action as the Bank may at any
time or times reasonably request in order to carry out the provisions and intent
of this Agreement.
8. If all indebtedness of the Borrower to the Bank is at any time or times
hereafter paid in full and thereafter the Borrower again becomes indebted to the
Bank, the provisions of this Agreement shall apply to such new indebtedness
unless before the same is incurred the Creditors notify the Bank in writing to
the contrary. If, in reliance upon this Agreement, the Bank grants loans or
extensions or takes other action, after the death or incapacity of or the
termination of this Agreement by the Creditors, but prior to the receipt by the
Bank of written notice of such death, incapacity or termination, the Bank's
rights shall be the same as they would have been had such death, incapacity or
termination not occurred, and the Borrower and the Creditors shall indemnify the
Bank and save it harmless from and against any loss, cost, liability or expense
which it may have incurred or suffered by reason of any action so taken by it.
9. If any warranty herein contained shall prove to have been materially false
when made or in the event of a breach by the Borrower or the Creditors in the
performance of any of the terms hereof, the Bank may, at its option, declare all
Bank Debt to be forthwith due and payable, without presentment, demand, protest,
or notice of any kind, notwithstanding any time or credit otherwise allowed.
10. The rights granted to the Bank hereunder are solely for its protection
and nothing herein contained shall impose on the Bank any duties with respect to
any property of the Borrower or the Creditors received hereunder beyond
reasonable care in its custody and preservation while in the Bank's possession.
The Bank shall have no duty to preserve rights against prior parties in any
instrument or chattel paper received hereunder.
11. This Agreement is intended to take effect as a sealed instrument, shall
be binding upon the Borrower, the Creditors, their respective executors,
administrators, other legal
<PAGE>
representatives, successors and assigns, shall inure to the benefit of the Bank,
its successors and assigns and shall be construed in accordance with the laws of
the Commonwealth of Massachusetts. The obligations hereby undertaken by the
Creditors shall be their joint and several obligations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed this 13th day of January, 2000.
BORROWER: CREDITOR:
- --------- ---------
INTRINSIX CORP.
By: /s/ Jim Gobes /s/ Gintaras Subatis
--------------------------- ---------------------------
James Gobes, President Gintaras Subatis
By: /s/ Brian Meeks
---------------------------
Brian Meeks, Treasurer
<PAGE>
Exhibit 10.9
SUBORDINATION AGREEMENT (Liens)
This SUBORDINATION AGREEMENT (the "Agreement") is dated January 13, 2000
and is between BANKBOSTON, N.A., a national bank with offices at 100 Front
Street, Worcester, Massachusetts 01608 (the "Bank"), and GINTARAS SUBATIS, an
individual with a mailing address of 10 Bald Hill Farm Road, Sharon,
Massachusetts 02607 ("Subatis"). Each Creditor (hereinafter defined) has filed
or may file financing statements under the Uniform Commercial Code (the "UCC")
and the Creditors desire to agree among themselves as to the relative priority
of their respective security interests in the Collateral.
For good and valuable consideration, the receipt of which is acknowledged,
the Bank and Subatis agree as follows:
1. Definitions. As used in this Agreement:
Bank shall mean BankBoston, N.A., its successors and assigns.
Bank Obligations means all indebtedness, liabilities and obligations of
the Obligor to the Bank of whatsoever nature and howsoever evidenced, whether
direct or indirect, absolute or contingent, now existing or hereafter incurred
or arising (including all renewals, extensions or modifications thereof and all
fees, costs and expenses incurred by the Bank in connection with the
preparation, administration, collection or enforcement thereof), including
without limitation, the indebtedness, liabilities and obligations of the Obligor
set forth in the Loan and Security Agreement.
Bank Security Agreement means all of the agreements now existing or
hereafter entered into pursuant to which the Obligor grants or purports to grant
a security interest in the Collateral (or a portion thereof) to the Bank as
security for the Bank Obligations, including without limitation, the Loan and
Security Agreement.
Creditor means either or both of the Bank or Subatis, as the context
requires.
Collateral shall mean all personal property, and other assets of the
Obligor, now owned or hereafter acquired, in or upon which either or both of the
Creditors now or hereafter has a lien, including without limitation, the
"Collateral" as defined in the Loan and Security Agreement, and all equipment,
inventory, accounts and general intangibles, as well as all chattel paper,
contract rights, documents of title (as such terms are used or defined in the
UCC) and all real property and all other personal property and fixtures of every
kind and description, tangible and intangible, and all products and proceeds of
such property (including, without limitation, insurance and condemnation
proceeds and escrow accounts covering any such property) and books and records
relating thereto, in which a security interest has been granted pursuant to any
security agreement.
Loan and Security Agreement means that certain Loan and Security Agreement
dated January 13, 2000 by and between the Bank and the Obligor.
<PAGE>
Obligor means Intrinsix Corp., a Massachusetts corporation with a
principal place of business at 33 Lyman Street, Westborough, Massachusetts.
Person means an individual, partnership, corporation, business, trust,
joint stock company, unincorporated association, joint venture, governmental
authority or other entity of whatever nature.
Security Interest means any security interest of a Creditor in any
Collateral, however arising.
Subatis Obligations means all indebtedness, liabilities and obligations of
the Obligor to Subatis of whatsoever nature and howsoever evidenced, whether
direct or indirect, absolute or contingent, now existing or hereafter incurred
or arising (including all renewals, extensions or modifications thereof and all
fees, costs and expenses incurred by Subatis in connection with the preparation,
administration, collection or enforcement thereof), including without limiting
the generality of the foregoing, pursuant to leases, loans and guaranties
provided "Subatis Obligations" shall not include any liabilities or obligations
to Subatis with respect to any salary or payments made to Subatis as
compensation in the ordinary course of the Obligor's business.
Subatis Security Agreement means all of the agreements pursuant to which
the Obligor grants or purports to grant a security interest to Subatis as
security for the Subatis Obligations.
2. Priority of Security Interests.
(a) Each Creditor agrees that the Security Interest of the Bank in the
Collateral ranks and will rank first and senior in priority,
operations and effect to the priority, operation and effect of the
Security Interest of Subatis in the Collateral. Each Creditor agrees
that the Security Interest of Subatis in the Collateral ranks and
will rank in all respects behind and junior in priority, operation
and effect to the priority, operation and effect of the Security
Interest of the Bank in the Collateral.
(b) The priorities specified herein are applicable irrespective of any
statement in any security agreement or in any other agreement to the
contrary, the time or order or method of attachment or perfection
(or failure to perfect) of Security Interests or the time or order
of filing of financing statements or expected acquisition of
purchase money or other security interests.
3. Division of Proceeds. The proceeds of any sale, disposition or other
realization by either Creditor upon the Collateral (or any portion
thereof) will be distributed in the following order of priorities:
First, to the Bank in an amount equal to all reasonable costs and expenses
incurred by the Bank in connection with or incident to the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral;
Second, to the payment or prepayment of all Bank Obligations; and
2
<PAGE>
Third, to the payment or prepayment of all Subatis Obligations.
4. No Representation or Warranties. The Creditors agree that they have not
made to each other nor do they hereby otherwise make to each other any
representations or warranties, express or implied, nor do they assume any
liability to each other with respect to: (1) the enforceability, validity,
value or collectibility of any of the Collateral (or any portion thereof)
or any guaranty or security which may have granted to either of them in
connection with any of the Obligations; or (2) Obligor's right, title,
interest, or right to transfer any of the Collateral (or any portion
thereof).
5. No Liability. Neither Creditor shall be liable to the other Creditor for
any action or failure to act or any of the judgment, negligence, or
mistake, or oversight whatsoever on the part of such Creditor or such
Creditor's agents, officers, employees or attorneys with respect to any
transaction relating to any of the obligations owed to it or the
enforcement of the Security Interest granted to it.
6. Obligations Under This Agreement Not Affected. The Creditors agree that
each Creditor may, at its sole discretion and without notice to the other
Creditor take any or all of the following actions with respect to the
obligations owed to such Creditor without affecting any of such Creditor's
rights under this Agreement; each Creditor may permit or agree with
Obligor with respect to:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations owed to it, or any
other amendment or waiver of or any consent to departure from any
agreement related to such obligations or any security agreement
executed for the benefit of such Creditor or any other agreements
related thereto;
(b) any release or amendment or waiver of or consent to departure from
any guaranty for all or any of the obligations owed to it, or any
release of any Person at any time primarily or secondarily liable
for all or any part of the obligations owed to it and/or any
collateral or security therefor;
(c) any alteration or exchange of any obligations owed to it, or release
or compromise of any such obligation;
(d) release its Security Interest in the Collateral; or
(e) exercise or refrain from exercising any rights against any Person
liable to such party under the obligations.
7. Assignment. Each Creditor may, from time to time, without notice to the
other Creditor, and without affecting any of such Creditor's rights
hereunder, assign or transfer any or all of the obligations owed such
Creditor or any interest therein; provided that neither Creditor may
assign any or all of its interests in the Collateral (or any portion
thereof) unless and until the assignee or transferee of such Creditor
shall agree in writing to be bound by the provisions of this Agreement.
3
<PAGE>
8. Specific Performance. Each Creditor is hereby authorized to demand
specific performance of this Agreement at any time when the other Creditor
shall have failed to comply with any of the provisions of this Agreement
applicable to such Creditor. Such Creditor hereby irrevocable waives any
defense based on the adequacy of a remedy at law which might be asserted
as a bar to such remedy of specific performance.
9. Amendment; Waiver. No amendment or waiver of a provision of this Agreement
shall be effective unless the same shall be in writing and signed by both
Creditors, and any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No delay
on the part of any Creditor in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial
exercise by such Creditor of any right, power or remedy preclude other of
further exercise thereof, or the exercise of any other right, power or
remedy.
10. Notices. Any notice required or permitted to be given under this Agreement
may be, and shall be deemed, given when deposited in the United States
mail, postage prepaid, or by telecopier or nationally recognized overnight
courier when delivered to the appropriate office for transmission, charges
prepaid, addressed to the applicable party at the address shown above, or
at such other address as it may, by written notice received by the other
party to this Agreement, have designated as its address for such purpose.
11. Entire Agreement. This Agreement embodies the entire agreement and
understandings of the Creditors and supersedes all prior agreements and
understandings of the Creditors relating to the subject matter herein
contained.
12. Captions. Section captions used in this Agreement are for convenience
only, and shall not affect the interpretation of the provisions of this
Agreement.
13. Counterparts. This Agreement may be executed by the undersigned parties in
any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. This
Agreement shall be become effective as of the date hereof when one or more
counterparts has been executed and delivered by each of the parties
hereto.
14. Termination. This Agreement shall remain in full force and effect until
the later of (1) the repayment in full of the Bank Obligations or (2) the
repayment in full of the Subatis Obligations.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts. Except as
otherwise provided in this Agreement, the rights and priorities of the
Creditors shall be determined in accordance with applicable law.
16. Successors and Assigns; Benefit of Agreement. This Agreement is solely for
the benefit of the Creditors and their successors, designees or assignees
and no other Persons, including, without limitation, the Obligor, shall
have any benefit, priority or interest under, or because of the existence
of, this Agreement.
4
<PAGE>
17. Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to each such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement in any other jurisdiction.
18. Controlling Contract. In the case of any conflict between this Agreement
and any security agreement, this Agreement shall control.
IN WITNESS WHEREOF, each Creditor has caused this Agreement to be duly
executed as of the 13th day of January, 2000.
BANKBOSTON, N.A.
/s/ Alison Kravice By: /s/ James P. Dutich
- -------------------------- -------------------------------
Witness Its Duly Authorized Officer
- -------------------------- -----------------------------------
Witness Gintaras Subatis
Read and agreed to by the Obligor:
INTRINSIX CORP.
/s/ James P. Dutich By: /s/ James Gobes
- --------------------------- -------------------------------
Witness to both James Gobes, President
By: /s/ Brian Meeks
-------------------------------
Brian Meeks, Treasuer
5
<PAGE>
Exhibit 10.10
ASSET PURCHASE AGREEMENT
by and among
INTRINSIX CORP.,
PRISM ACOUSTICS, INC.
(d/b/a The VHDL Technology Group)
and
WILLIAM D. BILLOWITCH
dated as of
May 18, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
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<PAGE>
Schedules to be provided by the Seller
1.1(a)(ii) - Contract Rights
1.1(a)(iii) - Fixed Assets
1.4 - Assumed Liabilities
1.5 - Allocation of the Base Purchase Price
2.3 - Third Party Consents
2.4 - Encumbrances
2.6 - Inventory
2.7 - Fixed Assets
2.10 - Contracts and Commitments
2.11 - Permits
2.12 - Intellectual Property
2.14 - Regulatory Approvals
Schedules to be provided by the Buyer
4.3 - Third Party Consents
4.5(i) - Capitalization
4.5(ii) - Commitments to Issue Securities
Exhibits
A - Instrument of Assumption of Liabilities
B - Bill of Sale
C - Employment Agreement
D - Trademark Assignment
- 3 -
<PAGE>
ASSET PURCHASE AGREEMENT
Agreement made as of the 18th day of May, 1998 by and among Intrinsix
Corp., a Massachusetts corporation (the "Buyer"), Prism Acoustics, Inc. (d/b/a
The VHDL Technology Group), a Delaware corporation (the "Seller") and William D.
Billowitch, the sole stockholder of the Seller (the "Stockholder"). The Buyer,
Seller and Stockholder are referred to collectively herein as the "Parties."
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business of the Seller, for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Seller shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase from the Seller, the following
properties, assets and other claims, rights and interests:
(i) all OEM and software product inventory of the
Seller, including without limitation all such inventories of the Seller's
software product formerly known as Sledgehammer 6 and all other raw materials,
work in process, finished goods, supplies, packaging materials, spare parts and
similar items (collectively, the "Inventory");
(ii) all rights of the Seller under the contracts,
agreements, licenses and other instruments set forth on Schedule 1.1(a)(ii)
attached hereto (collectively, the "Contract Rights");
- 6 -
<PAGE>
(iii) all of the machinery, equipment, tools, fixtures,
furniture, leasehold improvements and similar items of the Seller set forth on
Schedule 1.1(a)(iii) attached hereto (collectively, the "Fixed Assets");
(iv) all of the Seller's right, title and interest in
and to all intellectual and intangible property rights, including but not
limited to (i) inventions, discoveries, trade secrets, processes, formulas,
know-how, (ii) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, re-examination, utility
model, certificate of invention and design patents, patent applications,
registrations and applications for registrations, (iii) trademarks (other than
"Sledgehammer" and "VitalGen" and any derivations thereof, which shall not be
considered Intellectual Property or Assets for purposes of this Agreement),
service marks, trade dress, trade names (and derivations thereof) and
registrations and applications for registration thereof, (iv) copyrights and
registrations and applications for registration thereof, (v) mask works and
registrations and applications for registration thereof, (vi) computer software
(including source and object code) data and documentation, (vii) trade secrets,
procedural, training and product manuals and confidential business information,
whether patentable or non-patentable and whether or not reduced to practice,
know-how, manufacturing and product processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business, marketing plans and customer,
client and supplier lists and information, (viii) all license, OEM and other
agreements to which the Seller is a party (as licensor or licensee) or by which
the Seller is bound relating to any of the Intellectual Property (as defined
below), (ix) the Seller's Internet domain name "vhdl.com", (x) other proprietary
rights relating to any of the foregoing (including, without limitation, remedies
against infringements thereof and rights of protection of interest therein under
the laws of all jurisdictions) and (xi) copies and tangible embodiments thereof,
together with any developments or enhancements thereof (collectively, the
"Intellectual Property");
(v) all outstanding contracts, purchase orders and
purchase and other commitments for (a) the purchase of raw materials, work in
progress, finished goods, commodities, supplies, products or other personal
property of the Seller and (b) the receipt of services from the Seller
(collectively, the "Purchase Orders");
(vi) all claims, causes of action, chooses in action,
rights or recovery, right of set-off and rights of recoupment relating or
applicable to the Assets (as defined below), other than the Assets described in
this Subsection 1.1(a)(vi) (collectively the "Claims");
- 7 -
<PAGE>
(vii) all rights of the Seller under express or implied
warranties applicable to the Assets (as defined below) from suppliers of the
Seller, other than the Assets described in this Subsection 1.1(a)(vii)
(collectively, the "Warranties"); and
(viii) all other assets, properties, claims, rights and
interests of the Seller, relating to any of the Assets (as defined below), which
exist on the Closing Date, of every kind, nature and description, whether
tangible, intangible, real, personal or mixed.
(b) The Inventory, Contract Rights, Fixed Assets, Intellectual
Property, Purchase Orders, Claims, Warranties and other properties, assets and
business of the Seller described in paragraph (a) above shall be referred to
collectively as the "Assets."
1.2 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, the Seller
and Stockholder promptly shall execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action,
as the Buyer may reasonably request to more effectively transfer, convey and
assign to the Buyer, and to confirm the Buyer's title to, all of the Assets, to
put the Buyer in actual possession and operating control thereof, to assist the
Buyer in exercising all rights with respect thereto and to carry out the purpose
and intent of this Agreement.
1.3 Base Purchase Price.
(a) The purchase price for the Assets shall consist of:
(i) Seventy-Nine Thousand, Three Hundred and Fifty
Dollars ($79,350) in cash, payable by the Buyer at the Closing by cashiers or
certified check or by wire transfer of immediately available funds to an account
designated by the Seller (the "Cash Purchase Price"); and
(ii) Twenty Thousand (20,000) shares of Common Stock, no
par value per share, of the Buyer (the "Shares"), payable by delivery by the
Buyer at the Closing of a certificate or certificates representing the Shares
issued in the name of the Seller.
The Cash Purchase Price and the Shares shall be referred to collectively as (the
"Base Purchase Price").
- 8 -
<PAGE>
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption")
substantially in the form attached hereto as Exhibit A, pursuant to which it
shall assume and agree to perform, pay and discharge the obligations of the
Seller continuing after the Closing set forth on Schedule 1.4 attached hereto
(the "Assumed Liabilities").
(b) The Buyer shall not at the Closing assume or agree to
perform, pay or discharge, and the Seller shall remain unconditionally liable
for, any and all obligations, liabilities and commitments, whether fixed,
contingent or of any other nature or type whatsoever, of the Seller other than
the Assumed Liabilities (the "Retained Liabilities").
1.5 Allocation of Base Purchase Price and Assumed Liabilities. The
aggregate amount of the Base Purchase Price and the Assumed Liabilities shall be
allocated among the Assets as set forth on Schedule 1.5 attached hereto.
1.6 The Closing.
(a) The Closing shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts at 10:00 a.m., Boston time, on
May 18, 1998 or, if all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have not been satisfied or
waived by such date, on such mutually agreeable later date as soon as
practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Closing Date"). Any Party to this Agreement, including such Party's
representatives, may participate in the Closing telephonically. The Closing
shall be deemed to have occurred at 11:59 p.m., Boston time, on the Closing
Date.
(b) At the Closing:
(i) the Seller and Stockholder shall deliver to the
Buyer the various certificates, instruments and documents referred to in Section
6;
(ii) the Buyer shall deliver to the Seller the various
certificates, instruments and documents referred to in Section 7;
- 9 -
<PAGE>
(iii) the Seller and Stockholder shall execute and
deliver to the Buyer a Bill of Sale in the form attached hereto as Exhibit B
(the "Bill of Sale") and such other instruments of conveyance (e.g., trademark
assignments, patent assignments and copyrights and other intellectual property
license, including without limitation the form of Trademark Assignment attached
hereto as Exhibit D) as the Buyer may reasonably request in order to effect the
sale, transfer, conveyance and assignment to the Buyer of valid ownership of the
Assets;
(iv) the Buyer shall execute and deliver to the Seller
and Stockholder and the Seller and Stockholder shall acknowledge an Instrument
of Assumption in the form attached hereto as Exhibit A;
(v) the Buyer and Stockholder shall execute and deliver
an employment agreement in the form attached hereto as Exhibit C (the
"Employment Agreement");
(vi) the Buyer shall pay to the Seller the Cash Purchase
Price and deliver a certificate or certificates representing the Shares issued
in the name of the Seller as specified in Section 1.3;
(vii) the Seller shall deliver to the Buyer, or
otherwise cause the Buyer to take possession and control of, all of the Assets
of a tangible nature; and
(viii) the Buyer and the Seller shall execute and
deliver to each other Party a cross-receipt evidencing the transactions referred
to above.
2. Representations of the Seller and Stockholder
Except as disclosed in the attached schedules, which refer specifically to the
representations and warranties in this Agreement and which identify by Section
number the Section and Subsection to which such disclosure relates and are
delivered by the Seller and Stockholder to the Buyer prior to or simultaneously
with the execution of this Agreement (the "Seller Disclosure Schedule"), and
whether or not the Seller Disclosure Schedule is referred to in a specific
Section or Subsection herein, Seller and Stockholder, jointly and severally,
represent and warrant to the Buyer as follows:
2.1 Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has all requisite power
- 10 -
<PAGE>
and authority (corporate and other) to own its properties, to carry on its
business as now being conducted, to execute and deliver this Agreement and all
other agreements and instruments of conveyance and contemplated hereby,
including without limitation the Bill of Sale, Instrument of Assumption and
Trademark Assignment, and to consummate the transactions contemplated hereby and
thereby. The Seller is duly qualified to do business and in good standing in all
jurisdictions in which its ownership of property or the character of its
business requires such qualification. Certified copies of the Certificates of
Incorporation and Bylaws of the Seller, as amended to date, have been previously
or will be on the Closing Date delivered to the Buyer, are complete and correct,
and no amendments have been made thereto or have been authorized since the date
thereof. The Seller does not have any subsidiaries and does not own any capital
stock of or other equity interest in any corporation, partnership or other
entity.
2.2 Capitalization of the Seller. The Seller's authorized capital
stock consists of 1,000,000 shares of Common Stock, $.01 par value, of which
55,000 shares are issued and outstanding and held of record and beneficially by
the Stockholder. All of such shares have been duly and validly issued, are fully
paid and nonassessable and held of record by the Stockholder. No subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Seller is authorized
or outstanding and the Seller has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right.
2.3 Authorization. The execution and delivery of this Agreement by
the Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate and shareholder action. This Agreement and
all such other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby, to which each of the
Seller and the Stockholder is a party constitute the valid and legally binding
obligations of each of the Seller and Stockholder, enforceable against each of
the Seller and Stockholder in accordance with their respective terms. The
execution, delivery and performance by each of the Seller and Stockholder of
this Agreement and the other agreements provided for herein, and the
consummation by the Buyer of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to the
Seller or Stockholder; (b) violate the provisions of the Certificate of
Incorporation or Bylaws of the Seller; (c) violate any judgment, decree, order
or award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or
- 11 -
<PAGE>
cause any acceleration under, or cause the creation of any lien, charge or
encumbrance upon the properties or assets of the Seller pursuant to, any
indenture, mortgage, deed of trust or other instrument or agreement to which the
Seller or Stockholder is a party or by which the Seller or Stockholder or any of
the Seller's properties is or may be bound. Schedule 2.3 of the Seller
Disclosure Schedule sets forth a true, correct and complete list of all consents
and approvals of third parties that are required in connection with the
consummation by the Seller and Stockholder of the transactions contemplated by
this Agreement and the other agreements provided for herein.
2.4 Ownership of the Assets. Schedule 2.4 of the Seller Disclosure
Schedule sets forth a true, correct and complete list of all claims,
liabilities, liens, security interests, mortgages, restrictions, prior
assignments, pledges, charges, encumbrances and equities of any kind or nature
whatsoever affecting the Assets (collectively, the "Encumbrances"). The Seller
is, and at the Closing will be, the true and lawful owner of the Assets, and
will have the right to sell and transfer to the Buyer good, clear, record and
marketable title to the Assets, free and clear of all Encumbrances of any kind.
The delivery to the Buyer of all instruments of transfer of ownership
contemplated by this Agreement, including without limitation the Bill of Sale,
will vest good and marketable title to the Assets in the Buyer, free and clear
of all liens, mortgages, pledges, lines of credit, security interests,
restrictions, prior assignments, encumbrances and claims of any kind or nature
whatsoever.
2.5 Litigation. Each of the Seller and Stockholder is not a party
to, or to each of the Seller's and Stockholder's knowledge threatened with, and
none of the Assets are subject to, any litigation, suit, action, investigation,
proceeding or controversy before any court, administrative agency or other
governmental authority relating to or in any way affecting the Assets. Neither
the Seller nor Stockholder is in violation of or in default with respect to any
judgment, order, writ, injunction, decree or rule of any court, administrative
agency or governmental authority or any regulation of any administrative agency
or governmental authority relating to or affecting the Assets.
2.6 Inventory. Schedule 2.6 of the Seller Disclosure Schedule sets
forth a true, correct and complete list of the Inventory as of the date hereof,
including a description and the book value thereof. Such Inventory consists of
items of a quality and quantity which are usable or saleable without discount in
the ordinary course of the business conducted by the Seller. The value of all
items of obsolete materials and of materials of below standard quality has been
written down to realizable market value, and the values at which such Inventory
is
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carried reflect the normal inventory valuation policy of the Seller of stating
the Inventory at the lower of cost or market value in accordance with generally
accepted accounting principles.
2.7 Fixed Assets. Schedule 2.7 of the Seller Disclosure Schedule
sets forth a true, correct and complete list of all Fixed Assets as of the date
hereof, including a description and the book value thereof. All of the Fixed
Assets are in good operating condition and repair, normal wear and tear
excepted, are currently used by the Seller in the ordinary course of business
and in the production of products of the Seller and normal maintenance has been
consistently performed with respect to such Fixed Assets.
2.8 Change in Assets. Neither the Seller nor the Stockholder has
knowledge of any existing or threatened occurrence, event or development which,
as far as can be reasonably foreseen, could have a material adverse effect on
any of the Assets.
2.9 Tax Matters. The Seller has filed all federal, state and local
tax returns which are required to be filed and has paid all taxes, interest,
penalties, assessments and deficiencies which have become due or which have been
claimed to be due. The Seller is current in the payment of all income,
franchise, real estate, sales, use and withholding taxes and other employee
benefits, taxes or imposts. No deficiencies have been asserted or assessed as a
result of any audit by the Internal Revenue Service or any state or local taxing
authority and no such deficiency or audit has been proposed or threatened.
2.10 Contracts and Commitments.
(a) Schedule 2.10 of the Seller Disclosure Schedule contains a
true, complete and correct list and description of the following contracts and
agreements, whether written or oral, which are included in or relate in any way
to any of the Assets being conveyed to the Buyer pursuant to this Agreement
(such contracts and agreements, together with all contracts, agreements and
commitments concerning confidentiality or non-competition, collectively referred
to herein as the "Contracts"):
(i) all loan agreements, indentures, mortgages and
guaranties to which the Seller is a party or by which the Seller or any of its
property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal property leases
and lease purchase agreements to which the Seller is a party or by which the
Seller or any of its property is bound;
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(iii) all contracts, agreements, commitments, purchase
orders or other understandings or arrangements to which the Seller is a party or
by which the Seller or any of its property is bound which (A) involve payments
or receipts by the Seller of more than $5,000 in the case of any single
contract, agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties thereto or
(B) which may materially adversely affect the condition (financial or otherwise)
of any of the Assets;
(iv) all agency, marketing, distributor, reseller, sales
representative, OEM, license and similar agreements to which the Seller is a
party;
(v) all contracts, agreements or other understandings or
arrangements between the Seller any stockholder, officer, director, employee,
consultant or affiliate of the Seller;
(vi) all leases and subleases, whether operating,
capital or otherwise, under which the Seller is lessor or lessee;
(vii) all contracts and other arrangements under which
the consequences of a default or termination could have a material adverse
effect on any of the Assets;
(viii) all contracts, agreements and commitments
concerning confidentiality or non-competition entered into by the Seller not in
the ordinary course of its business;
(ix) all partnership, collaboration and joint venture
agreements to which the Seller is a party or by which the Seller or any of its
properties is bound; and
(x) any other Contract Right, material agreement or
contract entered into by the Seller.
(b) With respect to the Contracts:
(i) each Contract is a valid and binding agreement of
the Seller, enforceable against the Seller in accordance with its terms, and the
Seller does not have
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any knowledge that any Contract is not a valid and binding agreement of the
other parties thereto;
(ii) the Seller has fulfilled all material obligations
required pursuant to the Contracts to have been performed by the Seller on its
part prior to the date hereof and the Seller has no reason to believe that it
will not be able to fulfill, when due, all of its obligations under the
Contracts which remain to be performed by the Seller after the date hereof;
(iii) the Seller is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or giving
of notice or both would constitute such a default, result in a loss of rights or
result in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(iv) to the knowledge of the Seller, there is no
existing breach or default by any other party to any Contract, and no event has
occurred which with the passage of time or giving of notice or both would
constitute a default by such other party, result in a loss of rights or result
in the creation of any lien, charge or encumbrance thereunder or pursuant
thereto;
(v) the Seller is not restricted by any Contract from
carrying on the portion of its business relating to the Assets anywhere in the
world; and
(vi) the Seller has no written or oral Contracts to sell
products or perform services which are expected to be performed at, or to result
in, a loss.
(c) The continuation, validity and effectiveness of each
Contract will not be affected by the transfer thereof to Buyer under this
Agreement and all such Contracts are assignable to Buyer without the consent of
any other party.
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Seller to the Buyer provided, however, that
with respect to contracts, agreements and commitments concerning
confidentiality, or non-competition, only the agreements set forth in Section
2.10(a)(viii) have previously been delivered to the Buyer.
2.11 Compliance with Agreements and Laws. The Seller has all
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities necessary to
conduct the portion of its business relating to the
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Assets and to own and operate the Assets (collectively, the "Permits"). Schedule
2.11 of the Disclosure Schedule sets forth a true, correct and complete list of
all such Permits, copies of which have previously been delivered by the Seller
to the Buyer. Neither the Seller nor the Stockholder is in violation of any law,
regulation or ordinance (including, without limitation, laws, regulations or
ordinances relating to building, zoning, environmental, disposal of hazardous
substances, land use or similar matters) relating to the Assets, the violation
of which could have a material adverse effect on the Assets or Seller's ability
to convey good and marketable title to the Assets to the Buyer hereunder. The
portion of the Seller's business relating to the Assets and the ownership or use
by the Seller of the Assets do not violate, in any material respect, any
federal, state, local or foreign laws, regulations or orders (including, but not
limited to, any of the foregoing relating to employment discrimination,
occupational safety, environmental protection, hazardous waste (as defined in
the Resource Conservation and Recovery Act, as amended, and the regulations
adopted pursuant thereto), conservation, or corrupt practices, the enforcement
of which would have a material and adverse effect on the portion of the Seller's
business relating to the Assets or the Assets. The Seller has not since January
1, 1993 received any notice or communication from any federal, state or local
governmental or regulatory authority or otherwise of any such violation or
noncompliance.
2.12 Intellectual Property.
(a) The Seller is the sole and exclusive owner of, or has the
unrestricted right to use without further payment, all Intellectual Property and
all designs, permits, labels and packages used on or in connection therewith,
used in the operations of its business or necessary for the operation of its
business as presently conducted or proposed to be conducted. Upon execution and
delivery by the Seller to the Buyer of the instruments of conveyance referred to
in Section 6 hereof, each such item of Intellectual Property will be owned or
available for use by the Buyer on identical terms and conditions immediately
following the Closing. The Intellectual Property owned or used by the Seller
and, when transferred to the Buyer pursuant to this Agreement, will be
sufficient to permit the Buyer to conduct the business of the Seller as
currently conducted by the Seller. The Seller has taken all reasonable measures
necessary to protect the proprietary nature of each item of Intellectual
Property, and to maintain in confidence all trade secrets and confidential
information, that it owns or uses. To the knowledge of the Seller, no other
person or entity has any rights to any of the Intellectual Property (except, in
the case of off-the-shelf software programs licensed by the Seller pursuant to
"shrink wrap" licenses, for the licensors of such off-the-shelf software
programs), and, to the
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knowledge of the Seller, no other person or entity is infringing, violating or
misappropriating any of the Intellectual Property.
(b) Neither the business of the Seller, as conducted through
the date of this Agreement, nor the Intellectual Property has infringed or
violated, or constituted a misappropriation of, and does not now infringe or
violate, or constitute a misappropriation of, any intellectual property rights
of any other person or entity. The Seller has not received any complaint, claim
or notice alleging any such infringement, violation or misappropriation.
(c) Schedule 2.12 of the Seller Disclosure Schedule identifies
(i) all patents, copyright registrations, mask works, trademarks, service marks,
trade dress, any renewal rights for any of the foregoing, and any applications
and registrations for any of the foregoing, which are included in the
Intellectual Property and owned by or on behalf of, or used by the Seller, (ii)
all hardware products and tools, software products and tools, and services that
are currently published, offered, or under development by Seller, and (iii) all
licenses, sublicenses and other agreements to which Seller is a party and
pursuant to which Seller or any other person is authorized to use the
Intellectual Property or exercise any other rights with regard thereto. The
Seller has delivered to the Buyer true, correct and complete copies of all such
Intellectual Property listed in clauses (i) through (iii) above (as amended to
date) and has made available to the Buyer true, correct and complete copies of
all other written documentation evidencing ownership of, and any claims or
disputes relating to, each such item. With respect to each such item of
Intellectual Property that the Seller owns:
(i) the Seller possesses all right, title and interest
in and to such item;
(ii) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction; and
(iii) except in connection with the sale of products in
the ordinary course of business, the Seller has not agreed to indemnify any
person or entity for or against any infringement, misappropriation or other
conflict with respect to such item.
(d) Schedule 2.12 of the Seller Disclosure Schedule identifies
each item of Intellectual Property used at any time during the five-year period
prior to the Closing Date that is owned by a party other than the Seller (other
than off-the-shelf software programs licensed by the Seller pursuant to "shrink
wrap" licenses). The Seller has supplied the Buyer
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with true, correct and complete copies of all licenses, sublicenses or other
agreements (each as amended to date) pursuant to which the Seller uses such
Intellectual Property (other than "shrink wrap" licenses pursuant to which the
Seller licenses off-the-shelf software programs), all of which are listed on
Schedule 2.12 of the Seller Disclosure Schedule. With respect to each such item
of Intellectual Property:
(i) the license, sublicense or other agreement covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement is
assignable by the Seller to the Buyer without the consent or approval of any
party and such license, sublicense or other agreement will continue to be legal,
valid, binding, enforceable and in full force and effect without acceleration
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws which affect creditor's rights
generally;
(iii) with regard to such license, sublicense or other
agreement, the Seller is not, and, to the Seller's knowledge, no other party is,
in breach or default, and no event involving the Seller, and, to the knowledge
of the Seller, no event involving any other party, has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder;
(iv) to the Seller's knowledge, the underlying item of
Intellectual Property is not subject to any outstanding judgment, order, decree,
stipulation or injunction; and
(v) except in connection with the sale of products in
the ordinary course of business, the Seller has not agreed to indemnify any
person or entity for or against any interference, infringement, misappropriation
or other conflict with respect to such item.
(e) The Intellectual Property conveyed hereby includes all
intellectual property owned by the Seller or its affiliates relating to or used
in connection with the Seller's business (other than the trademarks
"Sledgehammer" and "VitalGen" and any derivations thereof).
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(f) Seller has obtained written agreements from all employees
and third parties with whom Seller has shared confidential proprietary
information (i) of Seller or (ii) received from others which Seller is obligated
to treat as confidential, which agreements require such employees and third
parties to keep such information confidential. The Seller has delivered copies
of all such written agreements, as executed, to Buyer.
2.13 Acquired Assets Complete. The Assets are, when utilized by a
labor force substantially similar to that employed by the Seller on the date
hereof, adequate to conduct the business operations currently conducted by the
Seller with the Assets.
2.14 Regulatory Approvals. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Seller or Stockholder and which are necessary for
the execution and delivery by the Seller and Stockholder of this Agreement and
the documents and agreements to be executed and delivered by the Seller and
Stockholder in connection herewith, are set forth on Schedule 2.14 of the Seller
Disclosure Schedule and have been, or will be prior to the Closing Date,
obtained and satisfied.
2.15 Real Property. The Seller does not own any real property.
2.16 Investment. With the exception of the intended distribution of
the Shares by the Seller to the Stockholder immediately following the Closing,
the seller is acquiring the Shares for its own account for investment and not
with a view to, or for sale in connection with, any distribution thereof, nor
with any present intention of distributing or selling the same, and, except as
contemplated by this Agreement, the agreements, documents and transactions
provided for herein, Seller has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof.
2.17 Experience. Seller has carefully reviewed the representations
concerning the Buyer contained in this Agreement and has made detailed inquiry
concerning the Buyer, its business and its personnel; the officers of the Buyer
have made available to Seller any and all written information which it has
requested and have answered to Seller's satisfaction all inquiries made by
Seller; and Seller has sufficient knowledge and experience in investing in
companies similar to the Buyer so as to be able to evaluate the risks and merits
of its investment in the Buyer and is able financially to bear the risks
thereof.
2.18 Authority. Seller has full power and authority to execute,
deliver and perform this Agreement and the Agreements and documents provided for
herein and to
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consummate the transactions contemplated hereby and thereby, and represents that
it has not been organized, reorganized or recapitalized specifically for the
purpose of investing in Buyer.
2.19 Legend. The Seller and Stockholder hereby agree that all
certificates representing the Shares (whether issued by the Buyer to the Seller
or subsequently distributed by the Seller to the Stockholder) shall bear a
legend substantially in the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated
unless and until such shares are registered under such Act or an
opinion of counsel satisfactory to the Buyer is obtained to the
effect that such registration is not required."
3. Representations of the Stockholder. The Stockholder represents and
warrants to the Buyer as follows:
3.1 Authority. Stockholder has full power and authority to execute,
deliver and perform this Agreement and the agreements and documents provided for
herein and to consummate the transactions contemplated hereby and thereby,
including without limitation the Employment Agreement, Bill of Sale, Instrument
of Assumption and Trademark Assignment in accordance with their respective
terms.
3.2 Conflicting Agreements. Stockholder is not, as a result of the
nature of the business conducted or proposed to be conducted by the Buyer or for
any other reason, in violation of (i) any fiduciary or confidential
relationship, (ii) any term of any contract or covenant relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation, or (iii) any other contract or agreement, or any judgment,
decree or order of any court or administrative agency relating to or affecting
the right of Stockholder to be employed by the Buyer on the Closing Date after
giving effect to the transactions contemplated hereby. No such relationship,
term, judgment, decree, or order will conflict with Stockholder's obligations to
use his best efforts to promote the interests of the Buyer on the Closing Date
after giving effect to the transactions contemplated hereby, nor will the
execution and delivery of this Agreement, nor the carrying on of the Buyer's
business as an officer or employee of the Buyer, conflict with any such
relationship, term, judgment, decree or order.
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3.3 Investment. Stockholder (who is receiving the Shares in a
distribution from the Seller immediately following the Closing) is acquiring or
receiving the Shares for its own account for investment and not with a view to,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the same, and, except as contemplated by
this Agreement, the agreements, documents and transactions provided for herein,
Stockholder has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
3.4 Experience. Stockholder has carefully reviewed the
representations concerning the Buyer contained in this Agreement and has made
detailed inquiry concerning the Buyer, its business and its personnel; the
officers of the Buyer have made available to Stockholder any and all written
information which it has requested and have answered to Stockholder's
satisfaction all inquiries made by Stockholder; and Stockholder has sufficient
knowledge and experience in investing in companies similar to the Buyer so as to
be able to evaluate the risks and merits of its investment in the Buyer and is
able financially to bear the risks thereof.
3.5 Ownership of Assets. Stockholder does not own, and has no right,
title or interest in or to any of the Assets.
4. Representations of the Buyer
The Buyer represents and warrants to the Seller as follows:
4.1 Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and has requisite power and authority (corporate
and other) to own its properties and to carry on its business as now being
conducted. The Buyer has full power to execute and deliver this Agreement, the
agreements and documents provided for herein and to consummate the transactions
contemplated hereby and thereby. Certified copies of the Certificate of
Incorporation and the Bylaws of the Buyer, as amended to date, have been
previously or will be on the Closing Date delivered to the Seller, are complete
and correct, and no amendments have been made thereto or have been authorized
since the date thereof.
4.2 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement have been, or will be on or prior to
the Closing, duly authorized by all necessary corporate action on the part of
the Buyer, and all such shares have been duly
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reserved for issuance. The Shares when so issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement will be
duly and validly issued, fully paid and non-assessable.
4.3 Authorization. The execution and delivery of this Agreement and
the agreements provided for herein by the Buyer, and the consummation by the
Buyer of all transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement and the agreements
provided for herein constitute the valid and legally binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms.
The execution, delivery and performance of this Agreement and the agreements
provided for herein, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Buyer; (b) violate the provisions of the Buyer's
Certificate of Incorporation or Bylaws; (c) violate any judgment, decree, order
or award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Buyer pursuant
to, any indenture, mortgage, deed of trust or other agreement or instrument to
which it or its properties is a party or by which the Buyer is or may be bound.
Schedule 4.3 attached hereto sets forth a true, correct and complete list of all
consents and approvals of third parties that are required in connection with the
consummation by the Buyer of the transactions contemplated by this Agreement and
the other agreements provided for herein.
4.4 Regulatory Approvals. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been, or will be prior
to the Closing Date, obtained and satisfied.
4.5 Capitalization of the Buyer. The Buyer's authorized capital
stock consists of 2,000,000 shares of Common Stock, no par value per share, of
which 1,162,743 shares are issued and outstanding and held of record and
beneficially by the stockholders listed on Schedule 4.5(i) attached hereto.
There are an aggregate of 400,000 shares of Common Stock reserved for issuance
pursuant to the Buyer's Incentive Stock Option Plan (the "Plan") and as of the
date hereof there are options outstanding under the Plan to purchase an
aggregate of 149,580 shares of Common Stock. Except as otherwise disclosed in
this Section 4.5, in the Employment
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Agreement or on Schedule 4.5(ii) attached hereto, no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Buyer is authorized or
outstanding and the Buyer has no obligation (contingent or otherwise) to issue
any subscription, warrant, option, convertible security or other such right.
5. Best Efforts to Obtain Satisfaction of Conditions
The Seller, Stockholder and the Buyer covenant and agree to use
their best efforts to obtain the satisfaction of the conditions specified in
this Agreement.
6. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
6.1 Continued Truth of Representations and Warranties of the Seller
and Stockholder; Compliance with Covenants and Obligations. The representations
and warranties of the Seller and Stockholder contained in Sections 2 and 3
hereof shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes permitted by the terms hereof or consented to in writing by the Buyer.
Each of the Seller and Stockholder shall have performed and complied with all
terms, conditions, covenants, obligations, agreements and restrictions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
6.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Seller to authorize or carry out this
Agreement and the transactions contemplated hereby and to convey, assign,
transfer and deliver the Assets shall have been taken.
6.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Seller or Stockholder of the transactions contemplated
by this Agreement and the conveyance, assignment, transfer and delivery of the
Assets to the Buyer shall have consented to, authorized, permitted or approved
such transactions.
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6.4 Consents of Lenders, Lessors and Other Third Parties. Each of
the Seller and Stockholder shall have received all requisite releases, consents
and approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for it or him to consummate the transactions
contemplated by this Agreement and the agreements provided for herein,
including, without limitation, those set forth on Schedule 2.3 attached hereto.
6.5 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or the agreements
provided for herein or which might affect the right of the Buyer to own or use
the Assets after the Closing.
6.6 Board of Directors and Shareholder Approval. The Board of
Directors of the Seller and the Stockholder (in his capacity as the sole
stockholder of the Seller) shall have duly authorized the transactions
contemplated by this Agreement.
6.7 The Assets. At the Closing the Buyer shall receive good, clear,
record and marketable title to the Assets, free and clear of all liens,
liabilities, security interests and encumbrances of any nature whatsoever.
6.8 Tax Lien Waivers. On or prior to the Closing Date, the Seller
shall have obtained and delivered to the Buyer tax lien waivers from all
jurisdictions in which Assets are located, and which impose tax liens on the
Assets and provide such tax lien waivers.
6.9 Termination of Security Interests, Etc. On or prior to the
Closing Date, the Seller shall have secured the termination of all security
interests, lines of credit, financing statements, liens and other encumbrances
on any of the Assets, and shall have delivered to the Buyer copies of all Form
UCC-3s or other documentation evidencing such termination.
6.10 Closing Deliveries. The Buyer shall have received at or prior
to the Closing each of the following documents:
(a) each of the Seller and Stockholder shall have delivered to
the Buyer a certificate to the effect that each of the conditions specified in
Sections 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 of this Section 6 (as are applicable to
it) is satisfied;
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(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of the Seller in Delaware;
(c) a certificate of the Secretary of the Seller attesting to
the incumbency of the Seller's officers, the authenticity of the resolutions
authorizing the transactions contemplated by the Agreement and the agreements
provided for herein, and the authenticity and continuing validity of the charter
documents delivered pursuant to Section 2.1; and
(d) such other documents, instruments or certificates as the
Buyer may reasonably request.
6.11 Assignment of Trademarks. The Buyer shall have received from
Seller and Stockholder a Trademark Assignment dated as of the Closing Date in
the form attached hereto as Exhibit D, duly executed and delivered by the Seller
and Stockholder.
6.12 Bill of Sale. Each of the Seller and Stockholder shall have
executed and delivered the Bill of Sale.
6.13 Instrument of Assumption of Liabilities. Each of the Seller and
Stockholder shall have executed and delivered the Instrument of Assumption.
6.14 Employment Agreement. The Stockholder shall have executed the
Employment Agreement.
6.15 Lease Agreement. The Buyer and Liberty Property Limited
Partnership ("Liberty") shall have executed and delivered a lease relating to
rental space located at 100 Brodhead Road, Bethlehem, Pennsylvania.
6.16 Lease Release. The Seller shall have obtained from Liberty an
agreement to terminate the Agreement of Lease dated May 31, 1996 between the
Seller and Liberty, as amended (the "Seller Lease"), and release the Seller from
its obligations thereunder.
7. Conditions to Obligations of the Seller
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The obligations of the Seller and Stockholder under this Agreement are subject
to the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing at the discretion of the Seller and
Stockholder:
7.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and warranties of
the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Seller and Stockholder.
The Buyer shall have performed and complied with all terms, conditions,
obligations, agreements and restrictions required by this Agreement and the
agreements provided for herein to be performed or complied with by it prior to
or at the Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement and the transactions contemplated hereby shall have been taken.
7.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
and the agreements provided for herein shall have consented to, authorized,
permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer
shall have received all requisite consents and approvals of all lenders, lessors
and other third parties whose consent or approval is required in order for the
Buyer to consummate the transactions contemplated by this Agreement and the
agreements provided for herein, including, without limitation, those set forth
on Schedule 4.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement and the agreements
provided for herein or which might affect the right of the Seller to transfer
the Assets.
7.6 Closing Deliveries. The Seller shall have received at or prior
to the Closing each of the following documents:
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(a) the Buyer shall have delivered to the Seller a certificate
to the effect that each of the conditions specified in Sections 7.1, 7.3, 7.4
and 7.5 of this Section 7 is satisfied;
(b) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good standing of the
Buyer in Massachusetts;
(c) a certificate of the Clerk of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Section 4.1; and
(d) such other documents, instruments or certificates as the
Seller may reasonably request.
7.7 Bill of Sale. The Buyer shall have executed and delivered the
Bill of Sale.
7.8 Instrument of Assumption of Liabilities. The Buyer shall have
executed and delivered the Instrument of Assumption.
7.9 Employment Agreement. The Buyer shall have executed the
Employment Agreement.
7.10 Lease Agreement. The Buyer and Liberty shall have executed and
delivered a lease relating to rental space located at 100 Brodhead Road,
Bethlehem, Pennsylvania.
7.11 Lease Release. The Seller shall have obtained from Liberty an
agreement to terminate the Seller Lease, and release Seller from its obligations
thereunder.
8. Indemnification
8.1 By the Buyer. The Buyer hereby agrees to indemnify and hold
harmless the Seller and Stockholder from any and all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any legal, accounting or other expenses for investigating or defending any
actions or threatened actions) reasonably incurred by the Seller and Stockholder
(the aggregate sum of all such claims, damages, losses, liabilities,
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costs and expenses reasonably incurred by Seller and Stockholder together, are
referred to herein as the "Buyer Indemnifiable Amounts") in connection with each
and all of the following:
(a) Any breach by the Buyer of any representation or warranty
in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Buyer contained in this Agreement;
(c) Any misrepresentation contained in this Agreement
furnished by the Buyer; and
(d) Any Assumed Liabilities.
8.2 By the Seller and Stockholder. The Seller and Stockholder,
jointly and severally, agree to indemnify and hold harmless the Buyer from any
and all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or other expenses
for investigating or defending any actions or threatened actions) reasonably
incurred by the Buyer (the "Seller Indemnifiable Amounts"), in connection with
each and all of the following:
(a) Any breach by the Seller or Stockholder of any
representation or warranty in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Seller or Stockholder contained in this Agreement (including without limitation,
the failure by the Seller to obtain and deliver any tax lien waivers required by
Section 6.8 hereof);
(c) Any misrepresentation contained in this Agreement
furnished by the Seller or Stockholder;
(d) Any claims against, or liabilities or obligations of the
Seller or against the Assets not specifically assumed by the Buyer pursuant this
Agreement;
(e) Any violation by the Seller or Stockholder of, or any
failure by the Seller or Stockholder to comply with, any law, ruling, order,
decree, regulation or zoning, environmental or permit requirement applicable to
the Assets, whether or not any such violation
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or failure to comply has been disclosed to the Buyer, including any costs
incurred by the Buyer (i) in order to bring the Assets into compliance with
environmental laws as a consequence of noncompliance with such laws on the
Closing Date or (ii) in connection with the transfer of the Assets;
(f) Any warranty claim or product liability claim relating to
Assets owned or used by the Seller prior to the Closing Date;
(g) Any tax liabilities or obligations of the Seller or
Stockholder;
(h) All liabilities or obligations of the Seller to pay
severance benefits to any employee of the Seller whose employment is terminated
(or treated as terminated) in connection with the consummation of the
transactions contemplated by this Agreement and to whom the Buyer (or its
designee) has offered employment, and all liabilities resulting from the
termination of employment of employees of the Seller prior to the Closing that
arose under any federal or state law or under any employee benefit plan
established or maintained by the Seller;
(i) The failure of the Buyer to obtain the protections
afforded by compliance with the notification and other requirements of the bulk
sales laws in force in the jurisdictions in which such laws may be applicable to
either the Seller or the transactions contemplated by this Agreement; and
(j) Any trademark infringement or other claims relating to,
arising from or made in connection with the ownership or use by Seller or
Stockholder of the names "Sledgehammer" and "VitalGen" or any derivations
thereof, including without limitation any names or word incorporating the names
"Sledgehammer" or "VitalGen".
8.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the Party seeking indemnification (the "Indemnified
Party"), shall promptly notify the Party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third-party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the
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Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 8.4 of this Agreement.
8.4 Defense by Indemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a Party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
it acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date such claim is made, (a) the
Indemnified Party may defend against such claim or litigation, in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying
Party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third party
claim in a reasonably prudent manner.
8.5 Payment of Indemnification Obligation. All indemnification by a
Party hereunder shall be effected by payment of cash or delivery of a cashier's
or certified check in the amount of the indemnification liability.
8.6 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the Parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the Parties hereto. All such
representations and warranties shall expire on the second anniversary of the
Closing Date, except (i) for claims, if any, asserted in writing prior to such
second anniversary, which shall survive until finally resolved and satisfied in
full, (ii) for the representations and warranties of the Seller set forth in
Section 2.4 (Ownership of Assets), which shall continue indefinitely, (iii) for
the representations and warranties of the Seller set forth in Section 2.9 (Tax
Matters), which shall continue until 90 days following the expiration of the
applicable statue of limitations date and (iv) that obligations of the Seller
and
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Stockholder, and Buyer for Seller Indemnifiable Amounts and Buyer Indemnifiable
Amounts, respectively, arising out of or in connection with fraud or knowing
misrepresentations or omissions of the Seller or Stockholder, or the Buyer,
respectively, will have no time limit (other than limits imposed by applicable
statutes of limitations, if any). All claims and actions for indemnity pursuant
to this Section 8 for breach of any representation or warranty shall be asserted
or maintained in writing by a party hereto on or prior to the expiration of the
applicable period.
8.7 Limitation of Liability. Notwithstanding the foregoing
provisions of this Section 8, the obligations of the Indemnifying Parties
pursuant to this Section 8 shall be subject to the following limitations:
(a) Buyer shall be entitled to indemnification hereunder only
to the extent that the aggregate Seller Indemnifiable Amounts exceed $5,000 (the
"Seller Basket Amount") (at which point the Buyer shall be entitled to
indemnification for the full amount of the Seller Indemnifiable Amounts,
including the first $5,000 of such Seller Indemnifiable Amounts). Any
qualification in the representations and warranties of the Seller and
Stockholder as to "material", "materially" and "materiality" shall be
disregarded in determining Seller Indemnifiable Amounts after the Seller Basket
Amount has been exceeded.
(b) Buyer shall not be entitled to indemnification hereunder
to the extent that the aggregate Seller Indemnifiable Amounts exceed $136,350
(the "Seller Cap Amount"), provided, however, that the Seller Cap Amount shall
not apply to, and there shall be no limit on, Seller Indemnifiable Amounts
arising from or in connection with the commission by Seller or Stockholder of
fraud in connection with this Agreement or a knowing misrepresentation or
omission relating to any representation, warranty, covenant or agreement made by
the Seller or Stockholder in this Agreement.
(c) Seller and Stockholder shall be entitled to
indemnification hereunder only to the extent that the aggregate Buyer
Indemnifiable Amounts exceed $5,000 (the "Buyer Basket Amount") (at which point
the Seller and Stockholder shall be entitled to indemnification for the full
amount of the Buyer Indemnifiable Amounts, including the first $5,000 of such
Buyer Indemnifiable Amounts). Any qualification in the representations and
warranties of the Buyer as to "material", "materially" and "materiality" shall
be disregarded in determining Buyer Indemnifiable Amounts after the Buyer Basket
Amount has been exceeded.
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(d) Seller and Stockholder shall not be entitled to
indemnification hereunder to the extent that the aggregate Buyer Indemnifiable
Amounts exceed $136,350, (the "Buyer Cap Amount"), provided, however, that the
Buyer Cap Amount shall not apply to, and there shall be no limit on, Buyer
Indemnifiable Amounts arising from or in connection with the commission by Buyer
of fraud in connection with this Agreement or a knowing misrepresentation or
omission relating to any representation, warranty, covenant or agreement made by
the Buyer in this Agreement.
9. Post-Closing Agreements
Each of the Seller and Stockholder agrees that from and after the Closing Date:
9.1 Proprietary Information.
(a) The Seller and Stockholder shall, and Seller shall use its
best efforts to have all of its officers, directors and personnel, hold in
confidence, all knowledge and information of a secret or confidential nature
with respect to the Assets and business of the Buyer and shall not disclose,
publish or make use of the same without the consent of the Buyer, except to the
extent that such information shall have become public knowledge other than by
breach of this Agreement by the Seller or Stockholder or breach of the
Employment Agreement by Stockholder.
(b) Each of the Seller and Stockholder agrees that the remedy
at law for any breach of this Section 9.1 would be inadequate and that the Buyer
shall be entitled to injunctive relief in addition to any other remedy it may
have upon breach of any provision of this Section 9.1.
9.2 No Solicitation or Hiring of Former Employees. Except as
provided by law, for a period of two years after the Closing Date, neither the
Seller nor the Stockholder shall solicit any person who was an employee of the
Seller on the Closing Date to terminate his employment with the Buyer or to
become an employee of the Seller, Stockholder or entity affiliated with the
Stockholder (other than the Buyer), or hire any person who was such an employee
on the date hereof or on the Closing Date.
9.3 Non-Competition Agreement.
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(a) For a period of two years after the Closing Date, neither
the Seller, Stockholder nor any affiliate thereof (other than the Buyer) shall
(i) manufacture, market or sell any product which has the same or substantially
the same form, function and primary application as any existing or proposed
product manufactured by the Seller on or prior to the Closing Date or (ii)
engage in any business competitive with the business of the Seller as conducted
on the date hereof or on the Closing Date, in the United States or any other
country in which the Seller conducted its business during the two years prior to
the Closing Date; provided, however, that nothing contained in this Section
9.3(a) shall be construed as prohibiting Stockholder from performing the duties
and fulfilling the obligations set forth in the Employment Agreement.
(b) The Parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Section 9.3 are
reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the Parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The Parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. Each of the Seller and Stockholder agrees that damages are an
inadequate remedy for any breach of this provision, and that the Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions without
bond or other security upon any actual or threatened breach of this
non-competition provision.
9.4 Sharing of Data.
(a) The Seller and Stockholder shall have the right for a
period of three years following the Closing Date to have reasonable access to
such books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other similar
information as are transferred to the Buyer pursuant to the terms of this
Agreement for the limited purposes of concluding its involvement in the business
of the Seller prior to the Closing Date and for complying with its obligations
under applicable securities, tax, environmental, employment or other laws and
regulations. The Buyer shall have the right for a period of three years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained by the Seller
or
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Stockholder pursuant to the terms of this Agreement to the extent that any of
the foregoing relates to the business of the Seller or Assets transferred to the
Buyer hereunder or is otherwise needed by the Buyer in order to comply with its
obligations under applicable securities, tax, environmental, employment or other
laws and regulations.
(b) The Seller, Stockholder and the Buyer agree that from and
after the Closing Date they shall cooperate fully with each other to facilitate
the transfer of the Assets from the Seller to the Buyer and the operation
thereof by the Buyer.
9.5 Use of Name. Each of the Seller and Stockholder agrees not to
use the names, "VHDL," "VHDL Technology Group", "Prism Acoustics" or "Prism
Acoustics, Inc." or any derivations thereof after the Closing Date in connection
with any business related to, competitive with, or an outgrowth of, the business
conducted by the Seller on the date hereof.
9.6 Cooperation in Litigation. Each Party hereto will fully
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such Party relating to or arising out of the conduct of the portion of the
Seller's business relating to the Assets prior to or after the Closing Date
(other than litigation arising out the transactions contemplated by this
Agreement). The Party requesting such cooperation shall pay the out-of-pocket
expenses (including legal fees and disbursements) of the party providing such
cooperation and of its officers, directors, employees and agents reasonably
incurred in connection with providing such cooperation, but shall not be
responsible to reimburse the Party providing such cooperation for such Party's
time spent in such cooperation or the salaries or costs of fringe benefits or
similar expenses paid by the Party providing such cooperation to its officers,
directors, employees and agents while assisting in the defense or prosecution of
any such litigation or proceeding.
9.7 Product Claims and Returns. Seller shall be responsible for
customer claims relating to services rendered by Seller prior to the Closing
Date, and customer claims relating to, or returns of, the Seller's software
product formerly known as Sledgehammer 6 and all other products of Seller which
(a) were sold and shipped by the Seller prior to the Closing Date or (b) were in
the finished goods inventory of the Seller as of the Closing Date. If a customer
makes a claim or seeks a return and, in the reasonable judgment of the Buyer,
the claim or return is proper, Buyer shall replace or repair, as the case may
be, the services rendered or product purchased at the Buyer's then generally
prevailing prices and labor rates.
10. Brokers
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10.1 For the Seller and Stockholder. Each of the Seller and
Stockholder represents and warrants that it has not engaged any broker or finder
or incurred any liability for brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement. The Seller and
Stockholder, jointly and severally, agree to indemnify and hold harmless the
Buyer against any claims or liabilities asserted against it by any person acting
or claiming to act as a broker or finder on behalf of the Seller or Stockholder.
10.2 For the Buyer. The Buyer represents and warrants that it has
not engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement. The Buyer agrees to indemnify and hold harmless the Seller and
Stockholder against any claims or liabilities asserted against it by any person
acting or claiming to act as a broker or finder on behalf of the Buyer.
11. Knowledge of the Seller.
For purposes of this Agreement, the term "knowledge" (including
without limitation any derivations thereof such as "know" or "knowing") as it
relates to the Seller shall be deemed to mean the knowledge of the Stockholder.
12. Notices
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by federal express,
registered or certified mail, postage prepaid, addressed as follows or to such
other address of which the parties may have given notice:
To the Seller: Prism Acoustics, Inc.
(d/b/a The VHDL Technology Group)
100 Brodhead Street, Suite 140
Bethlehem, PA 18017
Attention: William D. Billowitch, President
With a copy to: Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street
Philadelphia, PA 19103-7598
Attention: Steven B. King, Esq.
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To the Stockholder: William D. Billowitch
4310 Kathi Drive
Bethlehem, PA 18017
With a copy to: Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street
Philadelphia, PA 19103-7598
Attention: Steven B. King, Esq.
To the Buyer: Intrinsix Corp.
33 Lyman Street
Westboro, MA 01581
Attention: James A. Gobes, President
With copies to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Peter B. Tarr, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally; or (b) three
business days after being sent, if sent by registered or certified mail.
13. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and assigns, except that no Party
hereto may assign or delegate its respective obligations hereunder without the
prior written consent of the other Parties; provided, however, that the Buyer
may assign this Agreement, and its rights and obligations hereunder, to a
subsidiary or affiliate. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer from any obligation or liability
under this Agreement.
14. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the Parties pursuant hereto
represent the entire understanding and
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agreement between the Parties hereto with respect to the subject matter hereof
and supersede all prior oral and written and all contemporaneous oral
negotiations, commitments and understandings between such Parties. The Exhibits
and Schedules attached hereto or to be attached hereafter are hereby
incorporated as integral parts of this Agreement. The Buyer and the Seller, by
the consent of their respective Boards of Directors, or officers authorized by
such Boards, and the Stockholder may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by the Buyer, the
Seller and Stockholder.
15. Expenses
The Buyer shall pay the reasonable legal and closing costs of the
Seller in connection with the negotiation of this Agreement and the agreements
and transactions contemplated hereby, up to an aggregate maximum of $11,500.
16. Legal Fees
In the event that legal proceedings are commenced by the Buyer
against the Seller or Stockholder, or by the Seller or Stockholder against the
Buyer, in connection with this Agreement or the transactions contemplated
hereby, the Party or Parties which do not prevail in such proceedings shall pay
the reasonable attorneys' fees and other costs and expenses, including
investigation costs, incurred by the prevailing Party in such proceedings.
17. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of such
taxes on the Seller or the Buyer, as the case may be, the Seller and Buyer each
shall be responsible for and shall pay 50% of (a) all sales, use and transfer
taxes, and (b) all governmental charges, if any, upon the sale or transfer of
any of the Assets hereunder. If the Seller shall fail to pay such amounts on a
timely basis, the Buyer may pay such amounts to the appropriate governmental
authority or authorities, and the Seller and Stockholder shall promptly
reimburse the Buyer for any amounts so paid by the Buyer. If the Buyer shall
fail to pay such amounts on a timely basis, the Seller or Stockholder may pay
such amounts to the appropriate governmental authority or authorities, and the
Buyer shall promptly reimburse the Seller or Stockholder, as the case may be,
for any amounts so paid by the Seller or Stockholder.
18. Governing Law
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This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
19. Section Headings
The section headings are for the convenience of the Parties and in
no way alter, modify, amend, limit, or restrict the contractual obligations of
the Parties.
20. Severability
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
21. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties
hereto as of and on the date first above written.
BUYER:
INTRINSIX CORP.
By: /s/ James A. Gobes
-----------------------------------
James A. Gobes
Title: President
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SELLER:
PRISM ACOUSTICS, INC.
By: /s/ William D. Billowitch
-----------------------------------
William D. Billowitch
Title: President
STOCKHOLDER:
/s/ William D. Billowitch
---------------------------------------
William D. Billowitch
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Exhibit 10.11
AGREEMENT AND PLAN OF MERGER
AMONG
INTRINSIX CORP., INTRINSIX MERGER CORP.
AND
SEVA TECHNOLOGIES, INC.
JUNE 11, 1999
<PAGE>
TABLE OF CONTENTS
Page
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Exhibit A - Escrow Agreement
Exhibit B - Affiliate Agreement
Exhibit C - Investment Agreement
Exhibit D - Opinion of Wilson, Sonsini, Goodrich & Rosati
Exhibit E - Opinion of Hale and Dorr LLP
Exhibit F - Investment Questionnaire
Exhibit G - Purchaser Representative Questionnaire
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of June 11, 1999 by and among Intrinsix Corp. a
Massachusetts corporation (the "Buyer"), Intrinsix Merger Corp., a Massachusetts
corporation and a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and SEVA Technologies, Inc., a California corporation (the
"Company"). The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Company into the
Transitory Subsidiary. In such merger, the stockholders of the Company will
receive capital stock of the Buyer in exchange for their capital stock of the
Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Company shall merge with and into the Transitory Subsidiary (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Company shall cease and the Transitory Subsidiary shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation") with the corporate purposes as specified in its Articles of
Organization, as the same may be amended from time to time. The "Effective Time"
shall be the time at which the Company and the Transitory Subsidiary file the
articles of merger or other appropriate documents prepared and executed in
accordance with the relevant provisions of the Massachusetts Business
Corporation Law and the California Corporations Code (the "Articles of Merger")
with the Secretary of States of The Commonwealth of Massachusetts and the State
of California. The Merger shall have the effects set forth in Section 80 of
Chapter 156B of the Massachusetts Business Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP,
60 State Street, Boston,
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Massachusetts, commencing at 10:00 a.m. local time on June 30, 1999, or, if all
of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby have not been satisfied or waived by such date,
on such mutually agreeable later date as soon as practicable after the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (the "Closing Date").
1.3 Actions at the Closing. At the Closing, (a) the Company shall deliver
to the Buyer and the Transitory Subsidiary the various certificates, instruments
and documents referred to in Section 5.2, (b) the Buyer and the Transitory
Subsidiary shall deliver to the Company the various certificates, instruments
and documents referred to in Section 5.3, (c) the Company and the Transitory
Subsidiary shall file with the Secretary of States of The Commonwealth of
Massachusetts and the State of California the Articles of Merger, (d) each
Company Stockholder (as defined in Section 1.5(a)) shall deliver to the Buyer
the certificate(s) (the "Certificates") representing his or her shares of
Company Common Stock (as defined in Section 2.2), (e) the Buyer shall deliver a
certificate for the Initial Shares (as defined in Section 1.5(a)) in accordance
with Section 1.5 and (f) the Buyer, Yatin Trivedi and Larry F. Saunders acting
as duly appointed securityholder agents on behalf of the Company Stockholders
(collectively, the "Securityholder Agents"), and State Street Bank and Trust
Company (the "Escrow Agent") shall execute and deliver the Escrow Agreement
substantially in the form attached hereto as Exhibit A (the "Escrow Agreement")
and the Buyer shall deliver to the Escrow Agent a certificate for the Escrow
Shares (as defined in Section 1.5(a)) being placed in escrow on the Closing Date
pursuant to Section 1.10.
1.4 Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holders of the shares of
common stock, no par value per share, of the Company ("Company Common Stock"):
(a) Subject to the provisions of Section 1.6 and Section 1.9, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock owned beneficially by
the Buyer or the Transitory Subsidiary, Dissenting Shares (as defined in Section
1.7) and shares of Company Common Stock held in the Company's treasury) shall be
converted into and represent the right to receive
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(subject to the provisions of Section 1.10) such number of shares of common
stock, no par value per share, of the Buyer ("Buyer Common Stock") as is equal
to the conversion ratio, which shall initially be equal to 0.2193 (the
"Conversion Ratio"). Stockholders of record of the Company ("Company
Stockholders") shall be entitled to receive immediately 90% of the shares of
Buyer Common Stock into which their shares of Company Common Stock were
converted pursuant to this Section 1.5(a) (the "Initial Shares"); the remaining
10% of the shares of Buyer Common Stock into which Company Common Stock were
converted pursuant to this Section 1.5(a) (the "Escrow Shares") shall be
deposited in escrow pursuant to Section 1.10 and shall be held and disposed of
in accordance with the terms of the Escrow Agreement. The Initial Shares and the
Escrow Shares shall together be referred to herein as the "Merger Shares."
(b) Each share of Company Common Stock held in the Company's
treasury immediately prior to the Effective Time and each share of Company
Common Stock owned beneficially by the Buyer or the Transitory Subsidiary shall
be cancelled and retired without payment of any consideration therefor.
(c) Each share of common stock, no par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
no par value per share, of the Surviving Corporation.
1.6 Adjustment of the Conversion Ratios.
In the event that, prior to the Effective Date, any stock split, combination,
reclassification or stock dividend with respect to the Buyer Common Stock, any
change or conversion of Buyer Common Stock into other securities or any other
dividend or distribution with respect to the Buyer Common Stock should occur or,
if a record date with respect to any of the foregoing should occur, appropriate
and proportionate adjustments shall be made to each Conversion Ratio, and
thereafter all references to an Conversion Ratio shall be deemed to be such
Conversion Ratio as so adjusted.
1.7 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means shares
of Company Common Stock held as of the Effective Time by a Company Stockholder
who has not voted such shares of Company Common Stock in favor of the adoption
of this Agreement and the Merger and with respect to which purchase shall have
been duly demanded and perfected in
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accordance with Section 1301 of the California Corporations Code Law and not
effectively withdrawn or forfeited prior to the Effective Time. Dissenting
Shares shall not be converted into or represent the right to receive Merger
Shares, unless such Company Stockholder shall have forfeited his right to demand
purchase under the California Corporations Code or withdrawn, with the consent
of the Company, his demand for purchase. If such Company Stockholder has so
forfeited or withdrawn his right to appraisal of Dissenting Shares, then (i) as
of the occurrence of such event, such holder's Dissenting Shares shall cease to
be Dissenting Shares and shall be converted into and represent the right to
receive the Merger Shares issuable in respect of such shares of Company Common
Stock pursuant to Section 1.5(a), and (ii) promptly following the occurrence of
such event, the Buyer shall deliver to such Company Stockholder a certificate
representing 90% of the Merger Shares to which such holder is entitled pursuant
to Section 1.5(a) (which shares shall be considered Initial Shares for all
purposes of this Agreement) and shall deliver to the Escrow Agent a certificate
representing the remaining 10% of the Merger Shares to which such holder is
entitled pursuant to Section 1.5(a) (which shares shall be considered Escrow
Shares for all purposes of this Agreement).
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for purchase of any Company Shares under Section 1301 of the
California Corporations Code, withdrawals of such demands, and any other
instruments that relate to such demands received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for purchase under the California Corporations Code. The Company shall not,
except with the prior written consent of the Buyer, make any payment with
respect to any demands for purchase of shares of Company Common Stock or offer
to settle or settle any such demands.
1.8 Dividends. No dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Shares until such holders surrender their Certificates
in accordance with Section 1.12. Upon such surrender, the Buyer shall pay or
deliver to the persons in whose name the certificates representing such Initial
Shares are issued any dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date and which were paid or delivered between the Effective Time and the time of
such surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
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1.9 Fractional Shares. No certificates or script representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Initial Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Initial Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Initial Share shall, upon proper surrender of such person's
Certificates, receive such whole number of Initial Shares as is equal to the
precise number of Initial Shares to which such person would be entitled, rounded
up to the nearest whole number.
1.10 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the Escrow Agent
a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5(a), for the purpose
of securing the indemnification obligations of the Company Stockholders set
forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof. The Escrow Shares
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party, and
shall be held and disbursed solely for the purposes and in accordance with the
terms of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the Merger by
the Company Stockholders shall constitute approval of the Escrow Agreement and
of all of the arrangements relating thereto, including without limitation the
placement of the Escrow Shares in escrow and the appointment of the
Securityholder Agents.
1.11 Options.
(a) As of the Effective Time, all options to purchase Company Common
Stock issued by the Company pursuant to its stock option plans or otherwise
("Options"), whether vested or unvested, shall be assumed by the Buyer.
Immediately after the Effective Time, each Option outstanding immediately prior
to the Effective Time shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Option at the Effective
Time, such number of shares of Buyer Common Stock as is equal to the number of
Company Common Stock subject to the unexercised portion of such Option
multiplied by the Conversion Ratio (with any fraction resulting from such
multiplication to be
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rounded up to the nearest whole number). The exercise price per share of each
such assumed Option shall be equal to the exercise price of such Option
immediately prior to the Effective Time, divided by the Conversion Ratio,
rounded down to the nearest cent. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), if applicable, and all of the other terms
of the Options shall otherwise remain unchanged.
(b) As soon as practicable after the Effective Time, the Buyer or
the Surviving Corporation shall deliver to the holders of Options appropriate
notices setting forth such holders' rights pursuant to such Options, as amended
by this Section 1.11, and the agreements evidencing such Options shall continue
in effect on the same terms and conditions (subject to the amendments provided
for in this Section 1.11 and such notice).
(c) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
upon exercise of the Options assumed in accordance with this Section 1.11.
(d) The Company shall obtain, prior to the Closing, the consent from
each holder of an Option to the amendment of such Option pursuant to this
Section 1.11 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
1.12 Exchange of Certificates.
(a) Until surrendered, the Certificate(s) which represented shares
of Company Common Stock at the Effective Time shall be deemed for all corporate
purposes to evidence ownership of the shares of the Buyer Common Stock into
which the shares of Company Common Stock evidenced by the Certificate(s) so
surrendered shall have been converted in accordance with Section 1.5. From and
after the Effective Time, the holders of shares of Company Common Stock shall
cease to have any rights in respect of such shares of Company Common Stock
(except as provided herein or by law) and their rights shall be solely in
respect to the shares of the Buyer Common Stock into which the shares of Company
Common Stock evidenced by the Certificate(s) so surrendered shall have been
converted in accordance with Section 1.5.
(b) If any shares of the Buyer Common Stock are to be issued or
delivered in the name of a person other than the person in whose name the
Certificate(s) surrendered in exchange therefor is registered, it shall be a
condition to the issuance or delivery of such shares
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of Buyer Common Stock that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay the Buyer, or its exchange agent,
any transfer or other taxes payable by reason of the foregoing or establish to
the satisfaction of the Buyer that such taxes have been paid or are not required
to be paid. Notwithstanding the foregoing, no Party shall be liable to a holder
of shares of Company Common Stock for any shares of the Buyer Common Stock
issuable to such holder pursuant to Section 1.5 that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Buyer shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of the Buyer
Common Stock issuable in exchange therefor pursuant to Section 1.5. The Buyer
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to provide to
the Buyer an indemnity agreement against any claim that may be made against the
Buyer with respect to the Certificate alleged to have been lost, stolen or
destroyed.
1.13 Articles of Organization. The Articles of Organization of the
Surviving Corporation shall be the same as the Articles of Organization of the
Transitory Subsidiary immediately prior to the Effective Time, except that the
name of the corporation set forth therein shall be changed to the name of the
Company.
1.14 By-laws. The By-laws of the Surviving Corporation shall be the same
as the By-laws of the Transitory Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to the name of the Company.
1.15 No Further Rights. From and after the Effective Time, no shares of
Company Common Stock shall be deemed to be outstanding, and holders of
Certificates shall cease to have any rights with respect thereto, except as
provided herein or by law.
1.16 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of shares of Company Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the exchange agent, they shall be
cancelled and exchanged for Initial Shares in accordance with Section 1.5(a),
subject to Section 1.10 and to applicable law in the case of Dissenting Shares.
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The Disclosure
Schedule shall be initialed by the Parties and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify only the corresponding paragraph in this Article II.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the state of its incorporation. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification. The Company
has all requisite corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it. The
Company has furnished to the Buyer true and complete copies of its Articles of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under or in violation of any provision of its
Articles of Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the Company consists
of 10,000,000 shares of Company Common Stock, of which 2,280,000 shares are
issued and outstanding. Section 2.2 of the Disclosure Schedule sets forth a
complete and accurate list of (i) all stockholders of the Company, indicating
the number of shares of Company Common Stock held by each stockholder, and (ii)
all holders of Options and warrants, indicating the number of shares of Company
Common Stock subject to each Option and warrant. All of the issued and
outstanding shares of Company Common Stock are, and all shares of Company Common
Stock that may be issued upon exercise of Options and warrants will be, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock, other than the Options and warrants listed in Section 2.2
of the Disclosure Schedule. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company. There
are no agreements, voting trusts, proxies, or understandings with respect to the
voting, or registration
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under the Securities Act of 1933, as amended (the "Securities Act"), of any
shares of Company Common Stock. All of the issued and outstanding shares of
Company Common Stock were issued in compliance with applicable federal and state
securities laws.
2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and, subject to the
adoption of this Agreement and the approval of the Merger by a majority of the
votes represented by the outstanding shares of Company Common Stock entitled to
vote on this Agreement and the Merger (the "Requisite Stockholder Approval"),
the performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. Without
limiting the generality of the foregoing: (a) the Board of Directors of the
Company, at a meeting duly called and held or by the unanimous vote of all
directors (i) determined that the Merger is fair and in the best interests of
the Company and the Company Stockholders, (ii) adopted this Agreement in
accordance with the provisions of the California Corporations Code, and (iii)
directed that this Agreement and the Merger be submitted to the Company
Stockholders for their adoption and approval and recommended that Company
Stockholders vote in favor of the adoption of this Agreement and the approval of
the Merger; (b) the Company provided to each holder of shares of Company Common
Stock, prior to the vote by the Company Stockholders with respect to the Merger
and this Agreement, copies of the Buyer Financial Statements (as defined in
Section 3.5) and all information required under Section 1301 of the California
Corporations Code concerning their rights to demand purchase; and (c) prior to
the Effective Time, the holders of the shares of Company Common Stock shall have
approved this Agreement and the Merger, in accordance with the provisions of the
California Corporations Code, at a meeting duly called and held or by unanimous
written consent. This Agreement has been duly and validly executed and delivered
by the Company and, assuming due and valid execution by the other parties
hereto, constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
2.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the filing
of the Articles of Merger as required by the Massachusetts Business Corporation
Law and the California Corporations Code, neither the execution and delivery of
this Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will (a) conflict with or violate any
provision
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of the charter or By-laws of the Company, (b) require on the part of the Company
or any corporation with respect to which the Company, directly or indirectly,
has the power to vote or direct the voting of sufficient securities to elect a
majority of the directors (a "Subsidiary") any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity") , other than any filing, permit,
authorization, consent or approval which if not obtained or made would not have
a material adverse effect on the assets, business, financial condition, results
of operations or future prospects of the Company or on the ability of the
Parties to consummate the transactions contemplated by this Agreement, (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which the Company is a party or by which the Company is bound or
to which any of their assets is subject, other than any conflict, breach,
default, acceleration, termination, modification or cancellation which
individually or in the aggregate would not have a material adverse effect on the
assets, business, financial condition, results of operations or future prospects
of the Company or on the ability of the Parties to consummate the transactions
contemplated by this Agreement, (d) result in the imposition of any Security
Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets. For purposes of this Agreement, "Security Interest"
means any mortgage, pledge, security interest, encumbrance, charge, or other
lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the ordinary course of
business consistent with past custom and practice (including with respect to
frequency and amount) ("Ordinary Course of Business") of the Company and not
material to the Company.
2.5 Subsidiaries. The Company has no Subsidiaries.
2.6 Financial Statements. The Company has provided to the Buyer and
attached as Section 2.6 of the Disclosure Schedule the unaudited consolidated
balance sheets and statements of income, changes in stockholders' equity and
cash flows of the Company (a) as of and for each of the fiscal years ended
December 31, 1996, 1997 and 1998 and (b) for the four months ended
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as of April 30, 1999 (the "Most Recent Balance Sheet Date") (collectively, the
"Financial Statements"). The Financial Statements for the fiscal year ended
December 31, 1998 and for the four months ended as of the Most Recent Balance
Sheet Date have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, fairly present the financial condition, results of
operations and cash flows of the Company and the Subsidiaries as of the
respective dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company and the Subsidiaries;
provided, however, that such Financial Statements do not include footnotes.
2.7 Absence of Certain Changes. Except as otherwise contemplated by this
Agreement, since the Most Recent Balance Sheet Date, (a) there has occurred no
event or development which has had, or could reasonably be foreseen to have in
the future, a Company Material Adverse Effect (as defined below), and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (o)
of Section 4.3. For purposes of this Agreement, "Company Material Adverse
Effect" means a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company or on the
ability of the Parties to consummate the Merger and the transaction contemplated
thereby.
2.8 Undisclosed Liabilities. The Company does not have any liability
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in clause (b) of Section 2.6 (the "Most Recent
Balance Sheet"), (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are similar in nature
and amount to the liabilities which arose during the comparable period of time
in the immediately preceding fiscal period and (c) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet.
2.9 Tax Matters.
(a) The Company has filed all Tax Returns (as defined below) that it
was required to file and all such Tax Returns were correct and complete in all
material respects. The Company has paid all Taxes (as defined below) that are
shown to be due on any such Tax Returns. The unpaid Taxes of the Company for tax
periods through the Most Recent Balance Sheet Date do not exceed the accruals
and reserves for Taxes set forth on the Most Recent Balance Sheet. The Company
does not have any actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
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other entities that included the Company during a prior period) other than the
Company. All Taxes that the Company is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity. For purposes of this Agreement,
"Taxes" means all taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll and franchise taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means
all reports, returns, declarations, statements or other information required to
be supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since January 1, 1996.
The federal income Tax Returns of the Company have not been audited by the
Internal Revenue Service. No examination or audit of any Tax Returns of the
Company by any Governmental Entity is currently in progress or, to the knowledge
of the Company, threatened or contemplated. The Company has not waived any
statute of limitations with respect to taxes or agreed to an extension of time
with respect to a tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Code and none of the assets of the Company are subject
to an election under Section 341(f) of the Code. The Company has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code. The Company is not a party to any Tax allocation
or sharing agreement.
(d) The Company is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code). The
Company has not made an election under Treasury Reg. Section 1.1502-20(g). The
Company is not and has not been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
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2.10 Assets. The Company owns or leases all tangible assets necessary for
the conduct of its businesses as presently conducted and as presently proposed
to be conducted. Each such tangible asset is free from material defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
for the purposes for which it presently is used. No asset of the Company
(tangible or intangible) is subject to any Security Interest.
2.11 Intellectual Property.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications for such patents, trademarks, trade names,
service marks and copyrights, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material (collectively, "Intellectual Property") that are used to
conduct its business as currently conducted or planned to be conducted. Section
2.11 of the Disclosure Schedule lists (i) all patents and patent applications
and all trademarks, registered copyrights, trade names and service marks which
are used in the business of the Company, including the jurisdictions in which
each such Intellectual Property right has been issued or registered or in which
any such application for such issuance or registration has been filed, (ii) all
material written licenses, sublicenses and other agreements to which the Company
is a party and pursuant to which any person is authorized to use any
Intellectual Property rights, and (iii) all material written licenses,
sublicenses and other agreements as to which the Company is a party and pursuant
to which the Company is authorized to use any third party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property Rights")
which are used in the business of the Company or which form a part of any
product or service of the Company (excluding software that is available through
commercial distributors or in commercial retail stores and subject to
"shrink-wrap" agreements). The Company is not a party to any oral license,
sublicense or agreement which, if reduced to written form, would be required to
be listed in Section 2.11 of the Disclosure Schedule under the terms of this
Section 2.11(a).
(b) The Company is not and will not be as a result of the execution
and delivery of this Agreement or the performance of the Company's obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
(c) The Company has not been named in any suit, action or proceeding
which involves a claim of infringement of any Intellectual Property right of any
third party. To the
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knowledge of the Company, the manufacturing, marketing, licensing or sale of the
products or performance of the service offerings of the Company does not
infringe any Intellectual Property right of any third party; and to the
knowledge of the Company, the Intellectual Property rights of the Company are
not being infringed by activities, products or services of any third party.
2.12 Real Property. The Company does not own any real property. Section
2.12 of the Disclosure Schedule lists and describes briefly all real property
leased or subleased to the Company and lists the term of such lease, any
extension and expansion options, and the rent payable thereunder. The Company
has delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) listed in Section 2.12 of the Disclosure
Schedule. With respect to each lease and sublease listed in Section 2.12 of the
Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) no party to the lease or sublease is in breach or default, and
no event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(d) there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(e) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities; and
(g) to the knowledge of the Company, the owner of the facility
leased or subleased has good and clear record and marketable title to the parcel
of real property, free and clear of any Security Interest, easement, covenant or
other restriction, except for recorded easements, covenants, and other
restrictions which do not impair the Intended Uses, occupancy or value of the
property subject thereto.
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2.13 Contracts. Section 2.13 of the Disclosure Schedule lists the
following written arrangements (including without limitation written agreements)
to which the Company is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $5,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
products or other personal property or for the furnishing or receipt of services
(i) which calls for performance over a period of more than one year, (ii) which
involves more than the sum of $5,000, or (iii) in which the Company has granted
manufacturing rights, "most favored nation" pricing provisions or exclusive
marketing or distribution rights relating to any products or territory or has
agreed to purchase a minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain party;
(c) any written arrangement establishing a partnership or joint
venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $5,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible or intangible;
(e) any written non-competition arrangement or material
confidentiality agreement;
(f) any written arrangement involving any of the Company
Stockholders or their affiliates, as defined in Rule 12b-2 under the Exchange
Act ("Affiliates");
(g) any written arrangement under which the consequences of a
default or termination could have a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
Company; and
(h) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
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The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.13 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i) the
written arrangement is legal, valid, binding and enforceable and in full force
and effect; (ii) the written arrangement will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
and (iii) to the knowledge of the Company, no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration, under
the written arrangement. Except as set forth on Section 2.13 of the Disclosure
Schedule, the Company is not a party to any oral contract, agreement or other
arrangement which, if reduced to written form, would be required to be listed in
Section 2.13 of the Disclosure Schedule under the terms of this Section 2.13.
2.14 Accounts Receivable. Except as set forth in Section 2.14 of the
Disclosure Schedule, all accounts receivable of the Company reflected on the
Most Recent Balance Sheet are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts on the Most Recent Balance Sheet. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen since the Most
Recent Balance Sheet Date are valid receivables subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet.
2.15 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.16 Insurance. Section 2.16 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including fire,
theft, casualty, general liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond and
surety arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five years:
(a) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(b) the policy number and the period of coverage;
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(c) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(d) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
(i) Each such insurance policy is enforceable and in full force and effect; (ii)
such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing; (iii) the Company is not in breach or default
(including with respect to the payment of premiums or the giving of notices)
under such policy, and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
modification or acceleration, under such policy; and (iv) the Company has not
received any notice from the insurer disclaiming coverage or reserving rights
with respect to a particular claim or such policy in general. The Company has
not incurred any material loss, damage, expense or liability covered by any such
insurance policy for which it has not properly asserted a claim under such
policy.
2.17 Litigation. Section 2.17 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Company is a party or, to the knowledge of the
Company, is threatened to be made a party. None of the complaints, actions,
suits, proceedings, hearings, and investigations set forth in Section 2.17 of
the Disclosure Schedule could reasonably be expected to have a material adverse
effect on the assets, business, financial condition, results of operations or
future prospects of the Company.
2.18 Service Warranty. No service provided by the Company is subject to
any guaranty, warranty, right of return or other indemnity other than (i) the
applicable warranty terms which are set forth in Section 2.18 of the Disclosure
Schedule and (ii) any general warranty of merchantability or fitness for a
particular purpose implied as a matter of state law which continues to be
applicable notwithstanding the disclaimer of such warranty made by the Company
in writing. Section 2.18 of the Disclosure Schedule sets forth the aggregate
expenses incurred by the Company in fulfilling its obligations under any
guaranty, warranty, right of return and indemnity provisions during each of the
fiscal years and the interim period covered by the Financial Statements; and the
Company does not know of any reason why such expenses should significantly
increase as a percentage of sales in the future.
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2.19 Employees. Section 2.19 of the Disclosure Schedule contains a list of
all employees/officers of the Company, along with the position and the annual
rate of compensation of each such person. Each such employee has entered into a
confidentiality/assignment of inventions agreement with the Company, a copy of
which has previously been delivered to the Buyer. To the knowledge of the
Company, no key employee or group of employees has any present plans to
terminate employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. The Company has no knowledge of any organizational effort made or
threatened, either currently or within the past two years, by or on behalf of
any labor union with respect to employees of the Company.
2.20 Employee Benefits.
(a) Section 2.20(a) of the Disclosure Schedule contains a complete
and accurate list of all Employee Benefit Plans (as defined below) maintained,
or contributed to, by the Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the Company. Complete
and accurate copies of (i) all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan descriptions,
and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for the last
five plan years for each Employee Benefit Plan, have been delivered to the
Buyer. Each Employee Benefit Plan has been administered in all material respects
in accordance with its terms and each of the Company and the ERISA Affiliates
has in all material respects met its obligations with respect to such Employee
Benefit Plan and has made all required contributions thereto. The Company and
all
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Employee Benefit Plans are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder.
(b) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with respect
to qualified domestic relations orders) suits or proceedings against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost.
(d) Neither the Company nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(e) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code and
insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or any ERISA
Affiliate that would subject the Company or any ERISA Affiliate to any material
fine, penalty, tax or liability of any kind imposed under ERISA or the Code.
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(h) No Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(j) Section 2.20(j) of the Disclosure Schedule discloses each: (i)
agreement with any director, executive officer or other key employee of the
Company (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Company that may be subject
to the tax imposed by Section 4999 of the Code or included in the determination
of such person's "parachute payment" under Section 280G of the Code; and (iii)
agreement or plan binding the Company, including without limitation any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan, or any Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
2.21 Environmental Matters.
(a) The Company has complied with all applicable Environmental Laws
(as defined below) , except for violations of Environmental Laws that do not and
will not, individually or in the aggregate, have a material adverse effect on
the assets, business, financial condition, results of operations or future
prospects of the Company. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Company, except for litigation, notices of violations, formal administrative
proceedings or investigations, inquiries or information requests that will not,
individually or in the aggregate, have a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
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Company. For purposes of this Agreement, "Environmental Law" means any federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and Response Act of
1980 ("CERCLA").
(b) To the knowledge of the Company, there have been no releases of
any Materials of Environmental Concern (as defined below) into the environment
at any parcel of real property or any facility formerly or currently owned,
operated or controlled by the Company. With respect to any such releases of
Materials of Environmental Concern, the Company has given all required notices
to Governmental Entities (copies of which have been provided to the Buyer). The
Company is not aware of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those owned, operated or
controlled by the Company that could reasonably be expected to have a material
impact on the real property or facilities owned, operated or controlled by the
Company. For purposes of this Agreement, "Materials of Environmental Concern"
means any chemicals, pollutants or contaminants, hazardous substances (as such
term is defined under CERCLA), solid wastes and hazardous wastes (as such terms
are defined under the federal Resources Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
(c) Set forth in Section 2.21(c) of the Disclosure Schedule is a
list of all environmental reports, investigations and audits relating to
premises currently or previously
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owned or operated by the Company (whether conducted by or on behalf of the
Company or a third party, and whether done at the initiative of the Company or
directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Company has possession of or
reasonable access to. Complete and accurate copies of each such report, or the
results of each such investigation or audit, have been provided to the Buyer.
(d) Set forth in Section 2.21(d) of the Disclosure Schedule is a
list of all of the solid and hazardous waste transporters and treatment, storage
and disposal facilities that have been utilized by the Company since November
19, 1980, the effective date of the hazardous waste regulatory program under the
Resource Conservation and Recovery Act. The Company is not aware of any material
environmental liability of any such transporter or facility.
2.22 Legal Compliance. The Company and the conduct and operations of its
business are in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Company or its
business, except for any violation of or default under a law referred to in
clause (b) above which reasonably may be expected not to have a material adverse
effect on the assets, business, financial condition, results of operations or
future prospects of the Company.
2.23 Permits. Section 2.23 of the Disclosure Schedule sets forth a list of
all material permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under Environmental Laws and those relating to the occupancy or use of
owned or leased real property) ("Permits") issued to or held by the Company.
Such listed Permits are the only Permits that are required for the Company to
conduct its business as presently conducted or as proposed to be conducted,
except for those the absence of which would not have any material adverse effect
on the assets, business, financial condition, results of operations or future
prospects of the Company. Each such Permit is in full force and effect and, to
the best of the knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit will continue in full force
and effect following the Closing.
2.24 Certain Business Relationships With Affiliates. No Affiliate of the
Company(a) owns any property or right, tangible or intangible, which is used in
the business of the Company, (b) has any claim or cause of action against the
Company, or (c) owes any money to the Company. Section 2.24 of the Disclosure
Schedule describes any transactions or
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relationships between the Company and any Affiliate thereof which are reflected
in the statements of operations of the Company included in the Financial
Statements.
2.25 Brokers' Fees. Except as set forth on Schedule 2.25, the Company does
not have any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
2.26 Books and Records. The minute books and other similar records of the
Company contain true and complete records of all actions taken at any meetings
of the Company's stockholders, Board of Directors or any committee thereof and
of all written consents executed in lieu of the holding of any such meeting.
2.27 Customers and Suppliers. Section 2.27 of the Disclosure Schedule sets
forth a list of each customer that accounted for more than 25% of the
consolidated revenues of the Company during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period.
2.28 Pooling. To the best knowledge of the Company, neither the Company
nor any of its Affiliates has through the date of this Agreement taken or agreed
to take any action that would prevent the Company and the Buyer from accounting
for the business combination to be effected by the Merger as a "pooling of
interests" in conformity with GAAP.
2.29 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Company pursuant to this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has disclosed to the Buyer all information relating to the business
of the Company or the transactions contemplated by this Agreement, except for
the absence of disclosure which would not result in a Company Material Adverse
Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
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Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company as follows:
3.1 Organization. Each of the Buyer and the Transitory Subsidiary is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the state of its incorporation. Each of the Buyer and
the Transitory Subsidiary is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification. Each of the Buyer and the Transitory Subsidiary has all
requisite corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. Each of the
Buyer and the Transitory Subsidiary has furnished to the Company true and
complete copies of its Articles of Incorporation and By-laws, each as amended
and as in effect on the date hereof. Each of the Buyer and the Transitory
Subsidiary is not in default under or in violation of any provision of its
Articles of Incorporation or By-laws.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
12,000,000 shares of Buyer Common Stock, of which 6,098,110 shares are issued
and outstanding and 1,738,725 shares are held in the treasury of the Buyer.
Section 3.2 of the Disclosure Schedule sets forth a complete and accurate list
of (i) all stockholders of the Buyer, indicating the number of shares of Buyer
Common Stock held by each stockholder, and (ii) all holders of options and
warrants, as of March 31, 1999, indicating the number of shares of Buyer Common
Stock subject to each option and warrant. Since March 31, 1999 until the Closing
Date, any options granted by the Buyer shall have been granted pursuant to the
Buyer's Incentive Stock Option Plan. All of the issued and outstanding shares of
Buyer Common Stock are, and all shares of Buyer Common Stock that may be issued
upon exercise of options and warrants will be, duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. There are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which the Buyer is a party or which are binding upon the Buyer providing for
the issuance, disposition or acquisition of any of its capital stock, other than
the options and warrants listed in Section 3.2 of the Disclosure Schedule. There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Buyer. There are no agreements, voting trusts,
proxies, or understandings with respect to the voting, or registration under the
Securities Act of any shares of Buyer Common Stock. All of the issued and
outstanding shares of Buyer Common Stock were issued in compliance with
applicable federal and state securities laws.
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3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and (in the case of the Buyer) the Escrow Agreement by the Buyer and
the Transitory Subsidiary and the performance of this Agreement and (in the case
of the Buyer) the Escrow Agreement the consummation of the transactions
contemplated hereby and thereby by the Buyer and the Transitory Subsidiary have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and Transitory Subsidiary. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act, and the filing of the Articles of Merger as required by the
Massachusetts Business Corporation Law and the California Corporations Code,
neither the execution and delivery of this Agreement or (in the case of the
Buyer) the Escrow Agreement by the Buyer or the Transitory Subsidiary, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict or violate any provision of
the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require on
the part of the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, other than any
filing, permit, authorization, consent or approval which if not obtained or made
would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Buyer or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement, (c) conflict with, result in breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Buyer or Transitory Subsidiary is a party or by which
either is bound or to which any of their assets are subject , other than any
conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Buyer or on the ability of the Parties to
consummate the transactions contemplated by this Agreement, or (d) violate any
order, writ, injunction, decree,
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statute, rule or regulation applicable to the Buyer or the Transitory Subsidiary
or any of their properties or assets.
3.5 Financial Statements. The Buyer has provided to the Company (a) the
audited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Buyer as of and for each of the last
three fiscal years; and (b) the unaudited consolidated balance sheet and
statements of income, changes in stockholders' equity and cash flows as of and
for the four months ended as of April 30, 1999 (the "Buyer Most Recent Balance
Sheet Date"). Such financial statements (collectively, the "Buyer Financial
Statements") have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, fairly present the financial
condition, results of operations and cash flows of the Buyer and the Transitory
Subsidiary as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Buyer and the
Transitory Subsidiary; provided, however, that the Buyer Financial Statements
referred to in clause (b) above are subject to normal recurring year-end
adjustments (which will not be material) and do not include footnotes.
3.6 Absence of Certain Changes. Except as otherwise contemplated by this
Agreement, since the Buyer Most Recent Balance Sheet Date, there has occurred no
event or development which has had, or could reasonably be foreseen to have in
the future, a Buyer Material Adverse Effect. For purposes of this Agreement,
"Buyer Material Adverse Effect" means a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
Buyer or on the ability of the Parties to consummate the Merger and the
transaction contemplated thereby.
3.7 Tax Matters.
(a) The Buyer has filed all Tax Returns that it was required to file
and all such Tax Returns were correct and complete in all material respects. The
Buyer has paid all Taxes (as defined below) that are shown to be due on any such
Tax Returns. The unpaid Taxes of the Buyer for tax periods through the Buyer
Most Recent Balance Sheet Date do not exceed the accruals and reserves for Taxes
set forth on the Buyer Most Recent Balance Sheet. The Buyer does not have any
actual or potential liability for any Tax obligation of any taxpayer (including
without limitation any affiliated group of corporations or other entities that
included the Buyer during a prior period) other than the Buyer. All Taxes that
the Buyer is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
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(b) The Buyer has delivered to the Company correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Buyer for 1996 and 1997. The
federal income Tax Returns of the Buyer have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through 1995. No examination or audit of any Tax Returns of the
Buyer by any Governmental Entity is currently in progress or, to the knowledge
of the Buyer, threatened or contemplated. The Buyer has not waived any statute
of limitations with respect to taxes or agreed to an extension of time with
respect to a tax assessment or deficiency.
(c) The Buyer is not a "consenting corporation" within the meaning
of Section 341(f) of the Code and none of the assets of the Buyer are subject to
an election under Section 341(f) of the Code. The Buyer has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(l)(A)(ii)
of the Code. The Buyer is not a party to any Tax allocation or sharing
agreement.
(d) The Buyer is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code). The
Buyer has not made an election under Treasury Reg. Section 1.1502-20(g). The
Buyer is not and has not been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
3.8 Intellectual Property.
(a) The Buyer owns, or is licensed or otherwise possesses legally
enforceable rights to use the Intellectual Property that are used to conduct its
business as currently conducted or planned to be conducted. Section 3.8 of the
Disclosure Schedule lists (i) all patents and patent applications and all
trademarks, registered copyrights, trade names and service marks which are used
in the business of the Buyer, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any such
application for such issuance or registration has been filed, (ii) all material
written licenses, sublicenses and other agreements to which the Buyer is a party
and pursuant to which any person is authorized to use any Intellectual Property
rights, and (iii) all material written licenses, sublicenses and other
agreements as to which the Buyer is a party and pursuant to which the Buyer is
authorized to use any Third Party Intellectual Property Rights which are used in
the business of the Buyer or which form a part of any product or service of the
Buyer (excluding software that is available through commercial distributors or
in commercial retail stores and subject to "shrink-wrap" agreements). The Buyer
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is not a party to any oral license, sublicense or agreement which, if reduced to
written form, would be required to be listed in Section 3.8 of the Disclosure
Schedule under the terms of this Section 3.8(a).
(b) The Buyer is not and will not be as a result of the execution
and delivery of this Agreement or the performance of the Buyer's obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
(c) The Buyer has not been named in any suit, action or proceeding
which involves a claim of infringement of any Intellectual Property right of any
third party. To the knowledge of the Buyer, the manufacturing, marketing,
licensing or sale of the products or performance of the service offerings of the
Buyer does not infringe any Intellectual Property right of any third party; and
to the knowledge of the Buyer, the Intellectual Property rights of the Buyer are
not being infringed by activities, products or services of any third party.
3.9 Litigation. Section 3.9 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Buyer is a party or, to the knowledge of the Buyer,
is threatened to be made a party. None of the complaints, actions, suits,
proceedings, hearings, and investigations set forth in Section 3.9 of the
Disclosure Schedule could reasonably be expected to have a material adverse
effect on the assets, business, financial condition, results of operations or
future prospects of the Buyer.
3.10 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.11 Deferred Compensation. The Buyer does not have any employee deferred
compensation arrangements other than the Buyer's 401(k) Plan.
3.12 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material
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fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 Reasonable Best Efforts; Notice and Consents.
(a) Each of the Parties shall each use its best efforts, to the
extent commercially reasonable ("Reasonable Best Efforts"), (i) to take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary and proper under applicable law to consummate and make
effective the transactions contemplated hereby as promptly as practicable,
including without limitation using its Reasonable Best Efforts to ensure that
(A) its representations and warranties remain true and correct in all material
respects through the Closing Date and (B) the conditions to the obligations of
the other Parties to consummate the Merger are satisfied, (ii) to obtain from
any Governmental Entity or any other third party any consents, licenses,
permits, waivers, approvals, authorizations, or orders required to be obtained
or made by the Parties or any of their Affiliates in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby (including without limitation those listed
in Section 2.4 or Section 2.23 of the Disclosure Schedule and (iii) as promptly
as practicable, to make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger required
under any applicable federal or state securities laws and any other applicable
law. The Parties shall cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to the
non-filing Parties and its advisors prior to filing and, if requested, to accept
all reasonable additions, deletions or changes suggested in connection
therewith. Each of the Parties shall use its Reasonable Best Efforts to furnish
to the other Parties all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law in
connection with the transactions contemplated by this Agreement.
(b) Each of the Parties shall give (and shall cause their respective
Affiliates to give) any notices to third parties, and use (and cause their
respective Affiliates to use) their Reasonable Best Efforts to obtain any third
party consents related to or required in connection with the Merger that are (i)
necessary to consummate the transactions contemplated hereby, (ii) disclosed or
required to be disclosed in the Disclosure Schedule or (iii) required to prevent
a
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Company Material Adverse Effect or a Buyer Material Adverse Effect from
occurring prior to or after the Effective Time.
(c) No Company Stockholder shall take any action to rescind or
modify the written consent of stockholders of the Company approving the Merger.
4.2 Written Consent.
(a) The Company shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Stockholder Approval pursuant to a
written consent of the Company Stockholders, holding over 98% of the outstanding
shares of Company Common Stock, in accordance with the applicable requirements
of the California Corporations Code.
(b) The Company shall comply with all applicable provisions of and
rules under all applicable provisions of the Securities Act, state securities
laws and California Corporations Code in the preparation and solicitation of the
written consent of the Company Stockholders.
(c) Yatin Trivedi and Larry F. Saunders each agree to (i) vote all
shares of Company Common Stock that are beneficially owned by him, or for which
he has voting authority, in favor of the adoption of this Agreement and the
approval of the Merger and (ii) otherwise use his best efforts to obtain the
Requisite Stockholder Approval.
4.3 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall (and shall cause each Subsidiary to) conduct its operations in the
Ordinary Course of Business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use all reasonable efforts
to preserve intact its current business organization, keep its physical assets
in good working condition, use reasonable efforts to keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, prior to the Effective Time,
neither the Company nor any Subsidiary shall, without the written consent of the
Buyer:
(a) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase,
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any stock of any class or any other securities or any rights, warrants or
options to acquire any such stock or other securities (except pursuant to the
conversion or exercise of convertible securities, Options or warrants
outstanding on the date hereof), or amend any of the terms of any such
convertible securities, Options or warrants;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases) other than purchases on
credit in the ordinary course of business; assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.20(j) or (except for normal increases in the Ordinary Course of
Business) increase in any manner the compensation or fringe benefits of, or
materially modify the employment terms of, its directors, officers or employees,
generally or individually, or pay any benefit not required by the terms in
effect on the date hereof of any existing Employee Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
(f) amend its charter or By-laws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(h) except as otherwise contemplated by this Agreement, discharge or
satisfy any Security Interest or pay any obligation or liability other than in
the Ordinary Course of Business;
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(i) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
(j) sell, assign, transfer or license any Intellectual Property,
other than in the Ordinary Course of Business;
(k) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(l) make or commit to make any capital expenditure in excess of
$5,000 per item;
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Merger
set forth in Article V not being satisfied;
(n) take any action that would jeopardize the treatment of the
Merger as a "pooling of interests" for accounting purposes; or
(o) agree in writing or otherwise to take any of the foregoing
actions.
4.4 Full Access. The Company shall (and shall cause each Subsidiary to)
permit representatives of the Buyer to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and the Subsidiaries) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company and each Subsidiary. Each of the
Buyer and the Transitory Subsidiary (a) shall treat and hold as confidential any
Confidential Information (as defined below), (b) shall not use any of the
Confidential Information except in connection with this Agreement, and (c) if
this Agreement is terminated for any reason whatsoever, shall return to the
Company all tangible embodiments (and all copies) thereof which are in its
possession. For purposes of this Agreement, "Confidential Information" means any
confidential or proprietary information of the Company or any Subsidiary that is
furnished in writing to the Buyer or the Transitory Subsidiary by the Company or
any Subsidiary in connection with this Agreement and is labelled confidential or
proprietary; provided, however, that it shall not include any information (i)
which, at the time of disclosure, is available publicly, (ii) which, after
disclosure,
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becomes available publicly through no fault of the Buyer or the Transitory
Subsidiary, or (iii) which the Buyer or the Transitory Subsidiary knew or to
which the Buyer or the Transitory Subsidiary had access prior to disclosure.
4.5 Notice of Breaches. The Company shall promptly deliver to the Buyer
written notice of any event or development that would (a) render any statement,
representation or warranty of the Company in this Agreement (including the
Disclosure Schedule) inaccurate or incomplete in any material respect, or (b)
constitute or result in a breach by the Company of, or a failure by the Company
to comply with, any agreement or covenant in this Agreement applicable to such
party. The Buyer or the Transitory Subsidiary shall promptly deliver to the
Company written notice of any event or development that would (i) render any
statement, representation or warranty of the Buyer or the Transitory Subsidiary
in this Agreement inaccurate or incomplete in any material respect, or (ii)
constitute or result in a breach by the Buyer or the Transitory Subsidiary of,
or a failure by the Buyer or the Transitory Subsidiary to comply with, any
agreement or covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
4.6 Exclusivity. Until the earlier of the Effective Time or the
termination of this Agreement in accordance with Section 7.1, the Company shall
not, and the Company shall use its best efforts to cause its Affiliates and each
of its officers, directors, employees, representatives and agents not to,
directly or indirectly, (a) encourage, solicit, initiate, engage or participate
in discussions or negotiations with any person or entity (other than the Buyer)
concerning any merger, consolidation, sale of material assets, tender offer,
recapitalization, accumulation of shares of Company Common Stock, proxy
solicitation or other business combination involving the Company, any Subsidiary
or any division of the Company or any Subsidiary, (b) provide any non-public
information concerning the business, properties or assets of the Company or any
Subsidiary to any person or entity (other than the Buyer), or dispose of any of
the assets of the Company other than in the Ordinary Course of Business. The
Company shall immediately notify the Buyer of, and shall disclose to the Buyer
all details of, any inquiries, discussions or negotiations of the nature
described in the first sentence of this Section 4.6.
4.7 Agreements from Certain Affiliates of the Company. Concurrently with
the execution of this Agreement, the Company shall deliver to the Buyer a list
of all persons or entities who are at such time Affiliates of the Company (the
"Company Affiliates"). In order to help ensure that the Merger will be accounted
for as a "pooling of interests," that the issuance of Merger Shares will comply
with the Securities Act and that the Merger will be treated as a tax-
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free reorganization, the Company shall cause each Company Affiliate to execute
and deliver to the Buyer, prior to obtaining the written consent of the Company
Stockholders pursuant to Section 4.2(a), a written agreement substantially in
the form attached hereto as Exhibit B (the "Affiliate Agreement"). If any
Company Affiliate fails to execute and deliver an Affiliate Agreement, the Buyer
shall be entitled to place appropriate legends on the certificates evidencing
the Merger Shares to be issued to such person or entity and any other shares of
Buyer Common Stock issued to such person or entity upon exercise of an Option or
warrant, and to issue appropriate stock transfer instructions to the transfer
agent for the Buyer Common Stock, to the effect that (a) such shares may only be
sold, transferred or otherwise disposed of, and the holder thereof may only
reduce his or its interest in or risk relating to such shares, after financial
results covering at least 30 days of combined operations of the Company and the
Buyer after the Effective Time shall have been publicly released, and (b) such
shares may be sold publicly only in compliance with Rule 145 under the
Securities Act.
4.8 Tax-Free Reorganization. The Buyer and the Company shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code. The Parties hereby adopt this Agreement
as a plan of reorganization.
4.9 Pooling Accounting. From and after the date hereof and until the
Effective Time, neither the Company nor the Buyer, nor any of their respective
Subsidiaries, shall knowingly take any action, or knowingly fail to take any
action, the result of which is reasonably likely to jeopardize the treatment of
the Merger as a pooling-of-interests for accounting purposes.
4.10 Non-Competition.
(a) While employed by the Buyer, each of Yatin Trivedi and Larry F.
Saunders (each, a "Principal") and any of their respective Affiliates shall not:
(i) be employed by, provide consulting or other services to,
or otherwise be involved with, whether as an investor or otherwise (other than
as an investor holding less than 1% of the total outstanding stock of a publicly
held company), any competitor of the Company or the Buyer;
(ii) recruit, solicit or induce, or attempt to induce, any
employee, employees, consultant, consultants, subcontractor or subcontractors of
the Company or the Buyer to terminate their employment or consulting with, or
otherwise cease their relationship with, the Company or the Buyer; or
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(iii) solicit, divert or take away, or attempt to divert or
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company or the
Buyer.
(b) Termination for Cause or Resignation.
(i) If, during the period of two years after the Effective
Date (the "Non-Compete Period"), a Principal's employment with the Buyer
following the Closing is terminated by the Buyer for Cause (as defined below) or
by the Principal ("Resignation"), then neither such Principal nor any of his
respective Affiliates shall engage in any of the actions specified in (1)
Section 4.10(a)(i) for the longer of the remaining Non-Compete Period or a
period of 180 days from the date of such termination of employment (the
"Employment Termination Date") and (2) Section 4.10(a)(ii) and Section
4.10(a)(iii) for the longer of the remaining Non-Compete Period or a period of
one year from the Employment Termination Date. For the purposes of this Section
4.10, termination for "Cause" shall be deemed to exist upon (x) a good faith
finding by the Buyer of failure of the Principal to perform his assigned duties
for the Buyer, dishonesty, gross negligence or misconduct, or (y) conviction of
the Principal of, or the entry of a pleading of guilty or nolo contendere by the
Principal to, any crime involving moral turpitude or any felony.
(ii) If, after the Non-Compete Period, a Principal's
employment with the Buyer following the Closing is terminated by the Buyer for
Cause or by Resignation, then neither the Principals nor any of their respective
Affiliates shall engage in any of the actions specified in (1) Section
4.10(a)(i) for a period of 180 days from the Employment Termination Date and (2)
Section 4.10(a)(ii) and Section 4.10(a)(iii) for a period of one year from the
Employment Termination Date.
(c) Termination Without Cause or Constructive Termination.
(i) If, during the Non-Compete Period, a Principal's
employment with the Buyer following the Closing is terminated by the Buyer
without Cause or as a result of such Principal's Constructive Termination (as
defined below), then neither the Principals nor any of their respective
Affiliates shall engage in any of the actions specified in Section 4.10(a)(ii)
and Section 4.10(a)(iii) for the longer of the remaining Non-Compete Period or a
period of one year from the Employment Termination Date. For purposes of this
Section 4.10, "Constructive Termination" shall mean a reduction in a Principal's
assigned duties or base salary which is not consented to by such Principal, and
which reduction continues for a period of 60 days after
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delivery of written notice by such Principal to the President of the Buyer,
which notice describes in reasonable detail, to the best of such Principal's
belief, that his assigned duties have been reduced.
(ii) If, after the Non-Compete Period, a Principal's
employment with the Buyer following the Closing is terminated by the Buyer
without Cause or as a result of such Principal's Constructive Termination, then
neither the Principals nor any of their respective Affiliates shall engage in
any of the actions specified in Section 4.10(a)(ii) and Section 4.10(a)(iii) for
a period of one year from the Employment Termination Date.
(d) The Parties agree that the duration and geographic scope of the
non-competition provision set forth in this Section 4.10 are reasonable. In the
event that any court of competent jurisdiction determines that the duration or
the geographic scope, or both, are unreasonable and that such provision is to
that extent unenforceable, the Parties and Principals agree that the provision
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. The Parties and Principals
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. Each of the Principals agrees that damages are an
inadequate remedy for any breach of this provision and that the Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions without
bond or other security upon any actual or threatened breach of this
non-competition provision.
(e) Each of the Principals acknowledges that this Section 4.10 does
not constitute a contract of employment, does not imply that the Buyer will
continue such Principal's employment for any period of time and does not change
the at-will nature of such Principal's employment.
4.11 Securities Laws Matters.
(a) The Company agrees to cooperate with the Buyer in qualifying the
issuance of the Merger Shares to the Company Stockholders under Section 4(2) of
the Securities Act and/or Regulation D under the Securities Act, and in
complying with all state securities laws in respect thereto. Neither Company nor
any of its Affiliates is or shall be authorized to act on the Buyer's behalf
with respect to any aspect of the transactions contemplated by this Agreement
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or make any solicitations of or representations to any of the Company
Stockholders on the Buyer's behalf. Neither this Agreement nor any other act by
the Buyer shall be deemed an offer with respect to Merger Shares.
(b) The Company understands and agrees that:
(i) each certificate representing Merger Shares issued to
Company Stockholders will bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such Act
or an opinion of counsel satisfactory to the corporation to
the effect that such registration is not required."
(ii) each Company Stockholder receiving Merger Shares will be
required to sign an investment agreement in the form attached hereto as Exhibit
C (the "Investment Agreement").
4.12 Observation Rights. While employed by the Buyer or until the Buyer's
securities are publicly traded, each of Yatin Trivedi and Larry F. Saunders
shall be permitted to attend meetings of the Board of Directors of the Buyer and
receive copies of materials distributed to the Board of Directors; provided that
they may be excluded from any meetings or portions thereof when the Board of
Directors elects to meet in executive session.
4.13 Post-Signing Adjustment. In the event that the representation made by
Buyer under Section 3.2 hereof regarding the number of shares of outstanding
Buyer capital stock (the "Represented Shares") was incorrect when made because
the actual number of outstanding shares of Buyer capital stock (the "Actual
Shares") on the Closing Date is greater than the Represented Shares, Buyer
hereby agrees to issue to the Company Stockholders as additional consideration a
number of shares of Buyer Common Stock equal to the difference between (i) the
Actual Shares multiplied by the Conversion Ratio, and (ii) the Represented
Shares multiplied by the Conversion Ratio.
ARTICLE V
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CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval; and
(b) no action, suit or proceeding shall be pending or threatened by
any Governmental Entity wherein an unfavorable judgment, order, decree,
stipulation or injunction would be reasonably likely to (i) prevent consummation
of any of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own, operate or
control any of the assets and operations of the Surviving Corporation and the
Subsidiaries following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect.
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction of the following additional
conditions:
(a) the number of Dissenting Shares shall not exceed 5% of the
number of outstanding shares of Company Common Stock as of the Effective Time;
(b) the Company shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.1, except for any
which if not obtained or effected would not have a material adverse effect on
the assets, business, financial condition, results of operations or future
prospects of the Company or any Subsidiary or on the ability of the Parties to
consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Company set forth in
Article II shall be true and correct when made on the date hereof and shall be
true and correct in all material respects as of the Effective Time as if made as
of the Effective Time, except for representations and warranties made as of a
specific date, which shall be true and correct as of such date;
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(d) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(e) the Company shall have delivered to the Buyer and the Transitory
Subsidiary a certificate (without qualification as to knowledge or materiality
or otherwise) to the effect that each of the conditions specified in Section 5.1
and clauses (a) through (d) of this Section 5.2 is satisfied in all respects;
(f) the Buyer and the Transitory Subsidiary shall have received from
Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion with
respect to the matters set forth in Exhibit D attached hereto, addressed to the
Buyer and the Transitory Subsidiary and dated as of the Closing Date;
(g) except for any Company Stockholder who holds only Dissenting
Shares, (i) each Company Stockholder shall have executed and delivered an
Investment Agreement, and (ii) each Company Stockholder shall have executed and
delivered an investment questionnaire in the form attached hereto as Exhibit F
(an "Investment Questionnaire") or each Company Stockholder shall have had
executed and delivered on his or her behalf, a Purchaser Representative
Questionnaire in the form attached hereto as Exhibit G (a "Purchaser
Representative Questionnaire");
(h) the offer, sale and issuance of the Merger Shares pursuant
hereto shall be exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act and/or Regulation D under the Securities Act
and applicable state securities laws;
(i) the Buyer and the Transitory Subsidiary shall have received the
resignations, effective as of the Effective Time, of each director and officer
of the Company and the Subsidiaries specified by the Buyer in writing at least
five business days prior to the Closing;
(j) the Company shall have obtained (and shall have provided copies
thereof to the Buyer) from each of its employees, who is employed by the Company
immediately prior to the Effective Time, a consent to assign to the Buyer the
Proprietary Information Agreement executed by such employee and the Company;
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(k) the Company shall have obtained (and shall have provided copies
thereof to the Buyer) a release from Michael Carroll of all claims against
Buyer, Transitory Subsidiary and other respective affiliates;
(l) the Buyer shall have received duly executed Affiliate Agreements
from each of the Affiliates of the Company pursuant to Section 4.7;
(m) the Escrow Agent and Securityholder Agents shall have executed
and delivered the Escrow Agreement substantially in the form attached as Exhibit
A subject to modifications requested by the Escrow Agent and reasonably
acceptable to the Buyer and the Company;
(n) the California Franchise Tax Board shall have issued the Tax
Clearance Certificate for the Company; and
(o) all actions to be taken by the Company in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Buyer and the Transitory Subsidiary.
5.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III shall be true and correct when
made on the date hereof and shall be true and correct in all material respects
as of the Effective Time as if made as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be true
and correct as of such date;
(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time;
(c) each of the Buyer and the Transitory Subsidiary shall have
delivered to the Company a certificate (without qualification as to knowledge or
materiality or otherwise) to the effect that each of the conditions specified in
(a) and (b) of this Section 5.3 is satisfied in all respects;
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(d) the Company shall have obtained all of the waivers, permits,
consents, approvals or other authorizations referred to in Section 4.1, except
for any waivers, permits, consents, approvals or authorizations in whose absence
the Merger could be consummated without materially adversely affecting the
Company or the Company Stockholders;
(e) the Company shall have received from Hale and Dorr LLP, counsel
to the Buyer and the Transitory Subsidiary, an opinion with respect to the
matters set forth in Exhibit E attached hereto, addressed to the Company and
dated as of the Closing Date;
(f) the Company, Escrow Agent, and Securityholder Agents shall have
executed and delivered the Escrow Agreement substantially in the form attached
as Exhibit A subject to modifications requested by the Escrow Agent and
reasonably acceptable to the Buyer and the Company; and
(g) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby shall be reasonably satisfactory
in form and substance to the Company.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification. The Company and the Company Stockholders shall
jointly and severally indemnify the Surviving Corporation and the Buyer (the
"Indemnified Persons") in respect of, and hold the Indemnified Persons harmless
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) incurred or suffered by the Indemnified
Persons or any Affiliate thereof ("Damages"):
(a) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company contained in this Agreement or in the Certificate
delivered pursuant to Section 5.2(e);
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(b) resulting from any failure of any Company Stockholders to have
good, valid and marketable title to the issued and outstanding shares of Company
Common Stock held by such Company Stockholders, free and clear of all liens,
claims, pledges, options, adverse claims or charges of any nature whatsoever; or
(c) resulting from any claim by a stockholder or former stockholder
of the Company, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (i) ownership or rights to ownership of any shares of
stock of the Company; (ii) any rights of a stockholder (other than the right to
receive the Merger Shares pursuant to this Agreement or rights to demand
purchase under the applicable provisions of the California Corporations Code),
including any option, preemptive rights or rights to notice or to vote; (iii)
any rights under the charter or By-laws of the Company; or (iv) any claim that
his, her or its shares were wrongfully repurchased by the Company.
6.2 Method of Asserting Claims.
(a) All claims for indemnification by an Indemnified Person pursuant
to this Article VI shall be made in accordance with the provisions of the Escrow
Agreement.
(b) If a third party asserts that an Indemnified Person is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which such Indemnified Person may be entitled to
indemnification pursuant to this Article VI, and such Indemnified Person
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Person shall be entitled to satisfy such
obligation, without prior notice to or consent from the Securityholder Agents,
(ii) such Indemnified Person may make a claim for indemnification pursuant to
this Article VI in accordance with the provisions of the Escrow Agreement, and
(iii) such Indemnified Person shall be reimbursed, in accordance with the
provisions of the Escrow Agreement, for any such Damages for which it is
entitled to indemnification pursuant to this Article VI (subject to the right of
the Securityholder Agents to dispute the Indemnified Person's entitlement to
indemnification under the terms of this Article VI).
(c) The Indemnified Person shall give prompt written notification to
the Securityholder Agents of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VI may be sought; provided, however, that no delay on the part of the
Indemnified Person in notifying the Securityholder Agents shall relieve the
Company and the Company Stockholders of any liability or obligation
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hereunder except to the extent of any damage or liability caused by or arising
out of such failure. Within 20 days after delivery of such notification, the
Securityholder Agents may, upon written notice thereof to the Indemnified
Person, assume control of the defense of such action, suit or proceeding with
counsel reasonably satisfactory to the Indemnified Person, provided the
Securityholder Agents acknowledge in writing to the Indemnified Person that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Person in connection with such action, suit or proceeding constitute
Damages for which the Indemnified Person shall be entitled to indemnification
pursuant to this Article VI. If the Securityholder Agents do not so assume
control of such defense, the Indemnified Person shall control such defense. The
party not controlling such defense may participate therein at its own expense;
provided that if the Securityholder Agents assume control of such defense and
the Indemnified Person reasonably concludes that the indemnifying parties and
the Indemnified Person have conflicting interests or different defenses
available with respect to such action, suit or proceeding, the reasonable fees
and expenses of counsel to the Indemnified Person shall be considered "Damages"
for purposes of this Agreement. The party controlling such defense shall keep
the other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Person shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Securityholder Agents, which shall not be unreasonably withheld. The
Securityholder Agents shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnified Person, which
shall not be unreasonably withheld.
6.3 Survival. The representations and warranties of the Company set forth
in this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until one year after the Closing
Date and shall not be affected by any examination made for or on behalf of the
Buyer or the knowledge of any of the Buyer's officers, directors, stockholders,
employees or agents; provided, however, that those representations and
warranties of the Company and the Buyer that relate to contingencies that are
subject to resolution through the audit process shall only survive the execution
and delivery hereof and the Closing until the earlier of (i) the public issuance
of the first independent audit report on the Buyer following the Closing which
covers a period of time subsequent to the Closing and (ii) the first anniversary
of the Closing Date. Notwithstanding the foregoing, the representations and
warranties contained in Section 2.21 relating to environmental matters and the
representations and warranties contained in Section 2.9 relating to tax matters
shall survive the Closing and the consummation of the transactions contemplated
thereby and continue until the expiration of the applicable statute of
limitations relating to such representations. If a notice is given in
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accordance with the Escrow Agreement before expiration of such periods, then
(notwithstanding the expiration of such time period) the representation or
warranty applicable to such claim shall survive until, but only for purposes of,
the resolution of such claim. The representations and warranties of the Buyer
contained in Section 3.2 shall survive the Closing and the consummation of the
transactions contemplated hereby and shall continue until the date of the
consummation of the Buyer's initial public offering or the sale of substantially
all of the Buyer's assets or the transfer of a majority of the Buyer's voting
stock or a merger, whichever occurs first.
6.4 Limitations. The Escrow Agreement is intended to secure the
indemnification obligations of the Company Stockholders under this Agreement,
and shall be the sole and exclusive remedy of the Buyer subject to the
provisions of this Section 6.4. The aggregate liability of the Company and the
Company Stockholders to the Buyer for any reason (including, without limitation,
for any misrepresentation or breach of any representation, warranty or covenant
contained in this Agreement) shall not exceed the amount of the Escrow Shares;
provided, however, that the foregoing limitation shall not apply to liability
for fraud.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Company in the event the Company is in breach, and the Company may
terminate this Agreement by giving written notice to the Buyer and the
Transitory Subsidiary in the event the Buyer or the Transitory Subsidiary is in
breach, of any material representation, warranty or covenant contained in this
Agreement, and such breach is not remedied within 15 days of delivery of written
notice thereof;
(c) any Party may terminate this Agreement by giving written notice
to the other Parties at any time after the Company Stockholders have voted on
whether to approve this Agreement and the Merger in the event this Agreement and
the Merger failed to receive the Requisite Stockholder Approval;
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(d) the Buyer may terminate this Agreement by giving written notice
to the Company if the Closing shall not have occurred on or before the 120th day
following the date of this Agreement by reason of the failure of any condition
precedent under Section 5.1 or Section 5.2 hereof (unless the failure results
primarily from a breach by the Buyer or the Transitory Subsidiary of any
representation, warranty or covenant contained in this Agreement); or
(e) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before the 120th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5.1 or Section
5.3 hereof (unless the failure results primarily from a breach by the Company of
any representation, warranty or covenant contained in this Agreement).
7.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for breaches of this Agreement); provided, however, that the
confidentiality provisions contained in Section 4.4 shall survive any such
termination.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is defined
in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
Actual Shares 4.13
Affiliates 2.13(f)
Affiliate Agreement 4.7
Articles of Merger 1.1
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Financial Statements 3.5
Buyer Material Adverse Effect 3.6
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Buyer Most Recent Balance Sheet Date 3.5
Cause 4.10(b)(i)
CERCLA 2.21(a)
Certificates 1.3
Closing 1.2
Closing Date 1.2
Code 1.11(a)
Company Introduction
Company Affiliates 4.7
Company Common Stock 2.2
Company Material Adverse Effect 2.7
Company Stockholders 1.5(a)
Confidential Information 4.4
Constructive Termination 4.10(c)(i)
Conversion Ratio 1.5(a)
Damages 6.1, 6.2(c)
Disclosure Schedule Article II
Dissenting Shares 1.7(a)
Effective Time 1.1
Employee Benefit Plan 2.20(a)
Employment Termination Date 4.10(b)(i)
Environmental Law 2.21(a)
ERISA 2.20(a)
ERISA Affiliate 2.20(a)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Shares 1.5(a)
Exchange Act 2.4
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnified Persons 6.1
Initial Shares 1.5(a)
Intellectual Property 2.11(a)
Investment Agreement 4.11(b)(ii)
Investment Questionnaire 5.2(g)
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Materials of Environmental Concern 2.21(b)
Merger 1.1
Merger Shares 1.5(a)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-Compete Period 4.10(b)(i)
Options 1.11(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.23
Principal 4.10(a)
Purchaser Representative Questionnaire 5.2(g)
Reasonable Best Efforts 4.1(a)
Represented Shares 4.13
Requisite Stockholder Approval 2.3
Resignation 4.10(b)(i)
Securities Act 2.2
Security Interest 2.4
Securityholder Agents 1.3
Subsidiary 2.4
Surviving Corporation 1.1
Taxes 2.9(a)
Tax Returns 2.9(a)
Third Party Intellectual Property Rights 2.11(a)
Transitory Subsidiary Introduction
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
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9.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares are intended for the benefit
of the Company Stockholders and (b) the provisions in Article VI concerning
indemnification are intended for the benefit of the individuals specified
therein and their respective legal representatives.
9.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
9.5 Counterparts; Facsimile Signature. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by facsimile signature.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Company: Copy to:
------------------ --------
SEVA Technologies, Inc. Wilson Sonsini Goodrich & Rosati
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200 Brown Rd., Suite 103 650 Page Mill Road
Fremont, CA 94539 Palo Alto, CA 94304
Attention: Yatin Trivedi, Attention: Nevan C. Elam, Esq.
President
If to the Buyer: Copy to:
Intrinsix Corp. Hale and Dorr LLP
33 Lyman Street 60 State Street
Westboro, MA 01581 Boston, MA 02109
Attention: James A. Gobes, Attention: Peter B. Tarr, Esq.
President
If to the Transitory Subsidiary: Copy to:
Intrinsix Merger Corp. Hale and Dorr LLP
33 Lyman Street 60 State Street
Westboro, MA 01581 Boston, MA 02109
Attention: James A. Gobes, Attention: Peter B. Tarr, Esq.
President
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether The
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of The Commonwealth of
Massachusetts.
9.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment
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effected subsequent to the Requisite Stockholder Approval shall be subject to
the restrictions contained in the Massachusetts Business Corporation Law. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.11 Expenses. Except as set forth in the Escrow Agreement, each of the
Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
9.12 Specific Performance. Each of the Parties acknowledges and agrees
that one or more of the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter in addition to any other remedy to
which it may be entitled, at law or in equity.
9.13 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, or
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foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
9.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, each of the Parties hereto have caused this Agreement
to be executed and its corporate seal to be affixed thereto as of the date first
above written by its respective duly authorized officers.
BUYER
[SEAL] INTRINSIX CORP.
By: /s/ James A. Gobes
----------------------------------
James A. Gobes, President
By: /s/ Brian Meeks
----------------------------------
Brian C. Meeks, Treasurer
TRANSITORY SUBSIDIARY
[SEAL] INTRINSIX MERGER CORP.
By: /s/ James A. Gobes
----------------------------------
James A. Gobes, President
By: Brian Meeks
----------------------------------
Brian C. Meeks, Treasurer
COMPANY
[SEAL] SEVA TECHNOLOGIES, INC.
By: /s/ Yatin Trivedi
----------------------------------
Yatin Trivedi, President
By: /s/ Larry Saunders
----------------------------------
Larry F. Saunders, Treasurer
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The following stockholders of the Company hereby execute this Agreement
for the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.2(c), Section 4.10 and Article VI.
/s/ Yatin Trivedi
--------------------------------------
Yatin Trivedi
/s/ Larry Saunders
--------------------------------------
Larry F. Saunders
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Exhibit 10.12
ASSET PURCHASE AGREEMENT
BY AND
BETWEEN
INTRINSIX CANADA CO.
AND
TELEXIS CORP.
December 29, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I....................................................................5
1.1 Delivery of the Assets.................................................5
1.2 Further Assurances.....................................................6
1.3 Assumption of Liabilities; Etc.........................................6
1.4 Purchase Price.........................................................6
1.6 The Closing............................................................8
1.7 Buyer's Rights of Set-Off and Hold Back................................8
1.8 Adjustments............................................................8
1.9 Allocation of the Purchase Price.......................................8
ARTICLE II...................................................................8
2.1 Organization, Qualification and Corporate Power........................9
2.2 Authority..............................................................9
2.3 Noncontravention.......................................................9
2.4 Ownership of the Assets...............................................10
2.5 Financial Statements..................................................10
2.6 Absence of Certain Changes............................................10
2.7 Fixed Assets..........................................................10
2.8 Real Property.........................................................10
2.9 Contracts.............................................................10
2.10 Litigation...........................................................12
2.11 Warranty.............................................................12
2.12 Employees............................................................12
2.13 Intellectual Property................................................12
2.14 Permits..............................................................13
2.15 Legal Compliance.....................................................13
2.16 Year 2000............................................................13
2.18 Customers............................................................14
2.19 Prepayments..........................................................14
2.20 Completeness of Assets...............................................14
2.21 Brokers' Fees........................................................14
2.22 Real Property Leases.................................................14
2.23 Disclosure...........................................................15
ARTICLE III.................................................................15
3.1 Organization, Qualification and Corporate Power.......................15
3.2 Authority.............................................................15
3.3 Noncontravention......................................................16
3.4 Brokers' Fees.........................................................16
3.5 Disclosure............................................................16
ARTICLE IV..................................................................17
4.1 Conditions to Obligations of the Buyer................................17
4.2 Conditions to Obligations of the Seller...............................18
4.3 Covenants Relating to Closing and Termination.........................19
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ARTICLE V...................................................................20
5.1 Hired Employees.......................................................20
5.2 Sharing of Data.......................................................21
5.3 No Solicitation or Hiring of Former Employees.........................21
5.4 Cooperation in Litigation.............................................21
5.7 Warranty Obligations..................................................23
5.9 Assumed Contract Obligations..........................................23
5.10 Performance under Assumed Contracts..................................23
ARTICLE VI..................................................................23
6.1 Indemnification by the Seller.........................................23
6.2 Method of Asserting Claims............................................24
6.3 Survival..............................................................25
6.4 Limitations...........................................................26
ARTICLE VII.................................................................27
7.1 Press Releases and Announcements......................................27
7.2 Proprietary Information...............................................27
7.3 No Third Party Beneficiaries..........................................27
7.4 Entire Agreement......................................................27
7.5 Succession and Assignment.............................................27
7.6 Counterparts..........................................................28
7.7 Headings..............................................................28
7.8 Notices...............................................................28
7.9 Governing Law.........................................................28
7.10 Amendments and Waivers...............................................28
7.11 Severability.........................................................29
7.12 Expenses.............................................................29
7.13 Construction.........................................................29
7.14 Currency and Interest................................................29
7.15 Tax Aspects..........................................................29
7.16 Incorporation of Exhibits and Schedules..............................30
7.17 Guaranty of the Buyer's Obligations..................................30
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Exhibit A - Bill of Sale
Exhibit B - Instrument of Assumption of Liabilities
Exhibit C - Opinion of Bulger, Young, Counsel to the Seller
Exhibit D - Transition Services
Exhibit E - Transition Facility
Exhibit F - Opinion of Hale and Dorr LLP, Counsel to Intrinsix Corp.
Exhibit G - Opinion of Stewart McKelvey Stirling Scales, Counsel to the Buyer
Disclosure Schedule
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of the
29th day of December, 1999, by and between Intrinsix Canada Co., a Nova Scotia
company (the "Buyer"), and Telexis Corp., a corporation continued under the laws
of Canada (the "Seller"). The Buyer and the Seller are referred to collectively
herein as the "Parties."
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business associated with the operations of
the Consulting Engineering component of the Telecom Integration and Engineering
Services (TIES) division of the Seller (the "Business"), for the consideration
set forth below and the assumption of certain of the Seller's liabilities
associated with the Business set forth below, subject to the terms and
conditions of this Agreement. For greater certainty, the Business includes
substantially all of the assets and business associated with the operations of
the TIES division but does not include any assets relating to the OEM or
Trilogue components of the TIES division, which assets are set forth on Schedule
1.1(b).
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
SALE AND DELIVERY OF THE ASSETS
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this Agreement,
at the closing of the transactions contemplated by this Agreement (the
"Closing"), the Seller shall sell, transfer, convey, assign and deliver to the
Buyer, and the Buyer shall purchase from the Seller, the following properties,
assets and other claims, rights and interests:
(i) all rights of the Seller (collectively, the "Contract
Rights") under the contracts, agreements and other instruments set forth on
Schedule 1.1(a)(i) attached hereto (the "Assumed Contracts"), but not including
any accounts receivable outstanding as of the Closing Date or the value of any
uninvoiced work-in-progress under the Assumed Contracts up to the Closing Date
(which work-in-progress shall be valued, in the case of fixed contracts, based
upon the price allocations contained in the applicable statement of work or
similar benchmarks in accordance with Seller's customary income recognition
policy);
(ii) all books, records, correspondence, technical, accounting
and procedural manuals, marketing information, customer lists and databases and
client files, employment records and employee files, studies, reports or
summaries relating to the Assets (as defined below) and/or the operation of the
Business, and any confidential information which has been reduced to writing
relating to or arising out of the Business (collectively, the "Records"); and
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(iii) all of the computers (including all software installed
thereon, other than any site-licensed software), furniture and equipment, and
tangible personal property associated with the Business and owned by the Seller
on the Closing Date as set forth on Schedule 1.1(a)(iii) and used or useful in
conducting the Business (collectively, the "Fixed Assets"); and
(b) The Contract Rights, Records, and Fixed Assets described in
paragraph (a) above are hereinafter referred to collectively as the "Assets."
For greater certainty, the Assets do not include the Seller's interest, if any,
in the property described in Schedule 1.1 (b) (the "Excluded Assets").
1.2 Further Assurances. At any time and from time to time after the
Closing Date, at the Buyer's request and without further consideration, the
Seller promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption") in the
form attached hereto as Exhibit B, pursuant to which it shall assume and agree
to perform, pay and discharge all obligations of the Seller continuing after the
Closing under the Assumed Contracts which are to be performed after the Closing
Date, but excluding all obligations accrued on or prior to the Closing Date (the
"Assumed Liabilities").
(b) The Buyer shall not at the Closing or otherwise assume or
agree to perform, pay or discharge, and the Seller shall remain unconditionally
liable for, all obligations, liabilities and commitments, fixed or contingent,
of the Seller other than the Assumed Liabilities, provided, however, that this
clause shall not limit the obligations of the Buyer to indemnify the Seller as
set forth elsewhere in this Agreement.
1.4 Purchase Price.
(a) The purchase price to be paid by the Buyer for the Assets shall
be equal to the sum of (i) $1,750,000 (the "Base Purchase Price") and (ii) the
Post-Closing Net Adjustment (as defined in Section 1.5 below) (collectively, the
"Total Purchase Price").
(b) The payment of the Total Purchase Price shall be as follows: (a)
the Buyer shall deliver the Base Purchase Price to the Seller on the Closing
Date by cashiers or certified check or by bank transfer of immediately available
funds to an account designated by the Seller, and (b) the balance of the Total
Purchase Price (the Post-Closing Net Adjustment) shall be paid within 30 days
following the sixth month anniversary of the Closing Date, by cashiers or
certified check or by bank transfer of immediately available funds to an account
designated by the Seller; provided, however, in the event that a post-closing
dispute arises relating to the determination of the Post-Closing Net Adjustment
pursuant to Section 1.5 below,
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the Buyer shall not be obligated to pay such Post-Closing Net Adjustment until
such dispute is resolved to the mutual satisfaction of both parties.
1.5 Calculation of Post-Closing Net Adjustment.
(a) Within 15 days following the date which is the later of June 30,
2000 or the sixth month anniversary of the Closing Date (the "Adjustment Date"),
the Buyer shall calculate the Post-Closing Net Adjustment as follows and deliver
a detailed written accounting of such calculation to the Seller:
Post-Closing Revenue Retention
Net Adjustment = Percent x Percent x $250,000.
(b) "Revenue Percent" shall be calculated as follows:
(i) If the gross revenue recognized consistent with Seller's
past practices (using income recognition policies consistent with those of the
Seller, which policies are attached as Schedule 1.5(b)(i)) by the Buyer under
the Assumed Contracts between the Closing Date and the Adjustment Date (the
"Actual Revenue") is equal to or less than $965,090 (the "Minimum Revenue"),
then the Revenue Percent shall be equal to zero.
(ii) If the Actual Revenue exceeds the Minimum Revenue, then
the Revenue Percent shall be equal to the lesser of (x) 100% and (y) the
quotient obtained by dividing (a) the difference between the Actual Revenue and
the Minimum Revenue, by (b) $275,740.
(c) "Retention Percent" shall be calculated as follows:
(i) If the number of Original Employees (as defined below)
retained by the Buyer at the Adjustment Date (the "Actual Headcount") is equal
to or less than seventy percent of the Original Employees (rounded down to the
next integer) (the "Minimum Headcount"), then the Retention Percent shall be
equal to zero. "Original Employees" shall mean all employees associated with the
Business who have accepted offers of employment from the Buyer as of the Closing
Date minus any employees who have been terminated by the Buyer (with or without
just cause) prior to the Adjustment Date or who have been designated in writing
as having been removed by mutual agreement of the Buyer and the Seller.
(ii) If the Actual Headcount exceeds the Minimum Headcount,
then the Retention Percent shall be equal to the lesser of (x) 100% and (y) the
quotient obtained by dividing (a) the difference between the Actual Headcount
and the Minimum Headcount, by (b) twenty per cent of the number of Original
Employees.
(d) Within 15 days following receipt of Buyer's calculation of the
Post-Closing Net Adjustment, the Seller may request that a chartered accountant
review such calculation. The Seller and the Buyer shall select a mutually
acceptable chartered accountant who shall review the Buyer's calculation and
independently determine the Post-Closing Net Adjustment in accordance with this
Agreement. The determination made by such accountant
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shall be binding on both Parties and shall be the Post-Closing Net Adjustment
for all purposes of this Agreement.
1.6 The Closing. The Closing shall take place at the offices of Bulger,
Young, Ottawa, Ontario, on such date as the parties may agree, which date shall
be as soon as practicable and no later than three business days following the
date on which all the conditions of closing set forth in Article IV have been
satisfied or waived (the "Closing Date"). At the Closing the Parties shall
execute and deliver the instruments contemplated by Article IV hereof. Such
instruments may, at the election of the Parties, be exchanged by telecopier upon
a written undertaking to provide original executed copies within one business
day following the Closing. The transfer of the Assets by the Seller and the
assumption of the Assumed Liabilities by the Buyer shall be deemed to occur at
the close of business Ottawa time on the later of December 31, 1999 or the
Closing Date.
1.7 Buyer's Rights of Set-Off and Hold Back. Notwithstanding any other
provision of this Agreement, if the Buyer has made an indemnity claim pursuant
to Article VI hereof, and such claim or claims have not been paid in full by the
Seller or otherwise resolved prior to the payment of the Post-Closing Net
Adjustment, then the Buyer may elect to retain all or a portion of the
Post-Closing Net Adjustment necessary to satisfy the amount of any unresolved
indemnification obligation as provided in Section 6.3 below. Upon the resolution
of any indemnity claim, the Buyer shall (i) retain such portion (if any) of such
amount as the Buyer is entitled to receive pursuant to the resolution of such
indemnity claim, which shall release the Seller of its obligation to pay such
amount to the Buyer under Article VI, and (ii) pay to the Seller the remaining
portion (if any) of such amount, together with interest, calculated at the prime
rate in effect from time to time at the Royal Bank of Canada for Canadian dollar
loans, from the date Post-Closing Net Adjustment was otherwise due.
1.8 Adjustments. The Base Purchase Price shall be adjusted, promptly after
Closing, to reflect any prepaid amounts or arrears which relate to the Assets,
as well as the value of any uninvoiced work-in-progress under the Assumed
Contracts as of the later of December 31, 1999 or the Closing Date, and the net
amount of such adjustment shall be paid promptly by one Party to the other Party
as appropriate. If the amount of any required adjustment is subsequently
determined to be incorrect, each Party will readjust all adjustable items and
make any corresponding payment upon demand.
1.9 Allocation of the Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner provided by Schedule 1.9. Both Buyer
and Seller will file their respective tax returns in accordance with such
allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in sections and paragraphs
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corresponding to the numbered and lettered sections and paragraphs contained in
this Article II, and the disclosures in any section or paragraph of the
Disclosure Schedule shall qualify only the corresponding section or paragraph in
this Article II.
2.1 Organization, Qualification and Corporate Power. The Seller is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the place of its incorporation. The Seller is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. The Seller
has all requisite corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it. The
Seller is not in default under or in violation of any provision of its charter
or By-laws.
2.2 Authority. The Seller has all requisite power and authority to execute
and deliver this Agreement and the Bill of Sale in the form attached hereto as
Exhibit A (the "Bill of Sale") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by the Seller of this
Agreement and the Bill of Sale, and the consummation by the Seller of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Seller. This
Agreement has been, and the Bill of Sale will be, duly and validly executed and
delivered by the Seller and constitute valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms.
2.3 Noncontravention. The Seller has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by the Seller of this Agreement and the agreements
provided for herein, and the consummation by the Seller of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate and stockholder action. Neither the execution and delivery of this
Agreement or the Bill of Sale by the Seller, nor the consummation by the Seller
of the transactions contemplated hereby and thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Seller, (b) require on
the part of the Seller any filing with, or any permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory authority or agency (a "Governmental
Entity"), (c) conflict with, result in a breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest (as defined below)
or other arrangement to which the Seller is a party or by which the Seller is
bound or to which any of its assets is subject, (d) result in the imposition of
any Security Interest upon any assets of the Seller, or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Seller
or any of its properties or assets. For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (iii) liens arising under worker's compensation,
unemployment insurance, social security, retirement and similar legislation,
(iv) liens on goods in transit
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incurred pursuant to documentary letters of credit, (v) purchase money liens and
liens securing rental payments under capital lease arrangements, and (vi) other
liens arising in the ordinary course of business consistent with past custom and
practice (including with respect to frequency and amount) of the Seller in
connection with the Business (the "Ordinary Course of Business") and not
incurred in connection with the borrowing of money.
2.4 Ownership of the Assets. There are no mortgages, liens, pledges,
Security Interests, restrictions or similar encumbrances affecting the Assets.
The Seller is the true and lawful owner of the Assets, and has the right to sell
and transfer to the Buyer good, clear and marketable title to the Assets, free
and clear of all claims, liabilities, liens, pledges, Security Interests or
encumbrances of any kind. The delivery to the Buyer of the instruments of
conveyance contemplated by this Agreement will vest good and marketable title to
the Assets in the Buyer, free and clear of all claims, liabilities, liens,
pledges, Security Interests or encumbrances of any kind.
2.5 Financial Statements. The Seller has provided to the Buyer
documentation relating to the Business, including without limitation (a) the
Annual Budgets and Expenditures for the Business for fiscal 1997, 1998 and 1999,
(b) the monthly line item expenditures by Seller relating to the Business for
fiscal 1999 and (c) a proposed Year 2000 budget for the Business. The foregoing
financial statements have been prepared in accordance with the Seller's past
practice throughout the periods covered thereby and are consistent with the
books and internal records of the Seller.
2.6 Absence of Certain Changes. Since December 7, 1999, there has not been
any adverse change in the assets, employees, business, financial condition or
results of operations of the Business, nor has there occurred any event or
development which could reasonably be foreseen to result in such an adverse
change in the future. Without limiting the foregoing, since December 7, 1999,
the Seller has continued to operate the Business as it has done in the past and
has not engaged in any transactions outside of the Ordinary Course of Business.
2.7 Fixed Assets. Section 1.1(a)(iii) of the Disclosure Schedule sets
forth a true, correct and complete list of all Fixed Assets as of the Closing
Date, including a description thereof and the aggregate net book value thereof.
All of the Fixed Assets are in good operating condition and repair, normal wear
and tear excepted, are currently used by the Seller in the Ordinary Course of
Business and normal maintenance has been consistently performed with respect to
such Fixed Assets. The Fixed Assets constitute substantially all of the fixed
assets currently used in the Business.
2.8 Real Property. There is no real property included in the Assets. The
Buyer will not have any liabilities, obligations or commitments relating to any
real property owned or otherwise used by the Seller after the Closing, except as
provided in the Shared Facility License Agreement.
2.9 Contracts.
(a) Section 2.9 of the Disclosure Schedule lists the following
agreements relating to the Business to which the Seller is a party:
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(i) any agreement concerning confidentiality, non-competition
or non-solicitation (other than confidentiality agreements with customers or
employees of the Seller set forth in the Seller's standard terms and conditions
of sale or standard form of employment agreement, copies of which have
previously been delivered to the Buyer);
(ii) any agreement under which the consequences of a default
or termination could have a material adverse effect on the assets, business,
financial condition, results of operations or future prospects of the Business
or the ability of the Parties to consummate the transactions contemplated by
this Agreement and the Bill of Sale;
(iii) any agreement which requires or contemplates the
performance of services by the Buyer as a result of the completion of this
transaction; and
(iv) any other agreement reflecting or relating to the
Contract Rights or the Assumed Contracts.
(b) Section 2.9 of the Disclosure Schedule accurately discloses with
respect to each Assumed Contract which is with a Governmental Entity (i) the
project name; (ii) the date of the Contract and the term of the Contract; (iii)
the customer name and address and customer contact person and phone number; (iv)
the contract amount or, if the contract amount is not fixed, a good faith,
reasonable estimate of the contract amount; (v) the estimated contract amount
most recently communicated to the customer; (vi) the total billings to date
under such Contract; (vii) the estimated completion dates therefor; (viii)
whether or not the Seller has any reason to believe that the revenue to be
received with respect to such Contract might be less than it has customarily
been in the past for similar contracts; and (ix) whether or not such Contract is
included within the Assets to be acquired by the Buyer under this Agreement.
Section 2.9 of the Disclosure Schedule accurately discloses with respect to each
Assumed Contract which is with a commercial customer (i) the name of the
customer; (ii) the address of the customer; (iii) the contact person and phone
number; (iv) a description of the work; (v) the Contract number; (vi) the date
of the Contract; (vii) the estimated completion date therefor; and (viii) the
Contract amount.
(c) The Seller has delivered to the Buyer a correct and complete
copy of each Assumed Contract as amended to date. With respect to each Assumed
Contract: (i) the Assumed Contract is legal, valid, binding and enforceable
against the Seller and in full force and effect; (ii) to the knowledge of the
Seller, the Assumed Contract is legal, valid, binding and enforceable against
the other party thereto; (iii) the Assumed Contract will continue to be legal,
valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing; and (iv) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration, under the Assumed Contract.
(d) Except as set forth on Schedule 2.9, the Seller is not a party
to oral contracts which, if reduced to written form, would be required to be
listed in Section 2.9 of the Disclosure Schedule under the terms of this Section
2.9. The Seller is not a party to any arrangement relating to the Business (i)
to perform services which is expected to be performed
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at, or to result in, a loss, or (ii) which requires the performance of services
by the Seller at a fixed price. The Seller is not restricted by any Assumed
Contract from carrying on the Business anywhere in the world.
2.10 Litigation. Section 2.10 of the Disclosure Schedule identifies, and
contains a brief description of, (a) any unsatisfied judgment, order, decree,
stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Seller or any employee of the Seller (including any
former employees employed by the Seller within the past two years) is a party
or, to the Seller's knowledge, is threatened to be made a party and which relate
directly or indirectly to the Business (collectively, "Litigation"). None of the
complaints, actions, suits, proceedings, hearings and investigations set forth
in Section 2.10 of the Disclosure Schedule, if any, could have a material
adverse effect on the Assets or the Business.
2.11 Warranty. No product or service manufactured, sold, licensed, leased,
delivered or otherwise provided by the Seller is subject to any guaranty,
warranty, right of return or other indemnity, except for Seller's standard
customer warranty in Customer's standard customer contract.
2.12 Employees. Except as set forth in Section 2.12 of the Disclosure
Schedule, each employee of the Seller providing services primarily on behalf of
the Business (an "Employee") has entered into the Seller's standard form of
confidentiality and non-competition agreement with the Seller. None of such
Employees is a party to an employment agreement or contract with the Seller that
provides them with employment other than on an indefinite basis or with any
express severance provision. The Seller is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Seller has no knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to Employees of the
Seller. For purposes of this Agreement, the term "Employee" shall be construed
to include sales agents and other independent contractors who spend a majority
of their working time on the business of the Seller (each of whom shall be so
identified in Section 2.12 of the Disclosure Schedule). Section 2.12 of the
Disclosure Schedule contains a brief description of all Employee Benefit Plans
(as defined in Section 6.1) of the Seller pursuant to which the Employees are
entitled to benefits. The Seller has fulfilled all of its obligations to the
Employees under such Employee Benefit Plans.
2.13 Intellectual Property.
(a) Except as provided for in Schedule 2.13, the Buyer will not have
any liabilities, obligations or commitments relating to any Intellectual
Property utilized, directly or indirectly, by the Business prior to the Closing.
For purposes of this Agreement, "Intellectual Property" means all (i)
trademarks, service marks, trade dress, logos, trade names and corporate names
and registrations and applications for registration thereof, (ii) copyrights and
registrations and applications for registration thereof, (iii) computer
software, data and documentation, (iv) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced to
practice, know-how, manufacturing and production processes and techniques,
research and development information, copyrightable works, integrated circuit
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topography rights, patent rights, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (v) other proprietary rights relating to any of
the foregoing, and (vi) copies and tangible embodiments thereof.
(b) To the best of Seller's knowledge, none of the activities or
business conducted by the Seller in connection with the Business infringes,
violates or constitutes a misappropriation of (or in the past infringed,
violated or constituted a misappropriation of) any Intellectual Property rights
of any other person or Business Entity. The Seller has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation, and to the knowledge of the Seller, there is no basis for any
such complaint, claim or notice.
(c) The Intellectual Property owned or licensed by the Seller is
sufficient to conduct the Business as presently conducted and, when transferred
to the Buyer pursuant to this Agreement, will be sufficient to permit the Buyer
to conduct the Business as presently conducted by the Seller.
(d) As used herein, the term "Business Entity" shall mean any
corporation, partnership, limited liability company or other form of business
association.
2.14 Permits. The Seller holds all permits, licenses, registrations,
certificates, orders or approvals from any Governmental Entity ("Permits")
required for the Seller to conduct the Business as presently conducted or as
proposed to be conducted. Each such Permit is in full force and effect and, to
the best of the knowledge of the Seller, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit, (with the exception of the
Seller's security clearance for the site facility, which the Buyer will have to
renew ) will continue in full force and effect following the Closing.
2.15 Legal Compliance. The Seller, and the conduct and operations of its
business, is and has been in compliance with each law (including rules and
regulations thereunder) of any federal, provincial, local or foreign government,
or any Governmental Entity, which (a) affects or relates to this Agreement or
the Bill of Sale or the transactions contemplated hereby or thereby or (b) is
applicable to the Business.
2.16 Year 2000. The Seller recognizes that the Year 2000 poses a challenge
to the entire information technology industry. In order to address these
concerns, Seller has made commercially reasonable efforts to determine that all
hardware, software, firmware, systems, files, applications, interfaces,
databases and other computer-related materials (the "Internal Systems")
associated with the Business are Y2K Compliant. "Y2K Compliant" means that
Internal Systems are designed to be used prior to, during and after the calendar
year 2000 A.D. and each will operate during each such time period without error
relating to or caused by date data, including any error relating to, or the
product of, date data which represents, is generated in or references more than
one century ("Century-Based Data"). Specifically, the Internal Systems will
operate prior to, during and after the calendar year 2000 A.D., both on a
stand-alone basis and when interacting or interoperating with third-party
hardware, software and systems, without error and without human intervention,
other than original data entry. The Seller's efforts have
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been in accordance with commercially reasonable standards and practices, and
have been reviewed by external auditors, whose report has been provided to the
Buyer. To the best of Seller's knowledge, neither the occurrence of any date nor
the change of century will adversely affect the processing, calculating,
comparing, sequencing or other use of data by the Business including without
limitation causing (i) any error relating to or resulting from Century-Based
Data; (ii) any abnormal ending or provision of invalid or incorrect results as a
result of any Century-Based Data; and (iii) any error relating to century
recognition or calculations accommodating Century-Based Data, values or
formulae.
2.17 Books and Records. The books and records of the Seller pertaining to
the Business, including without limitation the Records, accurately reflect the
assets, liabilities, business, financial condition and results of operations of
the Business and have been maintained in accordance with good business and
bookkeeping practices.
2.18 Customers. No party to the Contracts has indicated that it will stop,
or decrease the rate of, buying materials or services from the Seller. The
Seller has good customer relations with the customers of the Business, and none
of such customers has notified the Seller that it intends to discontinue its
relationship with the Seller.
2.19 Prepayments. The Seller has not received or submitted any invoices or
requests for any prepayment or deposits from customers for products to be
shipped, or services to be performed after the Closing Date otherwise than as
adjusted for.
2.20 Completeness of Assets. Except as disclosed on Schedule 1.1(b), the
Assets are, when utilized by a labor force substantially similar to that
employed by the Seller on the date hereof, adequate to conduct the Business as
currently conducted by the Seller. Except for the Excluded Assets, the Assets
comprise substantially all of the assets of the Business.
2.21 Brokers' Fees. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.22 Real Property Leases. Section 2.22 of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Seller
relating to the Business and lists the term of such lease, any extension and
expansion options, and the rent payable thereunder. The Seller has delivered to
the Buyer correct and complete copies of the leases and subleases (as amended to
date) listed in Section 2.22 of the Disclosure Schedule. With respect to each
lease and sublease listed in Section 2.22 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) neither the Seller nor, to the knowledge of the Seller, any
other party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of
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time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(d) there are no disputes, oral agreements or forbearance programs
in effect as to the lease or sublease;
(e) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities as
conducted during the period covered by the Financial Statements; and
(g) no construction, alteration or other leasehold improvement work
with respect to the lease or sublease remains to be paid for or performed by the
Seller.
2.23 Disclosure. No representation or warranty by the Seller contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of the Seller pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or, coupled with the Exhibits
and the Disclosure Schedule attached hereto, omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Seller has disclosed to the Buyer all material information relating to the
Business and the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization, Qualification and Corporate Power. The Buyer is an
unlimited company duly organized, validly existing and in corporate and tax good
standing under the laws of the Province of Nova Scotia. The Buyer is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. The Buyer
has all requisite corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it. The
Buyer is not in default under or in violation of any provision of its Articles
of Association, its Memorandum of Association or By-laws.
3.2 Authority. The Buyer has all requisite corporate power and authority
to execute and deliver this Agreement and the Instrument of Assumption of
Liabilities in the form attached hereto as Exhibit B (the "Instrument of
Assumption") and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by the Buyer of this Agreement and
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the Instrument of Assumption and the consummation by the Buyer of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been, and the Instrument of Assumption will be, duly and validly
executed and delivered by the Buyer and constitute valid and binding obligations
of the Buyer, enforceable against the Buyer in accordance with their respective
terms.
3.3 Noncontravention. Neither the execution and delivery of this Agreement
or the Instrument of Assumption by the Buyer, nor the consummation by the Buyer
of the transactions contemplated hereby and thereby, will (a) conflict with or
violate any provision of the charter or By-laws of the Buyer, (b) require on the
part of the Buyer any filing with, or any permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer is a
party or by which the Buyer is bound or to which any of its assets is subject,
or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or any of its properties or assets.
3.4 Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.5 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any other document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
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ARTICLE IV
CONDITIONS TO PURCHASE OF THE ASSETS
4.1 Conditions to Obligations of the Buyer. The obligations of the Buyer
under this Agreement are subject to the satisfaction of the following
conditions:
(a) the Seller shall have obtained all of the waivers, permits,
consents, approvals and other authorizations, and effected all of the
registrations, filings and notices, from third parties and Governmental Entities
(including without limitation all consents to the assignment of the Assumed
Contracts) necessary to effect the transactions contemplated by this Agreement;
(b) [intentionally omitted];
(c) the representations and warranties of the Seller set forth in
Article II shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties made as of a specific date,
which shall be true and correct as of such date;
(d) the Seller shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement and
any other agreements between the Parties as of or prior to the Closing Date;
(e) no action, suit or proceeding shall be pending or threatened as
of the Closing Date before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of the Buyer to own,
operate or control the Assets or the Business, and no such judgment, order,
decree, stipulation or injunction shall be in effect;
(f) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a), (c), (d) and (i) of
this Section 4.1 are satisfied in all respects as of the Closing Date;
(g) the Buyer shall have received an opinion of Bulger, Young,
counsel to the Seller, dated as of the Closing Date, in the form attached hereto
as Exhibit C;
(h) the Buyer shall have entered into employment agreements
reasonably satisfactory in form to the Buyer with each of the following
individuals: Claude Cloutier, Sanjay Belkhode, Karl Siemens and Menno Stoffels;
(i) all corporate and other proceedings required to be taken on the
part of the Seller to authorize or carry out this Agreement and to convey,
assign, transfer and deliver the Assets shall have been taken;
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(j) on the Closing Date the Buyer shall receive good, clear, and
marketable title to the Assets, free and clear of all liens, liabilities,
Security Interests and encumbrances of any nature whatsoever;
(k) the Buyer shall have received at or prior to the Closing Date
each of the following documents:
(i) the Bill of Sale;
(ii) the Records, all in form and substance satisfactory to
the Buyer;
(iii) such contracts, files and other data and documents
pertaining to the Assets or the Business as the Buyer may reasonably request
(including without limitation the Assumed Contracts);
(iv) a certificate of Industry Canada as to the legal
existence and good standing of the Seller in Canada;
(v) certificates of the Secretary of the Seller attesting to
the incumbency of the Seller's officers and the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement; and
(vi) a cross receipt executed by the Buyer and the Seller.
(l) the Buyer shall have completed its due diligence review relating
to the Assets and shall be satisfied, in Buyer's sole discretion, with the
results of such investigation; and
(m) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Buyer.
4.2 Conditions to Obligations of the Seller. The obligations of the Seller
under this Agreement are subject to the satisfaction of the following
conditions:
(a) the representations and warranties of the Buyer set forth in
Article III shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties made as of a specific date,
which shall be true and correct as of such date;
(b) the Buyer shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Closing Date;
(c) the Seller shall have received at or prior to the Closing each
of the following documents:
(i) the Instrument of Assumption;
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(ii) payment of the Base Purchase Price pursuant to Section
1.4; and
(iii) a cross receipt executed by the Buyer and the Seller;
(d) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Seller;
(e) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a), (b) and (g) of this
Section 4.2 is satisfied in all respects;
(f) the Seller shall have received an opinion from Hale and Dorr
LLP, general counsel to Intrinsix Corp., the sole stockholder of the Buyer,
dated as of the Closing Date, in the form attached hereto as Exhibit F and an
opinion from Stewart McKelvey Stirling Scales, special counsel to the Buyer,
dated as of the Closing Date, in the form attached hereto as Exhibit G;
(g) all corporate and other proceedings required to be taken on the
part of the Buyer to authorize or carry out this Agreement shall have been
taken; and
(h) the Buyer shall have delivered to the Seller a certificate of
the Secretary of the Buyer attesting to the incumbency of the Buyer's officers
and the authenticity of the resolutions authorizing the transactions
contemplated by this Agreement.
4.3 Covenants Relating to Closing and Termination.
(a) Each of the Parties will use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, as soon as possible,
all things necessary proper or advisable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement, including using
its best efforts to ensure the satisfaction of the conditions precedent to each
party's obligations under this Agreement.
(b) In the event that the Closing shall not have occurred on or
before January 6, 2000 due to the failure of any closing condition to be (x)
satisfied or (y) waived by the party whose obligation to perform under this
Agreement is contingent upon the satisfaction of such condition, this Agreement
may be terminated by either Buyer or Seller without any further liability or
obligation; provided, however, that the right to terminate this Agreement
pursuant to this Section 4.3(b) shall not be available to any party whose
failure to comply with Section 4.3(a) hereto has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date.
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ARTICLE V
POST-CLOSING COVENANTS
5.1 Hired Employees.
(a) On or after the execution of this Agreement, the Buyer or a
subsidiary of the Buyer shall offer employment to those Employees identified on
Schedule 5.1 attached hereto (the "Hired Employees"), and, for those Hired
Employees who accept the Buyer's offer of employment within two weeks of the
Closing Date, provide such Hired Employees with benefit programs substantially
similar in the aggregate to those provided to similarly situated employees of
the Seller; provided however, that if such offers are delivered prior to
Closing, such offers shall be expressly conditional upon the Closing of this
transaction.
(b) The Seller shall, within seven calendar days following the
Closing Date, issue to each individual employed by the Seller in connection with
the Business immediately prior to the Closing a final paycheck, which paycheck
shall include payment for all salary, bonus, accrued vacation, sickness and
disability and other financial obligations due to such employees for all periods
through the later of December 31, 1999 and the Closing Date. The Seller hereby
consents to the hiring of the Hired Employees by the Buyer and waives, with
respect to the employment by the Buyer of such employees, any claims or rights
the Seller may have against the Buyer or any such employee under any
non-competition, confidentiality or employment agreement.
(c) The Seller shall offer all Hired Employees who accept the
Buyer's offer of employment, the right to retain equity options to purchase
shares of the Seller and the right for each of such options to continue to vest
as if such Hired Employees remained employees of the Seller, provided that such
Hired Employees continue to be employed by the Buyer during the applicable
vesting period. The Parties hereby agree that the Hired Employees shall be
express third party beneficiaries of this Section 5.1(c) and the Seller agrees
that the Buyer shall have the right to enforce this Section 5.1(c) against the
Seller. The Buyer will advise Seller forthwith upon any Hired Employee ceasing
to be employed by the Buyer or its subsidiary during the applicable vesting
period.
(d) The Seller will pay all severance amounts due to employees of
the Business (other than Hired Employees); and
(e) The Buyer agrees to indemnify the Seller against all claims and
demands by Hired Employees who accept the Buyer's offer of employment, which
claims and demands are based on events arising after the Closing Date (including
termination of such employees from employment by the Buyer). Without limiting
the generality of the foregoing, such indemnity shall include any claims or
demands based on events arising after the Closing Date by such employees with
respect to wages, severance pay, notice of termination or pay in lieu thereof,
benefits, damages for wrongful dismissal or other employee benefits or claims
under the Employment Standards Act or at common law and including any costs or
expenses incurred by the Seller in defending any such claim or demand; provided,
however, that the Buyer shall not be
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required to indemnify the Seller for any claims by Hired Employees which arise
out of any breach by the Seller of this Agreement.
5.2 Sharing of Data. The Parties agree and covenant that:
(a) The Seller shall have the right for a period of three years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
the Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its involvement in the Business prior to the Closing Date and for
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. The Buyer shall have the right for a
period of three years following the Closing Date to have reasonable access to
those books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other records which
are retained by the Seller pursuant to the terms of this Agreement to the extent
that any of the foregoing relates to the Business transferred to the Buyer
hereunder or is otherwise needed by the Buyer in order to comply with its
obligations under applicable securities, tax, environmental, employment or other
laws and regulations. Prior to the seventh-month anniversary of the Closing
Date, the Seller shall also have access to all books, records, accounts,
contracts and other data relating to the calculation of the Post-Closing Net
Adjustment.
(b) The parties agree that from and after the Closing Date they
shall cooperate fully with each other to facilitate the transfer of the Assets
from the Seller to the Buyer and the operation thereof by the Buyer.
5.3 No Solicitation or Hiring of Former Employees. For a period of three
years after the Closing Date, the Seller shall not directly or indirectly
recruit, solicit or induce any person who was an employee or subcontractor of
the Buyer or any of the Buyer's subsidiaries or the Business on the date hereof
or the Closing Date to terminate his or her employment with, or otherwise cease
their relationship with, the Buyer or any such subsidiary or to become an
employee of the Seller or an Affiliate of the Seller. In addition, without the
prior consent of the Buyer, the Seller shall not hire or employ or use in any
subcontracting arrangement any present or former employee of the Business, the
Buyer or any subsidiary of the Buyer.
5.4 Cooperation in Litigation. From and after the Closing Date, the Buyer
and the Seller shall each fully cooperate with the other in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such other party relating to or arising out
of the conduct of the Business prior to or after the Closing Date (other than
litigation arising out of the transactions contemplated by this Agreement). The
party requesting such cooperation shall pay the reasonable out-of-pocket
expenses incurred in providing such cooperation (including legal fees and
disbursements) by the party providing such cooperation and by its officers,
directors, employees and agents, but shall not be responsible to such party or
its officers, directors, employees and agents, for their time spent in such
cooperation.
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5.5 Transition Services.
(a) Seller agrees to provide Buyer with those services described in
Exhibit D (the "Transition Services"), on the terms and for the duration
specified in Exhibit D and in this Section 5.5. The Transition Services listed
and described in Exhibit D are based on the parties' understanding of the
support and other services reasonably required to be provided by the Seller to
Buyer immediately following the Closing in order to assure the uninterrupted
operation of the Business during the transition period in which the Buyer shall
make such arrangements as may be necessary to assume such responsibilities on a
permanent basis. If, following the Closing, either party reasonably determines
that additional services should be provided by the Seller to the Buyer, the
Parties agree to negotiate in good faith to appropriately modify this Agreement
with respect to such additional services; provided, however, that any such
additional services shall be provided on a basis substantially consistent with
the recent historical practices of the Seller.
(b) All individuals providing Transition Services on behalf of the
Seller pursuant to this Agreement shall remain employees of the Seller. The
Buyer shall have no liability to such individuals with respect to any matter
arising out of or relating to their employment by the Seller, including, without
limitation, claims for wages, salaries, benefits or severance. The Seller agrees
to indemnify and hold harmless the Buyer and its officers, directors, employees
and agents from and against any claims by the Seller's employees against any of
them, except claims for which the Buyer is required to indemnify Seller's
employees pursuant to Article VI hereof or claims based upon or arising out of
Buyer's recklessness or willful misconduct. The Seller shall have no liability
to the Buyer for any errors, omissions or other negligence (other than
recklessness or wilful misconduct) of individuals providing Transition Services
to the Buyer.
(c) The Transition Services shall be performed in a timely,
efficient and workmanlike manner. The Seller shall use commercially reasonable
efforts to make available to the Buyer the services which it is obligated to
provide under this Agreement in substantially the same manner as it makes
similar services available for its own operations.
5.6 Access to Facility. Seller agrees to provide Buyer with access to the
facility described in Exhibit E (the "Facility"), on the terms and for the
duration specified in Exhibit E and in this Section 5.6. During the term therein
specified, each Party covenants and agrees that it will not (and will instruct
all of its employees, agents and representatives who have access to the Facility
not to) (i) interfere with the business or property of the each Party, except as
expressly provided herein or in Exhibit E, (ii) disclose any confidential
information which was made available to it as a result of its access to the
Facility pursuant to this Agreement or (iii) make any material alterations to
the Facility without the prior written consent of the Other Party. Either Party
will be entitled to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction in the event of any breach by the
Seller of this Section 5.6. Rights and remedies provided by this Section 5.6 are
cumulative and in addition to any other rights and remedies either Party may
have at law or equity.
5.7 No Solicitation of Seller's Employees. For a period of three years
after the Closing Date, the Buyer shall not directly or indirectly recruit,
solicit or induce any person who was an employee or subcontractor of the Seller
or any of the Seller's subsidiaries on the date
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hereof or the Closing Date to terminate his or her employment with, or otherwise
cease their relationship with, the Seller or any such subsidiary or to become an
employee of the Buyer or an Affiliate of the Buyer. In addition, without the
prior consent of the Seller, the Buyer shall not hire or employ or use in any
subcontracting arrangement any present or former employee of the Seller or any
subsidiary of the Seller.
5.8 Warranty Obligations. The Seller shall be responsible, and shall
indemnify the Buyer, for any warranty obligations or errors and omissions claims
which relate to services provided by or on behalf of the Seller on or before the
Closing Date. The Buyer agrees that, upon Seller's request and after reasonable
notice, it shall provide, at its then current rates, the services of former
employees of the Seller as needed by the Seller to satisfy any warranty
obligations arising out of services provided by or on behalf of the Seller on or
prior to the Closing Date.
5.9 Assumed Contract Obligations. The Buyer shall be responsible, and
shall indemnify the Seller for any errors or omissions claims or warranty
obligations which relate to services provided or which ought to have been
provided by the Buyer under the Assumed Contracts after the Closing Date.
5.10 Performance under Assumed Contracts. The Buyer will use commercially
reasonable efforts to perform the Seller's obligations under the Assumed
Contracts from and after the Closing Date in accordance with the provisions
thereof, and will use such efforts to complete the Assumed Contracts quickly and
expeditiously in order to maximize the Actual Revenue.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Seller. The Seller hereby agrees to defend,
indemnify and hold harmless the Buyer, its directors, officers, affiliates,
successors and assigns, from and against any and all claims, losses, damages,
liabilities, costs and expenses (including legal fees and disbursements)
(collectively, "Damages") resulting from, consisting of or arising out of or in
connection with (a) any misrepresentation, breach of representation or warranty
or failure to perform any covenant or agreement of the Seller in this Agreement
or in any of the agreements, schedules or exhibits contemplated herein; (b) any
warranty claim or product liability claim relating to services provided or
products distributed or sold by the Seller prior to the Closing Date; (c) any
liabilities or obligations of the Seller for Taxes (as defined below); (d) the
failure of the Buyer to obtain protections afforded by compliance with the
notification and other requirements of the bulk sales laws in force in the
jurisdictions in which such laws may be applicable to either the Seller or the
transactions contemplated by this Agreement; (e) any claims against, or
liabilities or obligations of, the Seller with respect to obligations under any
Employee Benefit Plan (as defined below) other than claims of Hired Employees
arising after the Closing Date; (f) any claims of Hired Employees arising from
actions of the Seller or any of its Affiliates (as such term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and
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regulations promulgated thereunder) or agents prior to the Closing Date; (g) any
third-party litigation, suit, action, investigation, proceeding or controversy
arising out of the Seller's actions prior to the Closing Date; (h) any
liabilities, obligations or commitments, fixed or contingent, of the Seller
other than the Assumed Liabilities; (i) any liability arising from the Seller's
failure to qualify to do business in any jurisdiction prior to the Closing Date;
and (j) any liability arising from Seller's failure to obtain consents to the
assignment of the Assumed Contracts to the Buyer. For purposes of this
Agreement, (i) "Taxes" includes federal, state, provincial, local, municipal,
foreign and other net income, gross income, gross receipts, sales, goods and
services, use, business and occupation, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and (ii) "Employee Benefit Plan" means
any written or oral plan, agreement or arrangement involving direct or indirect
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation, post-retirement compensation, vacations, leaves of absence or
similar practices.
6.2 Indemnification by the Buyer. The Buyer hereby agrees to defend,
indemnify and hold harmless the Seller, its directors, officers, affiliates,
successors and assigns, from and against any and all claims, losses, damages,
liabilities, costs and expenses (including legal fees and disbursements)
resulting from, consisting of or arising out of or in connection with any
misrepresentation, breach of representation or warranty or failure to perform
any covenant or agreement of the Buyer in this Agreement or in any of the
agreements, schedules or exhibits contemplated herein.
6.3 Method of Asserting Claims.
(a) If the a Party has incurred or suffered Damages for which it is
entitled to indemnification under this Article VI, such Party (the "Indemnified
Party") shall, prior to the expiration of the representation, warranty, covenant
or agreement to which such claim relates, give written notice of such claim (a
"Claim Notice") to the other Party (the "Indemnifying Party"). Each Claim Notice
shall state the amount of claimed Damages (the "Claimed Amount"), if known, and
the basis for such claim.
(b) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall provide to the Indemnified Party a written response
(the "Response Notice") in which the Indemnifying Party shall: (i) agree that
all of the Claimed Amount is owed to the Indemnified Party, (ii) agree that
part, but not all, of the Claimed Amount (the "Agreed Amount") is owed to the
Indemnified Party, or (iii) contest that any of the Claimed Amount is owed to
the Indemnified Party. The Indemnifying Party may contest the payment of all or
a portion of the Claimed Amount only based upon a good faith belief that all or
such portion of the Claimed Amount does not constitute Damages for which the
Indemnified Party is entitled to indemnification under this Article VI. If no
Response Notice is delivered by the Indemnifying Party within such 20-day
period, the Indemnifying Party shall be deemed to have agreed that all of the
Claimed Amount is owed to the Indemnified Party.
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(c) If the Indemnifying Party in the Response Notice agrees (or is
deemed to have agreed) that all of the Claimed Amount is owed to the Indemnified
Party, the Indemnifying Party shall promptly pay to the Indemnified Party an
amount equal to the Claimed Amount. If the Indemnifying Party in the Response
Notice agrees that part, but not all, of the Claimed Amount is owed to the
Indemnified Party, the Indemnifying Party shall promptly pay to the Indemnified
Party an amount equal to the Agreed Amount set forth in such Response Notice.
Acceptance by the Indemnified Party of part payment of any Claimed Amount shall
be without prejudice to the Indemnified Party's right to claim the balance of
any such Claimed Amount. Notwithstanding the foregoing, the Indemnified Party
shall have the right, at its option, to elect to satisfy any obligation of the
Seller under this subsection (c) pursuant to the provisions of Section 1.7
hereof by deducting such funds from any unpaid portion of the Post-Closing Net
Adjustment. The Indemnified Party shall not, however, have any right to offset
or deduct any such claims from any sum owed to Seller with respect to the
occupancy of the Facility in accordance with Exhibit E.
(d) The Indemnified Party shall give prompt written notification to
the Indemnifying Party of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VI may be sought. Within 20 days after delivery of such notification,
the Indemnifying Party may, upon written notice thereof to the Indemnified
Party, assume control of the defense of such action, suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party, provided the
Indemnifying Party acknowledges in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Party in connection with such action, suit or proceeding constitute
Damages for which the Indemnified Party shall be entitled to indemnification
pursuant to this Article VI. If the Indemnifying Party does not so assume
control of such defense, the Indemnified Party shall control such defense. The
party not controlling such defense may participate therein at its own expense;
provided that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such action, suit or proceeding, the reasonable fees and
expenses of counsel to the Indemnified Party shall be considered "Damages" for
purposes of this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
other party with respect thereto. The Indemnified Party shall not agree to any
settlement of such action, suit or proceeding without the prior written consent
of the Indemnifying Party, which shall not be unreasonably withheld. The
Indemnifying Party shall not agree to any settlement of such action, suit or
proceeding without the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld (it being understood that it is reasonable to
withhold such consent if, among other things, the settlement or the entry of
judgment (A) lacks a complete release of the Indemnified Party for all liability
with respect thereto or (B) imposes any liability or obligation on the
Indemnified Party).
6.4 Survival.
(a) Unless otherwise specified in this Section 6.4 or elsewhere in
this Agreement, all provisions of this Agreement shall survive the Closing and
the consummation of
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the transactions contemplated hereby and shall continue forever in full force
and effect in accordance with their terms.
(b) The representations and warranties of the Seller set forth in
Article II and the indemnification obligations set forth in this Article VI:
(i) shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until the second anniversary of
the Closing Date; and
(ii) shall not be affected by any examination made for or on
behalf of the Buyer or the knowledge of any of the Buyer's officers, directors,
stockholders, employees or agents.
Notwithstanding the foregoing, the indemnification obligations set forth in
Section 6.1(c), (e), (f), (g) and (h) shall survive the Closing and the
consummation of the transactions contemplated thereby and continue until the
expiration of the applicable statute of limitations.
(c) The date on which any particular representation, warranty or
indemnification obligation of the Seller or the Buyer terminates shall be
referred to herein as the "Termination Date." If a notice of a claim is given in
accordance with the notice provisions of this Agreement before the Termination
Date, then (notwithstanding the occurrence of the Termination Date) the
representation, warranty or indemnification obligation applicable to such claim
shall survive until, but only for purposes of, the resolution of such claim.
(d) The representations and warranties of the Buyer set forth in
Article III above or in any other location in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby and shall
continue until the second anniversary of the Closing Date.
6.5 Limitations.
(a) Notwithstanding anything to the contrary herein, except as
provided in this Section 6.5, no Indemnifying Party shall be liable under this
Article VI unless and until the aggregate Damages exceed $10,000 (at which point
such Indemnifying Party shall become liable for the aggregate Damages, not just
amounts in excess of $10,000) provided, however that the amount of any liability
attributable to Taxes shall not be so limited.
(b) The amount of any Damages which may be claimed by the
Indemnified Party shall be calculated to be the cost or loss to the Indemnified
Party after giving effect to:
(i) any insurance proceeds available to the Indemnified
Party or any Affiliate without adverse financial
consequences to such Indemnified Party or any Affiliate
in relation to the matter which is the subject of the
claim;
(ii) the value of any related, determinable tax benefits
realized, or which will (with reasonable certainty) be
realized within a two-year period following the date of
incurring such cost or loss, by the Indemnified
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Party or any Affiliate of such Indemnified Party in
relation to the matter which is the subject of the
claim; and
(iii) in the case of the Seller, any reduction in the amount
of the Post-Closing Net Adjustment payable to the Seller
which results from the subject-matter of the claim.
ARTICLE VII
MISCELLANEOUS
7.1 Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; provided, however, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party shall advise the other Party and
provide it with a copy of the proposed disclosure prior to making the
disclosure); and provided further that on and after the Closing Date the Buyer
may issue any press release or announcement relating to the subject matter of
this Agreement without the prior approval of the Seller.
7.2 Proprietary Information. The Seller agrees that from and after the
Closing Date the Seller and its Affiliates shall hold in confidence and shall
use its best efforts to have all officers, directors and personnel who continue
after the Closing to be employed by the Seller or any such Affiliate to hold in
confidence all knowledge and information of a secret or confidential nature with
respect to the Business and not to disclose, publish or make use of the same
without the consent of the Buyer, except to the extent that such information
shall have become public knowledge other than by breach of this Agreement by the
Seller or its Affiliates.
7.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns, except as set forth in Section 5.1(c) with
respect to the Hired Employees.
7.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter hereof,
including without limitation any agreement relating to nonsolicitation of
employees.
7.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. The Buyer may assign its rights, interests and
obligations hereunder to any wholly-owned subsidiary of the Buyer. Upon such
assignment the assignee shall be deemed to be the "Buyer" for purposes of this
Agreement, provided however, that notwithstanding such assignment the Buyer
shall remain liable to the Seller for the performance of all of the obligations
of the Buyer contained herein. Subject to the foregoing, no Party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party.
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7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.8 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered three business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable overnight
courier service, in each case to the intended recipient as set forth below:
If to the Seller: Copy to:
Telexis Corp. Bulger, Young
Tower B, Suite 530 310-411 Roosevelt Avenue
555 Legget Drive Ottawa, Ontario
Kanata, Ontario K2K 2X3 K2A 3X9
Attention: President Attention: Donald S. Duncan
If to the Buyer: Copy to:
Intrinsix Canada Co. Hale and Dorr LLP
c/o Intrinsix Corp. 60 State Street
33 Lyman Street Boston, MA 02109
Westboro, MA 01581 Attention: William C. Benjamin
Attention: President
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other Party or Parties notice in the manner herein set forth.
7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the Province
of Ontario.
7.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default,
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<PAGE>
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
7.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.12 Expenses. Except as otherwise expressly provided herein, each of the
Buyer, on the one hand, and the Seller, on the other hand, will pay its own fees
and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated
hereby.
7.13 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any reference
to any federal, state, local, provincial or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
7.14 Currency and Interest. All references to currency in this Agreement
(or any exhibit or schedule hereto) shall be deemed to refer to Canadian
dollars. In the event that either of the Parties defaults in its obligation to
make any payment hereunder, the defaulting Party shall pay the other Party
interest at the prime rate in effect from time to time at the Royal Bank of
Canada for Canadian dollar loans, plus two percent. Rights and remedies provided
to the nondefaulting Party by this Section 7.14 are cumulative and in addition
to any other rights and remedies which such Party may have at law or equity.
7.15 Tax Aspects. The Buyer shall be liable for and shall pay all
applicable federal and provincial sales taxes, land transfer taxes, goods and
services taxes, excise taxes and all other taxes (other than income taxes of the
Seller), duties and other like charges properly payable on and in connection
with the conveyance and transfer of the Assets to the Buyer. The Seller will do
and cause to be done such things as are reasonably requested to enable the Buyer
to comply with such obligations in an efficient manner.
The Total Purchase Price shall not include, and Seller shall have no
liability for, any goods and services taxes, nor any tax imposed upon the Buyer
in connection with the transactions contemplated herein by any jurisdiction. The
Parties shall use commercially reasonable efforts to obtain the benefit of s.
167(1) of the Excise Tax Act, R.S.C. 1985, c. E-15 (Canada), as from time to
time amended, including the execution of a joint election in the
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prescribed form containing the prescribed information and the filing of such
joint election within the prescribed time and in the prescribed manner.
In this regard,
(1) The Seller represents and warrants to the Buyer that:
(a) the Seller is registered for purposes of Part IX of the Excise
Tax Act R.S.C. 1985, c.E-15 (Canada) (the "GST Legislation");
and
(b) the Business is a "commercial activity" for the purposes of
the GST Legislation.
(2) The Buyer hereby represents and warrants to the Seller that the
Buyer is a registrant for the purposes of the GST Legislation; and
(3) The Buyer will indemnify the Seller against any tax, interest or
penalties assessed against the Seller as a result of a determination
that the election pursuant to s. 167(1) of the Excise Tax Act
(Canada) was not available for any reason other than the inaccuracy
of any of the representations and warranties made by the Seller
pursuant to paragraph (1) of this section.
7.16 Incorporation of Exhibits and Schedules. If the provisions of any
Exhibit or Schedule to this Agreement are inconsistent with the provisions of
this Agreement, the provisions of the Agreement shall prevail. The Exhibits and
Schedules attached hereto or to be attached hereafter are hereby incorporated as
integral parts of this Agreement.
7.17 Guaranty of the Buyer's Obligations. Intrinsix Corp., a Massachusetts
corporation and the sole stockholder of the Buyer ("Parent"), irrevocably and
unconditionally guaranties in full the due and prompt payment of all liabilities
and obligations of the Buyer to the Seller set forth in this Agreement and the
Shared Facility License Agreement (the "Guarantied Obligations"). This guaranty
is a continuing guaranty and shall apply to all Guarantied Obligations and any
ultimate unpaid balance thereof. This guaranty is in no way conditioned upon any
requirement that the Seller first attempt to collect or enforce any Guarantied
Obligation from or against the Buyer provided, however, that the Seller has
first requested payment from the Buyer in writing, has not refused payment, and
has not received payment from the Buyer within 10 business days following
request by the Seller. Except as set forth in the preceding sentence and so long
as any Guarantied Obligation remains unpaid, the liability of Parent shall be
payable promptly upon written demand delivered to Parent at the addresss and in
the manner set forth in Section 7.8 of this Agreement. Parent hereby waives all
special suretyship defenses, and protest, notice of protest, demand for
performance, diligence, notice of any other action at any time taken or omitted
to be taken by the Seller and, generally, all demands and notices of every kind
(other than as set forth in the preceding sentence) in connection with this
Section 7.17. If any of the
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obligations of Parent or waivers set forth in this Section 7.17 is
determined by a Governmental Entity to be contrary to any applicable law or
public policy, such obligations and/or waivers shall be effective only to the
extent permitted by law.
[Remainder of page intentionally blank.]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
INTRINSIX CANADA CO.
By: /s/ Jim Gobes
--------------------------------
Title: President
-----------------------------
SELLER:
TELEXIS CORP.
By: /s/ Andre Rancourt
--------------------------------
Title: /s/ VP, Finance and CFO
-----------------------------
By: /s/ [signature illegible]
--------------------------------
Title: VP & GM
-----------------------------
In accordance with and subject to the terms of Section 7.17 of this Agreement,
the obligations of Intrinsix Canada Co. are hereby irrevocably guarantied in
full.
INTRINSIX CORP.
By:/s/ Jim Gobes
--------------------------
Title: President
----------------------
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Exhibit 10.13
ESCROW AGREEMENT
This Escrow Agreement is entered into as of June 30, 1999 (the
"Agreement"), by and among Intrinsix Corp., a Massachusetts corporation (the
"Buyer"), Yatin Trivedi and Larry F. Saunders (the "Securityholder Agents") and
State Street Bank and Trust Company (the "Escrow Agent").
WHEREAS, the Buyer and SEVA Technologies, Inc. (the "Company") have
entered into an Agreement and Plan of Merger, dated June 11, 1999 (the "Merger
Agreement"), by and among the Company, the Buyer and Intrinsix Merger Corp., a
subsidiary of the Buyer (the "Transitory Subsidiary"). The Company will be
merged into the Transitory Subsidiary.
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the indemnification obligations of the stockholders of
record of the Company (the "Company Stockholders") to the Buyer (the
"Indemnified Person") under the Merger Agreement on the terms and conditions set
forth herein.
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which such escrow account will be established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Consent of Company Stockholders. By virtue of the Company Stockholders'
approval of the Merger Agreement, the Company Stockholders receiving shares of
common stock, no par value per share, of the Buyer (the "Buyer Common Stock")
pursuant to the Merger (the "Indemnifying Stockholders") have, without any
further act of any Company Stockholder, consented to: (a) the establishment of
this escrow to secure the Company Stockholders' indemnification obligations
under Article VI of the Merger Agreement in the manner set forth herein, (b) the
appointment of the Securityholder Agents as their representatives for purposes
of this Agreement and as attorneys-in-fact and agents for and on behalf of each
Indemnifying Stockholder, and the taking by the Securityholder Agents of any and
all actions and the making of any decisions required or permitted to be taken or
made by them under this Agreement and (c) all of the other terms, conditions and
limitations in this Agreement.
2. Securityholder Agents' Representations and Succession.
a. The Securityholder Agents represent and warrant to the Escrow
Agent that they have the irrevocable right, power and authority (i) to enter
into and perform this Agreement and bind all of the Indemnifying Stockholders to
its terms, (ii) to give and receive directions and notices hereunder; and (iii)
to make all determinations that may be required or that they deem appropriate
under this Agreement.
b. Until notified in writing by the Securityholder Agents that they
or either of them has resigned or been removed by a majority in interest of the
Indemnifying Stockholders,
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the Escrow Agent may act upon the directions, instructions and notices of the
Securityholder Agents who are original parties to this Escrow Agreement and,
thereafter, upon the directions, instructions and notices of any successor named
in a writing executed by a majority-in-interest of the Indemnifying Stockholders
filed with the Escrow Agent.
3. Escrow and Indemnification.
a. Escrow of Shares. On the date of the closing of the transactions
contemplated by the Merger Agreement (the "Closing Date"), the Buyer shall
deposit with the Escrow Agent a certificate for 49,995 shares of Buyer Common
Stock (the "Escrow Shares"), either issued in the name of the Escrow Agent or
accompanied by stock powers endorsed to transfer the shares to the Escrow Agent
or its nominee, with guaranteed signatures. The Buyer may from time to time
deposit a certificate for additional Escrow Shares, either issued in the name of
the Escrow Agent or accompanied by stock powers endorsed to transfer the shares
to the Escrow Agent or its nominee, with guaranteed signatures, with the Escrow
Agent pursuant to the final sentence of Section 1.7(a) of the Merger Agreement.
The Escrow Shares shall be held as a trust fund and shall not be subject to any
lien, attachment, trustee process or any other judicial process of any creditor
of any party hereto. The Escrow Agent agrees to accept delivery of the Escrow
Shares and to hold the Escrow Shares in an escrow account (the "Escrow
Account"), subject to the terms and conditions of this Agreement.
b. Indemnification. The Indemnifying Stockholders have agreed in
Article VI of the Merger Agreement to indemnify and hold harmless the
Indemnified Person from and against specified Damages. For purposes of this
Agreement, "Damages" shall mean any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) incurred or suffered by the Indemnified Person, the Transitory
Subsidiary or any Affiliate thereof, including the reasonable fees and expenses
of counsel incurred by the Indemnified Person in participating in the defense,
the control of which is assumed by the Securityholder Agents, of any action,
suit or proceeding relating to a third party claim (for which indemnification
may be sought pursuant to Article VI of the Merger Agreement) where the
Indemnified Person reasonably concludes that the indemnifying parties and the
Indemnified Person have conflicting interests or different defenses available.
Subject to the limitations, and in the manner provided, in this Agreement, the
Escrow Shares shall be the sole and exclusive security for such indemnity
obligation of the Indemnifying Stockholders, and the aggregate liability of such
indemnity obligation shall not exceed the amount of the Escrow Shares; provided,
however, that the foregoing limitation shall not apply to liability for fraud.
c. Dividends, Etc. Any securities distributable to the Indemnifying
Stockholders in respect of or in exchange for any of the Escrow Shares, whether
by way of stock dividends, stock splits or otherwise, shall be delivered to the
Escrow Agent, who shall hold such securities in the Escrow Account. Such
securities shall either be issued in the name of the Escrow Agent or accompanied
by stock powers endorsed to transfer the shares to the Escrow
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Agent or its nominee, with guaranteed signatures, and shall be considered Escrow
Shares for purposes hereof. Any cash dividends or property (other than
securities) distributable to the Indemnifying Stockholders in respect of the
Escrow Shares shall be distributed to the Escrow Agent who shall hold such
securities in the Escrow Account.
d. Voting of Shares. The Securityholder Agents shall have the right,
in their sole discretion, on behalf of the Indemnifying Stockholders, to direct
the Escrow Agent in writing as to the exercise of any voting rights pertaining
to the Escrow Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions, the Escrow Agent shall not
vote any of the Escrow Shares. The Securityholder Agents shall have no
obligation to solicit consents or proxies from the Indemnifying Stockholders for
purposes of any such vote.
e. Transferability. The respective interests of the Indemnifying
Stockholders in the Escrow Shares shall not be assignable or transferable, other
than by operation of law. Notice of any such assignment or transfer by operation
of law shall be given to the Escrow Agent and the Buyer, and no such assignment
or transfer shall be valid until such notice is given.
4. Administration of Escrow Account. The Escrow Agent shall administer the
Escrow Account as follows:
a. The Escrow Agent shall hold and safeguard the Escrow Shares,
shall treat such fund as a trust fund in accordance with the terms of this
Agreement and not as property of the Buyer, and shall hold and dispose of the
Escrow Shares only in accordance with the terms hereof. The Escrow Agent shall
have no responsibility for the genuiness, validity, market value, title or
sufficiency for any intended purpose of any shares held by it in escrow under
this Agreement.
b. If an Indemnified Person has incurred or suffered Damages for
which it is entitled to indemnification under Article VI of the Merger
Agreement, the Indemnified Person shall, prior to the expiration of the
representation, warranty, covenant or agreement to which such claim relates,
give written notice of such claim (a "Claim Notice") to the Securityholder
Agents and the Escrow Agent. Each Claim Notice shall specify in reasonable
detail the individual Damages included in the amount so stated (the "Claimed
Amount"), the date each such item was paid or properly accrued and the nature of
the misrepresentation or breach to which it was related. For purposes of this
Agreement, the "Termination Date" shall mean the date on which all of the
representations and warranties, with the exception of the representations and
warranties contained in Section 2.9 and Section 2.21 of the Merger Agreement,
covenants and agreements of the Company expire, which shall be one year after
the Closing Date; provided, however, that those representations and warranties
of the Company and the Buyer that relate to contingencies that are subject to
resolution through the audit process shall only survive the execution and
delivery of the Merger Agreement and the Closing Date until the earlier of (i)
the public issuance of the first independent audit report on the Buyer following
the Closing Date which covers a period subsequent to the Closing Date, a copy of
which report the Buyer shall provide to the Escrow Agent as a form of notice of
termination of this Agreement, and (ii) the first anniversary of the Closing
Date.
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c. Within 20 days after delivery of a Claim Notice the
Securityholder Agents shall provide to the Indemnified Person, with a copy to
the Escrow Agent, a written response (the "Response Notice") in which the
Securityholder Agents shall: (i) agree that Escrow Shares having a Fair Market
Value (as specified in Section 6) equal to the full Claimed Amount may be
released from the Escrow Account to the Indemnified Person, (ii) agree that
Escrow Shares having a Fair Market Value equal to part, but not all, of the
Claimed Amount (the "Agreed Amount") may be released from the Escrow Account to
the Indemnified Person or (iii) contest that any of the Escrow Shares may be
released from the Escrow Account to the Indemnified Person. The Securityholder
Agents may contest the release of Escrow Shares having a Fair Market Value equal
to all or a portion of the Claimed Amount only based upon a good faith belief
that all or such portion of the Claimed Amount does not constitute Damages for
which the Indemnified Person is entitled to indemnification under Article VI of
the Merger Agreement. If no Response Notice is delivered by the Securityholder
Agents within such 20-day period, the Securityholder Agents shall be deemed to
have agreed that Escrow Shares having a Fair Market Value equal to all of the
Claimed Amount may be released to the Indemnified Person from the Escrow
Account.
d. If the Securityholder Agents in the Response Notice agree (or are
deemed to have agreed) that Escrow Shares having a Fair Market Value equal to
all of the Claimed Amount may be released from the Escrow Account to the
Indemnified Person, the Escrow Agent shall, after two business days from the
earlier of (i) the required delivery date for the Response Notice or (ii) the
delivery of the Response Notice, transfer, deliver and assign to the Indemnified
Person such number of Escrow Shares held in the Escrow Account which have a Fair
Market Value equal to the Claimed Amount (or such lesser number of Escrow Shares
as is then held in the Escrow Account).
e. If the Securityholder Agents in the Response Notice agree that
Escrow Shares having a Fair Market Value equal to part, but not all, of the
Claimed Amount may be released from the Escrow Account to the Indemnified
Person, the Escrow Agent shall, after two business days from the delivery of the
Response Notice, transfer, deliver and assign to the Indemnified Person such
number of Escrow Shares held in the Escrow Account which have a Fair Market
Value equal to the Agreed Amount (or such lesser number of Escrow Shares as is
then held in the Escrow Account).
f. If the Securityholder Agents in the Response Notice contest the
release of Escrow Shares having a Fair Market Value equal to all or part of the
Claimed Amount (the "Contested Amount"), the matter shall be settled by binding
arbitration in Boston, Massachusetts. All claims shall be settled by three
arbitrators in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association (the "AAA Rules"). The Securityholder
Agents and the Indemnified Person shall each designate one arbitrator within 15
days of the delivery of the Securityholder Agents' Response Notice contesting
the Claimed Amount. The Securityholder Agents and the Indemnified Person shall
cause such designated arbitrators mutually to agree upon and designate a third
arbitrator; provided, however, that (i) failing such agreement within 45 days of
delivery of the Securityholder Agents' Response Notice, the third arbitrator
shall be appointed in accordance with the AAA Rules and (ii) if either the
Securityholder Agents or the Indemnified Person fail to
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<PAGE>
timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. The Indemnifying Stockholders and the Indemnified
Person shall pay the fees and expenses of their respectively designated
arbitrators and shall bear equally the fees and expenses of the third
arbitrator. The Securityholder Agents and the Indemnified Person shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 60 days
after the appointment of the last arbitrator. The arbitrators' decision shall
relate solely to whether the Indemnified Person is entitled to receive the
Contested Amount (or a portion thereof) pursuant to the applicable terms of the
Merger Agreement and this Agreement. The final decision of the majority of the
arbitrators shall be furnished to the Securityholder Agents, the Indemnified
Person and the Escrow Agent in writing and shall constitute a conclusive
determination of the issue in question, binding upon the Securityholder Agents,
the Indemnifying Stockholders, the Indemnified Person and the Escrow Agent, and
shall not be contested by any of them. The Escrow Agent shall be required to act
in accordance with any arbitrator's decision so long as the Securityholder
Agents and the Indemnified Person shall provide notice to the Escrow Agent of
the names and addresses of the arbitrators appointed. Such decision may be used
in a court of law only for the purpose of seeking enforcement of the
arbitrators' award. After delivery of a Response Notice that the Claimed Amount
is contested by the Securityholder Agents, the Escrow Agent shall continue to
hold in the Escrow Account a number of Escrow Shares having a Fair Market Value
sufficient to cover the Contested Amount (up to the number of Escrow Shares then
available in the Escrow Account), notwithstanding the occurrence of the
Termination Date, until (i) delivery of a copy of a settlement agreement
executed by the Indemnified Person and the Securityholder Agents setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the majority of the arbitrators setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release Escrow Shares from the Escrow Account (to the extent Escrow
Shares are then held in the Escrow Account) in accordance with such agreement or
instructions.
5. Release of Escrow Shares.
a. Promptly after the Termination Date, the Escrow Agent shall
distribute to the Indemnifying Stockholders all of the Escrow Shares then held
in escrow. Notwithstanding the foregoing, if an Indemnified Person has
previously given a Claim Notice which has not then been resolved in accordance
with Section 4, the Escrow Agent shall retain in the Escrow Account after the
Termination Date a number of Escrow Shares having a Fair Market Value equal to
the Claimed Amount covered by any Claim Notice which has not then been resolved.
Any funds so retained in escrow shall be disbursed in accordance with the terms
of the resolution of such claims.
b. Any distribution of all or a portion of the Escrow Shares to the
Indemnifying Stockholders shall be made in accordance with the percentages set
forth opposite such holders' respective names on Attachment A attached hereto;
provided, however, that the Escrow Agent shall withhold the distribution of the
portion of the Escrow Shares otherwise distributable to Indemnifying
Stockholders who have not, according to written notice provided by the Buyer to
the Escrow Agent, prior to such distribution, surrendered their respective
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certificates representing shares of Company Common Stock (the "Certificates")
pursuant to the terms and conditions of the Merger Agreement; and provided
further that such Attachment A shall be appropriately revised in the event the
Buyer deposits additional Escrow Shares with the Escrow Agent pursuant to the
final sentence of Section 1.6(a) of the Merger Agreement following the date of
this Agreement. Any such withheld shares shall be delivered to the Buyer
promptly after the Termination Date, and shall be delivered by the Buyer to the
Indemnifying Stockholders to whom such shares would have otherwise been
distributed upon surrender of their respective Certificates. Distributions to
the Indemnifying Stockholders shall be made by mailing stock certificates to
such holders at their respective addresses shown on Attachment A (or such other
address as may be provided in writing to the Escrow Agent by any such holder).
No fractional Escrow Shares shall be distributed to Indemnifying Stockholders
pursuant to this Agreement. Instead, the number of shares that each Indemnifying
Stockholder shall receive shall be rounded up or down to the nearest whole
number (provided that the Securityholder Agents shall have the authority to
effect such rounding in such a manner that the total number of whole Escrow
Shares to be distributed equals the number of Escrow Shares then held in the
Escrow Account).
6. Valuation of Escrow Shares. For the purposes of this Agreement, the
Fair Market Value of the Escrow Shares shall be $2.40 per share.
7. Concerning the Escrow Agent.
a. Each of the Buyer and the Securityholder Agents (the "Interested
Parties") acknowledges and agrees that the Escrow Agent (i) shall not be
responsible for any of the agreements referred to or described herein (including
without limitation the Merger Agreement), or for determining or compelling
compliance therewith, and shall not otherwise be bound thereby, (ii) shall be
obligated only for the performance of such duties as are expressly and
specifically set forth in this Escrow Agreement on its part to be performed,
each of which is ministerial (and shall not be construed to be fiduciary) in
nature, and no implied duties or obligations of any kind shall be read into this
Agreement against or on the part of the Escrow Agent, (iii) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with acceptable indemnification, (iv) may rely on and shall
be protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
person, and shall have no responsibility for determining the accuracy thereof,
and (v) may consult counsel satisfactory to it, including in-house counsel, and
the opinion or advice of such counsel in any instance shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion or advice of
such counsel.
b. The Escrow Agent shall not be liable to anyone for any action
taken or omitted to be taken by it hereunder except in the case of the Escrow
Agent's gross negligence or wilful misconduct in breach of the terms of this
Agreement. In no event shall the Escrow Agent
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be liable for indirect, punitive, special or consequential damage or loss
(including but not limited to lost profits) whatsoever, even if the Escrow Agent
has been informed of the likelihood of such loss or damage and regardless of the
form of action.
c. The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
securities intermediary employed by the Escrow Agent than any such book-entry
depository or securities intermediary has to the Escrow Agent, except to the
extent that such action or omission of any book-entry depository or securities
intermediary was caused by the Escrow Agent's own gross negligence, bad faith or
wilful misconduct in breach of this Agreement.
8. Compensation, Expenses Reimbursement and Indemnification.
a. The Buyer shall (i) pay or reimburse the Escrow Agent for its
attorney's fees and expenses incurred in connection with the preparation of this
Agreement and (ii) pay the Escrow Agent's compensation for its normal services
hereunder in accordance with the fee schedule attached hereto as Attachment B,
which may be subject to change hereafter on an annual basis. The Buyer shall pay
the Escrow Agent's annual service fee for the first year of service under this
Agreement at the time this Agreement is executed, and its fee for each
subsequent year of service shall be due and payable in advance on the
anniversary of the date hereof.
b. The Buyer and the Indemnifying Stockholders agree, jointly and
severally, to reimburse the Escrow Agent on demand for all costs and expenses
incurred in connection with the administration of this Agreement or the escrow
created hereby or the performance or observance of its duties hereunder which
are in excess of its compensation for normal services hereunder, including
without limitation, payment of any legal fees and expenses incurred by the
Escrow Agent in connection with resolution of any claim by any party hereunder.
c. The Buyer and the Indemnifying Stockholders covenant and agree,
jointly and severally, to indemnify the Escrow Agent (and its directors,
officers and employees) and hold it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and expense of any
nature incurred by the Escrow Agent arising out of or in connection with this
Agreement or with the administration of its duties hereunder, including but not
limited to attorney's fees and other costs and expenses of defending or
preparing to defend against any claim of liability unless and except to the
extent such loss, liability, damage, cost and expense shall be caused by the
Escrow Agent's gross negligence, bad faith, or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Agreement and the resignation of the Escrow Agent.
d. Without altering or limiting the joint and several liability of
any of the Buyer and Indemnifying Stockholders to the Escrow Agent hereunder and
with the exception of the amounts payable by the Buyer to the Escrow Agent
pursuant to Section 8(a), the Buyer, on the one hand, and the Indemnifying
Stockholders, on the other hand, shall each be liable for one-half of all
amounts payable to the Escrow Agent pursuant to this Section 8.
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9. Tax-Related Terms.
a. Tax Reporting. The Buyer and the Indemnifying Stockholders agree
that, for tax reporting purposes, all interest or other income earned from the
investment of the Escrow Funds in any tax year shall (i) to the extent such
interest or other income is distributed by the Escrow Agent to any person or
entity pursuant to the terms of this Agreement during such tax year, be
allocated to such person or entity, and (ii) otherwise shall be allocated to the
Buyer and the Indemnifying Stockholders, one-half each.
b. Certification of Tax Identification Number. The Buyer and the
Indemnifying Stockholders agree to provide the Escrow Agent with a certified tax
identification number by signing and returning a Form W-9 (or Form W-8, in case
of non-U.S. persons) to the Escrow Agent promptly after the execution of this
Agreement but in no event later than thirty days after execution. The Interested
Parties understand that in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Funds.
c. Tax Indemnification. The Buyer and the Indemnifying Stockholders
agree, jointly and severally, (i) to assume any and all obligations imposed now
or hereafter by any applicable tax law with respect to any payment or
distribution of the Escrow Shares or performance of other activities under this
Agreement, (ii) to instruct the Escrow Agent in writing with respect to the
Escrow Agent's responsibility for withholding and other taxes, assessments or
other governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless
from any liability or obligation on account of taxes, assessments, additions for
late payment, interest, penalties, expenses and other governmental charges that
may be assessed or asserted against the Escrow Agent in connection with or
relating to any payment made or other activities performed under the terms of
this Agreement, including without limitation any liability for the withholding
or deduction of (or the failure to withhold or deduct) the same, and any
liability for failure to obtain proper certifications or to report properly to
governmental authorities in connection with this Agreement, including costs and
expenses (including reasonable legal fees and expenses), interest and penalties.
The foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement and the resignation of the Escrow Agent.
10. Liability and Authority of Securityholder Agents; Successors and
Assignees.
a. The Securityholder Agents shall incur no liability to the
Indemnifying Stockholders with respect to any action taken or suffered by them
in reliance upon any note, direction, instruction, consent, statement or other
documents believed by them to be genuinely and duly authorized, nor for other
action or inaction except their own willful misconduct or gross negligence. The
Securityholder Agents may, in all questions arising under the Escrow Agreement,
rely on the advice of counsel and for anything done, omitted or suffered in good
-8-
<PAGE>
faith by the Securityholder Agents based on such advice, the Securityholder
Agents shall not be liable to the Indemnifying Stockholders.
b. In the event of the death or permanent disability of either
Securityholder Agents, or his resignation as a Securityholder Agent, a successor
Securityholder Agent shall be appointed by the other Securityholder Agent or,
absent its appointment, a successor Securityholder Agents shall be elected by a
majority vote of the Indemnifying Stockholders, with each such Indemnifying
Stockholder (or his or her successors or assigns) to be given a vote equal to
the number of votes represented by the shares of Company Common Stock held by
such Indemnifying Stockholder immediately prior to the Effective Time. Each
successor Securityholder Agents shall have all of the power, authority, rights
and privileges conferred by this Agreement upon the original Securityholder
Agents, and the term "Securityholder Agents" as used herein shall be deemed to
include successor Securityholder Agents.
c. The Securityholder Agents, acting jointly but not singly, shall
have full power and authority to represent the Indemnifying Stockholders, and
their successors, with respect to all matters arising under this Agreement and
all actions taken by any Securityholder Agent hereunder shall be binding upon
the Indemnifying Stockholders, and their successors, as if expressly confirmed
and ratified in writing by each of them. Without limiting the generality of the
foregoing, the Securityholder Agents, acting jointly but not singly, shall have
full power and authority to interpret all of the terms and provisions of this
Agreement, to compromise any claims asserted hereunder and to authorize payments
to be made with respect thereto, on behalf of the Indemnifying Stockholders and
their successors. All actions to be taken by the Securityholder Agents hereunder
shall be evidenced by, and taken upon, the written direction of a majority
thereof.
11. Amounts Payable by Indemnifying Stockholders.
a. The amounts payable by the Indemnifying Stockholders under this
Agreement (i.e., the fees and expenses of arbitrators payable pursuant to
Section 4(e) and the indemnification obligations pursuant to Section 8 and
Section 9(c)) shall be payable solely as follows. The Securityholder Agents
shall notify the Escrow Agent of any such amount payable by the Indemnifying
Stockholders as soon as they become aware that any such amount is payable, with
a copy of such notice to the Buyer. On the sixth business day after the delivery
of such notice, the Escrow Agent shall sell such number of Escrow Shares, valued
at $2.40 per share, (up to the number of Escrow Shares then available in the
Escrow Account), subject to compliance with all applicable securities laws,
equal to such amount, and shall disburse such proceeds to the party to whom such
amount is owed in accordance with the instructions of the Securityholder Agents;
provided that if the Buyer delivers to the Escrow Agent (with a copy to the
Securityholder Agents), within five business days after delivery of such notice
by the Securityholder Agents, a written notice contesting the legitimacy or
reasonableness of such amount, then the Escrow Agent shall not sell Escrow
Shares to raise the disputed portion of such claimed amount, and such dispute
shall be resolved by the Buyer and the Securityholder Agents in accordance with
the procedures set forth in Section 4(e).
-9-
<PAGE>
b. In connection with any sale of the Escrow Shares pursuant to
Section 11(a) of this Agreement, the Escrow Agent shall be entitled to receive
and rely upon, prior to taking action in that regard, written direction from the
Securityholder Agents as to the manner and method to be undertaken in carrying
out such sale, including without limitation written direction (i) identifying
the number of shares to be sold, (ii) identifying the brokerage firm the
Securityholder Agents requests to be used or instruct the Escrow Agent to use
its affiliated brokerage service, and (iii) setting forth any necessary or
special instructions with respect to the sale (including any stop loss or
minimum price per share instruction); and the Securityholder Agents shall
execute and deliver any instruments reasonably required by the Escrow Agent in
order to carry out such sale or liquidation.
c. The Escrow Agent shall have no responsibility in connection with
such sale other than to make delivery of the Escrow Shares to the selected
brokerage firm, with instruction (including any special instruction provided by
the Securityholder Agents), and to receive and deposit into the Escrow Account
(to be administered and distributed in accordance with this Agreement) any net
sale proceeds received therefrom. The Escrow Agent shall have no liability for
any actions or omissions of any such brokerage firm, and shall have no liability
for the price or execution achieved. Without limiting the generality of the
foregoing, the Securityholder Agents expressly acknowledge that (a) the Escrow
Shares may need to be sent to a transfer agent to be reissued in saleable form,
(b) the Escrow Shares may contain or be subject to transfer restrictions that
may limit their marketability and impose restrictions upon the number of types
of purchasers to whom they can be offered or sold, and (c) the Escrow Agent
shall have no liability for any failure or delay (or any price change during any
such delay) on the part of the Securityholder Agents or any transfer agent, or
caused by any necessary registration or delivery procedures, or compliance with
any applicable transfer restrictions, involved in the transfer of such Escrow
Shares.
d. The Escrow Agent shall be entitled to contract with any brokerage
firm (which may be selected by the Escrow Agent without liability on its part,
taking into consideration any brokerage firm requested by the Securityholder
Agents, as provided above), which may be affiliated with the Escrow Agent, and
may enter into any such contract on a basis which provides that such brokerage
firm shall use its "best efforts" to effect such sale. The Escrow Agent shall be
indemnified hereunder for any costs, expense and risks associated therewith or
arising thereunder (other than resulting from its own gross negligence or wilful
misconduct), and the proceeds of sale to which the Indemnifying Stockholders
shall be entitled shall be net of all brokerage commissions and charges.
e. The net sale proceeds of any such sale of Escrow Shares received
by the Escrow Agent shall be apportioned among the Indemnifying Stockholders on
a pro rata basis as set forth in Attachment A less a $35.00 per Indemnifying
Stockholder fee for the proration of the net sales price and individual 1099-B
(the "Sales Administration Fee"). The Sales Administration fee shall be assessed
each day a sale is effected until the total number of shares specified in such
written direction from the Securityholder Agents are sold.
-10-
<PAGE>
12. Termination. This Agreement shall terminate upon the later of the
Termination Date or the distribution by the Escrow Agent of all of the Escrow
Shares in accordance with this Agreement; provided that the provisions of
Sections 8, 9 and 10 shall survive such termination.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent by (i) registered or certified mail,
return receipt requested, postage prepaid, (ii) a reputable nationwide overnight
courier service, (iii) hand delivery, or (iv) telecopy, in each case to the
address set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered (1) two business days after it is sent by
registered or certified
mail, return receipt requested, postage prepaid, (2) one business day after it
is sent via a reputable nationwide overnight courier service, (3) when received
by the Escrow Agent if it is sent by hand delivery, or (4) when a confirmation
copy is provided the same day by regular mail to the Escrow Agent if it is sent
by telecopy.
If to the Buyer: Copy to:
Intrinsix Corp. Hale and Dorr LLP
33 Lyman Street 60 State Street
Westboro, MA 01581 Boston, MA 02109
Attention: James A. Gobes, President Attention: Peter B. Tarr, Esq.
Telecopy: (508) 836-4222 Telecopy: (617) 526-5000
If to the Securityholder Agents:
Yatin Trivedi Larry F. Saunders
2132 Bridle Ridge Ct. 13359 Entreken Ave.
San Jose, CA 95138 San Diego, CA 92129
Telecopy: (510) 249-9082 Telecopy: (619) 538-4271
If to the Escrow Agent:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, MA 02110
Attention: Corporate Trust Dept., Ref: Intrinsix Escrow
Telecopy: (617) 664-5742
Any funds to be paid to or by the parties hereto pursuant to this Agreement
shall be sent by (i) wire transfer (in the case of the Escrow Agent and Buyer)
pursuant to the following instructions or (ii) check (in the case of the
Indemnifying Stockholders) to addresses set forth on Attachment A hereto, (or by
such method of payment and in accordance with such instructions as may have been
given in advance in writing to or by the parties hereto, in accordance with this
Section 13):
-11-
<PAGE>
If to the Escrow Agent:
State Street Bank and Trust Company
ABA # 0110 0002 8
Account # 9903-990-1
Attn: Corporate Trust Department
Ref.: Intrinsix Escrow
If to the Buyer:
Bank: BankBoston, N.A.
ABA # 011000390
Account # 52769944
Account Name: Intrinsix Corp.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including ordinary mail), but no such
notice, instruction or communication shall be deemed to have been delivered
unless and until it is actually received by the party to whom it was sent. Any
party may change the address to which notices, instructions or communications
are to be delivered by giving the other parties to this Agreement notice thereof
in the manner set forth in this Section 13.
14. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by
delivering a resignation to the parties to this Escrow Agreement, not less than
30 days prior to the date when such resignation shall take effect. The Buyer may
appoint a successor Escrow Agent without the consent of the Securityholder
Agents so long as such successor is a bank with assets of at least $500 million
and may appoint any other successor Escrow Agent with the consent of the
Securityholder Agents, which shall not be unreasonably withheld; provided
however, that if the Interested Parties fail to so appoint within 20 days of
such resignation, the Escrow Agent may either appoint a successor or apply to
court for appointment of a successor. If, within such notice period, the Buyer
provides to the Escrow Agent written instructions with respect to the
appointment of a successor Escrow Agent and directions for the transfer of any
Escrow Shares then held by the Escrow Agent to such successor, the Escrow Agent
shall act in accordance with such instructions and promptly transfer such Escrow
Shares to such designated successor.
15. General.
a. Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts without regard to conflict-of-law principles and shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
-12-
<PAGE>
b. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
c. Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.
d. Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
e. Amendment. This Agreement may be amended only with the written
consent of the Buyer, the Escrow Agent and the Securityholder Agents.
f. Dispute Resolution. It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the securities or funds held by the Escrow Agent, or
should any claim be made upon the Escrow Agent or such securities or funds by a
third party, the Escrow Agent upon receipt or notice of such dispute or claim is
authorized and shall be entitled to retain in its possession without liability
to anyone, all or any of the securities and funds until such dispute shall have
been settled either by the mutual written agreement of the parties involved or
by a final award of an arbitrator, as provided in this Agreement. The Escrow
Agent may, but shall be under no duty whatsoever to, institute or defend any
legal proceedings which relate to escrowed securities or funds.
g. Consent to Jurisdiction and Service. Each of the Interested
Parties hereby absolutely and irrevocable consents and submits to the
jurisdiction of the courts in The Commonwealth of Massachusetts, sitting in
Suffolk County and of the United States District Court for the District of
Massachusetts, sitting in Boston, as the exclusive jurisdiction and venue for
any actions or proceedings brought against any of the Interested Parties by the
Escrow Agent or brought by any Interested Party against the Escrow Agent,
arising out of or relating to this Escrow Agreement. In any such action or
proceeding, each of the Interested Parties hereby absolutely and irrevocably (i)
waives any objection to jurisdiction or venue in such courts, (ii) waives
personal service of any summons, complaint, declaration or other process, and
(iii) agrees that the service thereof may be made by certified or registered
first-class mail directed to such party, as the case may be, at their respective
addresses in accordance with Section 13 hereof.
h. Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
-13-
<PAGE>
i. Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be as admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
[The remainder of this page has intentionally been left blank.]
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
INTRINSIX CORP.
By: /s/ James A. Gobes
---------------------------------
James A. Gobes
/s/ Yatin Trivedi
-------------------------------------
Yatin Trivedi, Securityholder Agent
/s/ Larry F. Saunders
-------------------------------------
Larry F. Saunders, Securityholder Agent
STATE STREET BANK AND TRUST
COMPANY
By: /s/ CM
-----------------------------
Chi C. Ma
Assistant Vice President
-15-
<PAGE>
ATTACHMENT A
------------
Indemnifying Stockholder Percentage
- ------------------------ ----------
Yatin Trivedi 49.3%
2132 Bridle Ridge Ct.
San Jose, CA 95138
Larry F. Saunders 49.3%
13359 Entreken Ave.
San Diego, CA 92129
Jayant Nagda 1.3%
223 Prairie Dog Lane
Fremont, CA 94539
-16-
<PAGE>
ATTACHMENT B
------------
June 7, 1999
Mr. Brian Meeks
CFO
Intrinsix Corporation
33 Lyman Street
Westboro, MA 01581
RE: Intrinsix Corp. Escrow
Dear Mr. Meeks:
On behalf of State Street Bank and Trust Company, I am pleased to provide our
fee schedule to act as Escrow Agent for the above-referenced transaction. Our
fees are outlined below:
FEES AND EXPENSES:
- ------------------
ACCEPTANCE FEE: Waived
$3,500.00 per year or any part
ANNUAL FEE: thereof
INVESTMENT FEE: $ 65.00 per buy/sell
(direct investments in treasuries,
C/D's CP, Repo's, etc.) or
--
SWEEP FEE:
(SSgA or selected other Money Market 40 basis points per annum of
Funds) the average daily net assets
WIRE FEE: $20.00 per wire
OUT-OF-POCKET EXPENSES: At Cost
LEGAL FEE: At Cost
(State Street will use Rob Coughlin at Peabody & Arnold as counsel)
The transaction underlying this proposal, and all related legal documentation,
is subject to review and acceptance by State Street in accordance with its
policies and procedures. Should the actual transaction materially differ from
the assumptions used herein, State Street reserves the right to modify this
proposal. In the event that the subject transaction fails to close for reasons
beyond the control of State Street, the party requesting these services agrees
to pay State Street's acceptance fees, legal fees and out-of-pocket expenses.
-17-
<PAGE>
Please do not hesitate to call me at (617) 664-5311 with any questions. We look
forward to working with you.
Sincerely,
/s/ John F. Sugden, Jr.
JFS:lm
-18-
<PAGE>
Exhibit 10.14
BILL OF SALE
This Bill of Sale dated as of May 18, 1998 is executed and delivered by
Prism Acoustics, Inc. (d/b/a The VHDL Technology Group), a Delaware corporation
(the "Seller"), and William D. Billowitch, the sole stockholder of the Seller
(the "Stockholder"), to Intrinsix Corp., a Massachusetts corporation (the
"Buyer"). All capitalized words and terms used in this Bill of Sale and not
defined herein shall have the respective meanings ascribed to them in the Asset
Purchase Agreement dated as of May 18, 1998 among the Seller, Stockholder and
Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer substantially all of the
assets and business of the Seller, and the Buyer has agreed to assume certain of
the liabilities of the Seller;
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller and Stockholder hereby
agree as follows:
1. The Seller hereby sells, transfers, conveys, assigns and delivers to
the Buyer, its successors and assigns, to have and to hold forever, all of the
Assets, including, without limitation, the Inventory, the Contract Rights, Fixed
Assets, Intellectual Property, Purchase Orders, Claims, Warranties and certain
other assets, properties, claims, rights and interests.
2. The Seller and Stockholder hereby covenant and agree that they will, at
the request of the Buyer and without further consideration, execute and deliver,
and will cause the employees of the Seller to execute and deliver, such other
instruments of sale, transfer, conveyance and assignment, and take such other
action as may reasonably be necessary to more effectively sell, transfer,
convey, assign and deliver to, and vest in, the Buyer, its successors and
assigns, good, clear, record and marketable title to the Assets hereby sold,
transferred, conveyed, assigned and delivered, or intended so to be, and to put
the Buyer in actual possession and operating control thereof, to assist the
Buyer in exercising all rights with respect thereto and to carry out the purpose
and intent of the Agreement.
3. The Seller and Stockholder each does hereby irrevocably constitute and
appoint the Buyer, its successors and assigns, its true and lawful attorney,
with full power of substitution, in its name or otherwise, and on behalf of each
of the Seller and Stockholder, respectively, or for its own use, to claim,
demand, collect and receive at any time and from time to time any and all Assets
hereby sold, transferred, conveyed, assigned and delivered, or intended so to
be, and to prosecute the same at law or in equity and, upon discharge thereof,
to complete, execute and deliver any and all necessary instruments of
satisfaction and release.
4. This sale, transfer, conveyance and assignment has been executed and
delivered by the Seller in accordance with the Agreement and is expressly made
subject to those liabilities,
<PAGE>
obligations and commitments which the Buyer has expressly assumed and agreed to
pay, perform and discharge pursuant to a certain Instrument of Assumption
executed by the Buyer of even date herewith.
5. Each of the Seller and Stockholder, by its execution of this Bill of
Sale, and the Buyer, by its acceptance of this Bill of Sale, each hereby
acknowledges and agrees that neither the representations and warranties nor the
rights and remedies of any party under the Agreement shall be deemed to be
enlarged, modified or altered in any way by this instrument.
IN WITNESS WHEREOF, the Seller, Stockholder and the Buyer have caused this
instrument to be duly executed under seal as of and on the date first above
written.
SELLER:
PRISM ACOUSTICS, INC.
By: /s/ William D. Billowitch
-------------------------------
William D. Billowitch
Title: President
STOCKHOLDER:
/s/ William D. Billowitch
----------------------------------
William D. Billowitch
Agreed and Accepted:
BUYER:
INTRINSIX CORP.
By: /s/ Jim Gobes
--------------------
James A. Gobes
Title: President
- 2 -
<PAGE>
Exhibit 10.15
INSTRUMENT OF ASSUMPTION OF LIABILITIES
This Instrument of Assumption of Liabilities dated as of May 18, 1998, is
made by Intrinsix Corp., a Massachusetts corporation (the "Buyer"), in favor of
Prism Acoustics, Inc. (d/b/a The VHDL Technology Group), a Delaware corporation
(the "Seller"). All capitalized words and terms used in this Instrument of
Assumption of Liabilities and not defined herein shall have the respective
meanings ascribed to them in the Asset Purchase Agreement dated as of May 18,
1998 among the Seller, William D. Billowitch, the sole stockholder of Seller
(the "Stockholder") and the Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer substantially all of the
assets and business of the Seller;
WHEREAS, in partial consideration therefor, the Agreement requires the
Buyer to assume certain of the liabilities of the Seller;
NOW, THEREFORE, for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Buyer hereby agrees as
follows:
1. The Buyer hereby assumes and agrees to perform, pay and discharge the
Assumed Liabilities specifically set forth in Schedule 1.4 attached to the
Agreement, which Schedule 1.4 is incorporated by reference herein.
2. Notwithstanding the foregoing, the Buyer does not hereby assume or
agree to perform, pay or discharge, and the Seller and Stockholder shall remain
unconditionally liable for, from and after the date hereof, all of the Retained
Liabilities.
3. Nothing contained herein shall require the Buyer to perform, pay or
discharge any liability, obligation or commitment expressly assumed by the Buyer
herein so long as the Buyer in good faith contests or causes to be contested the
amount or validity thereof.
4. Nothing herein shall be deemed to deprive the Buyer of any defenses,
set-offs or counterclaims which the Seller or Stockholder may have had or which
the Buyer shall have with respect to any of the Assumed Liabilities (the
"Defenses and Claims"). The Seller and Stockholder hereby transfer, convey and
assign to the Buyer all Defenses and Claims and agree to cooperate with the
Buyer to maintain, secure, perfect and enforce such Defenses and Claims,
including the signing of any documents, the giving of any testimony or the
taking of any such other action as is reasonably requested by the Buyer in
connection with such Defenses and Claims.
5. It is expressly understood and agreed that all Retained Liabilities
shall remain, as between the Buyer on the one hand and the Seller and
Stockholder on the other hand, the sole obligation of the Seller and Stockholder
and their respective successors and assigns.
<PAGE>
6. The Buyer, by its execution of this Instrument of Assumption of
Liabilities, and the Seller and Stockholder, by their acceptance of this
Instrument of Assumption of Liabilities, each hereby acknowledges and agrees
that neither the representations and warranties nor the rights and remedies of
any Party under the Agreement shall be deemed to be enlarged, modified or
altered in any way by such execution and acceptance of this instrument.
IN WITNESS WHEREOF, the Buyer, the Seller and the Stockholder have caused
this instrument to be duly executed under seal as of and on the date first above
written.
BUYER:
INTRINSIX CORP.
By: /s/ Jim Gobes
-------------------------
James A. Gobes
Title: President
Agreed and Accepted:
SELLER:
PRISM ACOUSTICS, INC.
By: /s/ William D. Billowitch
----------------------------
William D. Billowitch
Title: President
STOCKHOLDER:
/s/ William D. Billowitch
- ---------------------------------
William D. Billowitch
- 2 -
<PAGE>
Exhibit 10.16
TRADEMARK ASSIGNMENT
Prism Acoustics, Inc. (d/b/a The VHDL Technology Group), a Delaware
corporation, having its principal place of business at 100 Brodhead Street,
Suite 140, Bethlehem, Pennsylvania 18017 (the "Seller"), for good and valuable
consideration, the receipt of which is hereby acknowledged, hereby assigns and
delivers to Intrinsix Corp., a Massachusetts corporation having its principal
place of business at 33 Lyman Street, Westboro, Massachusetts 01581 (the
"Buyer"), its entire right, title and interest in and to each of the trademarks,
service marks, trade names, service marks, registrations and applications for
registrations used in the business of the Seller, including, without limitation,
the trademarks set forth herein, including all goodwill associated therewith,
together with the entire right, title and interest in and to any and all causes
of action for infringement thereof, including the right to recover for past
infringement, and the same to be held and enjoyed by the Buyer, its successors
and assigns.
TRADEMARKS
Prism
Prism Acoustics
VHDL
Designers' Introduction to VHDL
Dragster
Dragster-Pro
Each of the Seller and William D. Billowitch, the sole stockholder of the
Seller (the "Stockholder"), further agrees, for itself, its successors and
assigns, to execute such further documents and to perform such further lawful
acts as may reasonably be requested by the Buyer to effectuate this assignment.
<PAGE>
Witness my hand this 18th day of May, 1998.
SELLER:
PRISM ACOUSTICS, INC.
By: /s/ William D. Billowitch
--------------------------------
William D. Billowitch
Title: President
STOCKHOLDER:
/s/ William D. Billowitch
------------------------------------
William D. Billowitch
- 2 -
<PAGE>
Exhibit 10.17
BILL OF SALE
This Bill of Sale dated as of December 29, 1999, is executed and delivered
by Telexis Corp., a corporation continued under the laws of Canada (the
"Seller"), to Intrinsix Canada Co., a Nova Scotia unlimited company (the
"Buyer"). All capitalized words and terms used in this Bill of Sale and not
defined herein shall have the respective meanings ascribed to them in the Asset
Purchase Agreement dated as of December 29, 1999, by and among the Seller and
the Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Buyer desires to purchase, and the
Seller desires to sell, substantially all of the assets and business of the
Seller's Business referred to in the Agreement for the consideration set forth
in the Agreement, subject to the terms and conditions of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises set forth in the
Agreement and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Seller hereby agrees as follows:
1. The Seller hereby sells, transfers, conveys, assigns and delivers to
the Buyer, its successors and assigns, to have and to hold forever, all of the
Assets.
2. The Seller hereby covenants and agrees that it will, at the request of
the Buyer and without further consideration, execute and deliver, and will cause
its employees to execute and deliver, such other instruments of sale, transfer,
conveyance and assignment, and take such other action, as may reasonably be
necessary to more effectively sell, transfer, convey, assign and deliver to, and
vest in, the Buyer, its successors and assigns, good, clear and marketable title
to the Assets, and to put the Buyer in actual possession and operating control
thereof, to assist the Buyer in exercising all rights with respect thereto and
to carry out the purpose and intent of the Agreement.
3. The Seller does hereby irrevocably constitute and appoint the Buyer,
its successors and assigns, its true and lawful attorney, with full power of
substitution, in its name or otherwise, and on behalf of the Seller, or for its
own use, to claim, demand, collect and receive at any time and from time to time
any and all of the Assets, and to prosecute the same at law or in equity and,
upon discharge thereof, to complete, execute and deliver any and all necessary
instruments of satisfaction and release.
4. The Seller, by its execution of this Bill of Sale, and the Buyer, by
its acceptance of this Bill of Sale, each hereby acknowledges and agrees that
neither the representations and warranties nor the rights and remedies of any
party under the Agreement shall be deemed to be enlarged, modified or altered in
any way by this instrument.
5. Nothing in this Bill of Sale shall be construed as an attempt to assign
to the Buyer any Contract Rights which would otherwise be Assets where:
<PAGE>
(a) any such Contract Right which, as a matter of law or by the terms
thereof, is not assignable without the consent of the party or parties to such
Contract Right and in respect of which no such consent has been given; or
(b) any claim or demand as to which all of the remedies for the
enforcement thereof enjoyed by a Seller would not as a matter of law pass to the
Buyer as in incident of the transfer to be made under this Bill of Sale;
and the Seller hereby declares that it shall hold such Contract Rights as bare
trustee for the benefit of the Buyer, provided, however, that upon any consent
referred to in subsection (a) being obtained, all Contract Rights to which such
consent relates shall forthwith pass to the Buyer without any further or other
formality. In respect of the foregoing, the Seller shall take or cause to be
taken such action in its name or otherwise as the Buyer may require so as to
provide the Buyer with all of the benefits of the Contract Rights and to effect
collection of money to become due and payable by the other party to the Assumed
Contracts and the Seller shall promptly pay over to the Buyer all money received
by the Seller in respect of all of the foregoing. The Seller hereby authorizes
the Buyer to perform all of the Seller's obligations under the Assumed Contracts
and constitutes the Buyer its attorney to act in the name of the Seller with
respect thereto.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of the date first above written.
TELEXIS CORP.
By: /s/ Andre Rancourt
------------------------------------
[Corporate Seal] Title: Vice-President Finance and CFO
---------------------------------
By: /s/ David Rothwell
------------------------------------
Title: VP & GM
---------------------------------
ATTEST:
/s/ Brian Meeks
- ---------------------------
ACCEPTED:
INTRINSIX CANADA CO.
By: /s/ Jim Gobes
-----------------------
Title: President
--------------------
<PAGE>
Exhibit 10.18
INSTRUMENT OF ASSUMPTION OF LIABILITIES
This Instrument of Assumption of Liabilities dated as of December 29, 1999
is made by Intrinsix Canada Co., a Nova Scotia unlimited company (the "Buyer"),
in favor of Telexis Corp., a corporation continued under the laws of Canada (the
"Seller"). All capitalized words and terms used in this Instrument of Assumption
of Liabilities and not defined herein shall have the respective meanings
ascribed to them in the Asset Purchase Agreement dated as of December 29, 1999,
among the Seller and the Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to sell,
transfer, convey, assign and deliver to the Buyer substantially all of the
assets and business associated with the Seller's Business referred to in the
Agreement; and
WHEREAS, in partial consideration therefor, the Agreement requires the
Buyer to assume certain of the liabilities of the Seller;
NOW, THEREFORE, in consideration of the mutual promises set forth in the
Agreement and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Buyer hereby agrees as follows:
1. The Buyer hereby assumes and agrees to perform, pay and discharge all
of the Assumed Liabilities.
2. Notwithstanding the foregoing, the Buyer does not assume or agree to
perform, pay or discharge, and the Seller shall remain unconditionally liable
for, all obligations, liabilities and commitments, fixed or contingent, of the
Seller other than the Assumed Liabilities.
3. Nothing contained herein shall require the Buyer to perform, pay or
discharge any liability, obligation or commitment expressly assumed by the Buyer
herein so long as the Buyer in good faith contests or causes to be contested the
amount or validity thereof, subject, however, to the provisions of Paragraph 6
below.
4. Nothing herein shall be deemed to deprive the Buyer of any defenses,
set-offs or counterclaims which the Seller may have had or which the Buyer shall
have with respect to any of the obligations, liabilities and commitments hereby
assumed (the "Defenses and Claims"). The Seller hereby transfers, conveys and
assigns to the Buyer all Defenses and Claims and agrees to cooperate with the
Buyer to maintain, secure, perfect and enforce such Defenses and Claims,
including the signing of any documents, the giving of any testimony or the
taking of any such other action as is reasonably requested by the Buyer in
connection with such Defenses and Claims.
5. It is expressly understood and agreed that all liabilities, obligations
and commitments not assumed hereunder by the Buyer pursuant to Paragraph 1 above
shall remain the sole obligation of the Seller and its respective successors and
assigns.
<PAGE>
6. The Buyer agrees to indemnify and hold harmless the Seller from and
against all claims, damages, losses, liabilities, costs and expenses, including
without limitation reasonable attorneys' fees, with respect to the failure of
the Buyer to pay, discharge or otherwise satisfy or perform, when due, the
liabilities, obligations and commitments hereby assumed by the Buyer.
7. The Buyer, by its execution of this Instrument of Assumption of
Liabilities, and the Seller, by its acceptance of this Instrument of Assumption
of Liabilities, each hereby acknowledges and agrees that neither the
representations and warranties nor the rights, obligations or remedies of either
party under the Agreement shall be deemed to be enlarged, modified or altered in
any way by such execution and acceptance of this instrument.
IN WITNESS WHEREOF, the Buyer and the Seller have caused this instrument
to be duly executed under seal as of the date first above written.
INTRINSIX CANADA CO.
By: /s/ Jim Gobes
-----------------------
Title: President
---------------------
ACCEPTED:
TELEXIS CORP.
By: /s/ Andre Rancourt
----------------------------------
Title: Vice-President Finance and CFO
-------------------------------
By: /s/ David Rothwell
----------------------------------
Title: VP & GM
-------------------------------
<PAGE>
Exhibit 10.19
-------------
THIS LICENCE made the 29th day of December, 1999
Between
Telexis Corporation
a corporation continued under the laws of Canada
(the "Licensor")
and
Intrinsix Canada Co.
(the "Licensee")
WHEREAS the Licensor leases certain premises (the "Premises") located at Tower
B, 555 Legget Drive, Kanata, Ontario,(the "Building") pursuant to a lease from
Kanata Research Park Corporation (the "Landlord") dated the 25th day of
November, 1997 as amended by Amendment to Lease dated the 5th day of May, 1998,
(the "Lease") upon the terms and conditions set forth therein;
AND WHEREAS the Licensor and the Licensee have agreed that the Licensor and the
Licensee shall jointly occupy a portion of the Premises consisting of the third
floor of the Building (the "Shared Facility") upon the terms and conditions set
forth herein;
IN CONSIDERATION of the fees to be paid and the covenants in this license on the
part of the Licensee, the Licensor grants to the Licensee on the terms hereof
the following license:
(1) To occupy the Shared Facility in common with the Licensor for the purpose
of carrying on the consulting engineering and services business (the
"Purchased Business") formerly carried on by the Licensor in the Shared
Facility and recently purchased by the Licensee;
(2) To install such telephone and network facilities including computers and
other equipment therein as may be necessary or desirable for the conduct of
the Purchased Business;
(3) For the Licensee, its servants agents and invitees to enter and leave the
Shared Facility at all reasonable times subject to the Licensor's
reasonable regulations and security precautions
for the term of one year commencing the 1st day of January, 2000, and ending on
the 31st day of December, 2000, the Licensee paying the fees set out in this
license.
1. LICENSEE'S COVENANTS
The Licensee covenants with the Licensor as follows:
<PAGE>
(1) TO PAY FEES -- to pay to the Licensor during the term a fee equal to one
half of all rents and other occupancy charges incurred by the Licensor with
respect to the Shared Facility which accrue during the term of the license,
which sum shall be paid by the Licensee to the Licensor on or before the
date upon which payment is due by the Licensor to the Landlord or to any
third party without any deduction, set-off or abatement whatsoever except
as expressly provided herein;
(2) TO PAY INCREASES IN COSTS -- to pay to the Licensor as an additional
license fee, any amount by which the rent (which expression includes
additional rent and all other charges payable under the Lease) with respect
to the Shared Facility is increased as a result of any act or omission on
the part of the Licensee, including, without limiting the generality of the
foregoing, any increase resulting from the application of Sections 4.05,
5.03, 5.04, 7.04, 7.06, 7.07, 7.09, 7.10, 7.16, 7.22, and Schedule "D" of
the Lease.
(3) COMPLY WITH LEASE -- to comply in connection with its joint occupancy of
the Shared Facility, with all of the terms, conditions and provisos, rules
and regulations contained in the Lease, to the extent that same shall be
applicable from time to time to the Shared Facility;
(4) ALTERATIONS -- not to perform any alterations or renovations to the Shared
Facility without the express written consent of the Licensor;
(5) REMOVAL OF LIENS -- to procure the immediate removal of all liens against
the Shared Facility or any part of it arising in connection with work
performed for or materials furnished to, or obligations incurred by the
Licensee;
(6) SECURING OF APPROVAL -- to secure approval from the Landlord or any of the
authorities having jurisdiction and to submit proof of the approval to the
Licensor before commencing construction, alterations or renovations, it
being understood that the Licensor will co-operate in obtaining any such
approval;
(7) TO OBSERVE AND PERFORM TERMS AND PROVISIONS -- to observe and perform all
those terms and provisions of this license which are binding upon it and
not to do or suffer to be done anything contrary to any term or provision
of this license;
(8) RESTRICTIONS ON USE -- to use the Shared Facility only for the purpose of
the Purchased Business;
(9) NUISANCE -- that nothing shall be done, omitted, or permitted by the
Licensee in the Shared Facility which shall be or result in a nuisance or a
disturbance to the Licensor in its occupation of the Shared Facility;
(10) NO STORAGE -- not to store any goods or merchandise in the Shared Facility
without the written consent of the Licensor;
(11) REMOVAL OF SIGNS -- forthwith upon notice to remove from the Shared
Facility signs, decorations, merchandise or displays to which the Licensor,
acting reasonably, objects, and to permit the Licensor to remove such
signs, decorations, merchandise or displays;
-2-
<PAGE>
(12) MAINTENANCE AND REPAIRS -- at all times to keep the Shared Facility in a
clean and sanitary condition and to contribute one-half of the cost,
without mark-up of any repairs or maintenance required to be performed to
same by the Licensor, (except to the extent that some are expressly to be
borne by one party or the other pursuant hereto);
(13) ELECTRICAL APPARATUS -- at no time to use electrical or other services at
the Shared Facility which exceed the capacity of any transmission equipment
(including wiring, mains, pipes, conduits, valves and connections) so as to
constitute a hazard;
(14) LIABILITY INSURANCE -- the Licensee shall throughout the term of this
license provide and keep in force for the benefit of the Licensor and the
Licensee general liability insurance in an amount of not less than
$2,000,000.00 in respect of injury to or death of any one person or
property damage; that all insurance shall be effected with insurers and
upon terms and conditions satisfactory to the Licensor; the Licensee shall
promptly furnish to the Licensor copies of insurance policies or other
evidence satisfactory to the Licensor of insurance and any renewals of it;
that if the Licensee fails to insure as required or fails promptly to
furnish to the Licensor satisfactory evidence of insurance, or of the
renewal of any policy before its expiration, the Licensor may effect such
insurance for the benefit of the Licensee or the Licensor for a period not
exceeding one year, and any premium paid by the Licensor shall be
recoverable from the Licensee on demand as additional fees;
(15) TAXES -- to pay as and when they fall due all taxes and rates charged,
assessed or levied in respect of all business or other activity carried on,
in, or in connection with the Shared Facility by the Licensee, or in
respect of the Licensee's business, income or property, and taxes personal
to the Licensee;
(16) QUITTING OF PREMISES -- that at the expiration, cancellation or
determination of the term the Licensee will remove its furniture and its
fixtures from the Shared Facility and leave the Shared Facility in good
repair, reasonable wear and tear and damage by fire, lightning and tempest
for which the Licensor may have valid and collectible insurance only
excepted;
(17) ASSIGNMENT --
(1) that the Licensee shall not assign this license nor sublicense any
part of the Shared Facility without the written consent of the
Licensor, which consent may be withheld without reason
notwithstanding any statutory provision respecting the unreasonable
withholding of consent;
(2) that the Licensee will not mortgage or otherwise encumber its
interest in this license;
(3) that the Licensee will not permit any concessionaire or person, firm
or corporation to occupy any part of the Shared Facility, except its
employees, permitted assigns or sublicensees;
-3-
<PAGE>
(4) that the Licensee will ensure that each assignee and sublicensee of
any part of the licensed premises shall covenant with the Licensor to
carry on in the Shared Facility only the business expressly permitted
by this license and to be bound by all the terms and conditions of
this license;
(18) RULES AND REGULATIONS -- to observe and comply with the rules and
regulations set forth in the attached Schedule "B" and deemed to be a part
of this license.
2. LICENSOR'S COVENANTS
The Licensor covenants with the Licensee as follows:
(1) QUIET ENJOYMENT IN COMMON WITH LICENSOR -- that the Licensee shall have
joint use and access to the Shared Facility in common with the Licensor,
free of the claims of any third parties or interests in the Shared Facility
created by the Licensor;
(2) PERFORM OBLIGATIONS UNDER LEASE -- subject to payment of the licensee fees
by the Licensee and performance of the Licensee's obligations under this
license, to perform all of the Licensor's obligations as tenant under the
Lease with respect to the Premises, (except for the obligation to obtain
consent to this License) and to pay one half of all rents due including all
costs, charges and expenses payable under the Lease with respect to the
Shared Facility;
(3)
(4) COMPLY WITH LEASE -- to comply in connection with its joint occupancy of
the Shared Facility, with all of the terms, conditions and provisos, rules
and regulations contained in the Lease, to the extent that same shall be
applicable from time to time to the Licensor's occupation of the Shared
Facility;
(5) ALTERATIONS -- not to perform any alterations or renovations to the Shared
Facility without the express written consent of the Licensee;
(6) REMOVAL OF LIENS -- to procure the immediate removal of all liens against
the Shared Facility or any part of it arising in connection with work
performed for or materials furnished to, or obligations incurred by the
Licensor;
(7) TO OBSERVE AND PERFORM TERMS AND PROVISIONS -- to observe and perform all
those terms and provisions of this license which are binding upon it and
not to do or suffer to be done anything contrary to any term or provision
of this license;
(8) RESTRICTIONS ON USE -- to use the Shared Facility only for the purpose of
the business of the Licensor presently conducted in the Shared Facility;
(9) NUISANCE -- that nothing shall be done, omitted, or permitted by the
Licensor in the Shared Facility which shall be or result in a nuisance or a
disturbance to the Licensee in its occupation of the Shared Facility;
-4-
<PAGE>
(10) MAINTENANCE AND REPAIRS -- at all times to keep the Shared Facility in a
clean and sanitary condition and to contribute one-half of the cost,
without mark-up of any repairs or maintenance required to be performed to
same, (except to the extent that some are expressly to be borne by one
party or the other pursuant hereto);
(11) TAXES -- to pay as and when they fall due all taxes and rates charged,
assessed or levied in respect of all business or other activity carried on,
in or in connection with the Shared Facility or in respect of the
Licensor's business, income or property, and taxes personal to the
Licensor;
(12) Liability insurance -- the Licensor shall throughout the term of this
license provide and keep in force for the benefit of the Licensor and the
Licensee general liability insurance in an amount of not less than
$2,000,000.00 in respect of injury to or death of any one person or
property damage; the Licensor shall promptly furnish to the Licensee copies
of insurance policies or other evidence satisfactory to the Licensee of
insurance and any renewals of it; that if the Licensor fails to insure as
required or fails promptly to furnish to the Licensee satisfactory evidence
of insurance, or of the renewal of any policy before its expiration, the
Licensee may effect such insurance for the benefit of the Licensee or the
Licensor for a period not exceeding one year, and any premium paid by the
Licensee shall be recoverable from the Licensor on demand;
(12) RULES AND REGULATIONS -- to observe and comply with the rules and
regulations set forth in the attached Schedule "B" and deemed to be a part
of this license.
3. PROVISOS
Provided always and it is agreed between the parties as follows:
(1) LICENSOR NOT LIABLE FOR LOSS OR INJURIES. Neither the Licensor nor its
agents shall be liable for any loss, injury or damage caused to persons
using the Shared Facility, to vehicles or their contents or any other
property on them, for any damage to property entrusted to its or their
employees, or for the loss of any property by theft or otherwise, and all
property kept or stored in the Shared Facility shall be at the sole risk of
the owner thereof, and neither the Licensor nor its agents shall be liable
to the Licensee for any loss, injury or damage to persons or property
resulting from any cause except as provided herein, nor shall the Licensor
or its agents be liable for any loss or damage caused by acts or omissions
of the Landlord or of any person who is not an employee or agent of the
Licensor, or for damage caused by the construction of any public or other
works.
(2) REMEDIES OF LICENSOR FOR NON-PAYMENT BY LICENSEE. If the Licensee fails to
pay any moneys payable pursuant to this license and such moneys are in
arrears and unpaid for a period of eight days after written notice, or if
the Licensee is in default in the observance of any covenant on his part
contained in this license after fifteen days written notice (or, if such
default constitutes a default by Licensor under the terms of the Lease,
after the lesser of fifteen days and the
-5-
<PAGE>
number of days permitted by the Lease to remedy such default) except a
covenant to pay money, the Licensor may cancel this license by delivering
to the Licensee notice in writing to that effect, and upon such delivery
this license shall cease, but without prejudice to any rights of the
Licensor which had accrued under this license before the cancellation.
(3) ADDITIONAL REMEDIES OF LICENSOR. In addition to the rights of the Licensor
under paragraph 3(2), if the Licensee is in default in the performance of
any covenant on his part contained in this license, except a covenant to
pay money, the Licensor may perform the covenant for the account of the
Licensee and shall not be liable for any loss or damage to the Licensee's
business caused by acts of the Licensor in so remedying the default of the
Licensee. If the Licensor at any time is compelled or elects to pay any
sum of money or to do any acts which would require the payment of any sum
of money, by reason of the failure of the Licensee to comply with any
provisions of this license, or if the Licensor is compelled or elects to
incur any expense, including legal fees, any sum so paid by the Licensor to
the extent that it shall be reasonable shall be paid by the Licensee to the
Licensor upon demand.
(4) BANKRUPTCY OF LICENSEE. If:
(a) the Licensee is adjudicated a bankrupt, or adjudged to be insolvent,
or
(b) a receiver or trustee of the Licensee's property and affairs is
appointed, or
(c) the Licensee makes an assignment for the benefit of creditors or files
a petition in bankruptcy or insolvency or for the appointment of a
receiver, or
(d) any execution or attachment is issued against the Licensee or any of
the Licensee's property under which any person other than the Licensee
attempts to take or occupy any of the Licensee's rights under this
license, and the execution or attachment is not set aside, vacated,
discharged or bonded within fifteen days after it issues, or
(e) the Licensee attempts to execute a bulk sale or remove the bulk of its
fixtures from the Shared Facility,
this license may at the option of the Licensor be cancelled, whether the
term has commenced or any moneys have been prepaid or not, by delivering to
the Licensee notice to that effect, and upon such delivery this license
shall cease, but without prejudice to any rights of the Licensor which had
accrued before the cancellation.
(5) RELOCATION -- In the event that the Landlord shall at any time exercise any
right contained in the lease, or shall request that the Licensor relocate
to other premises in the Building or in the event that the Licensor should
wish to assign, sublet, or surrender its tenancy of the Shared Facility and
to relocate to other premises (the "Relocated Premises") the following
terms and conditions shall be applicable;
(a) the Relocated Premises shall contain a similar floor area as the
Shared Facilities or, alternately, the Licensee shall be entitled to
the use and
-6-
<PAGE>
occupation of an appropriately adjusted percentage thereof
in accordance with the Licensee's requirements at such time (subject
to an appropriate adjustment in the license fee);
(b) the Licensor shall provide at its expense leasehold improvements in
the Relocated Premises to a standard equal to the leasehold
improvements in the Shared Facility;
(c) the Licensor shall pay for the actual, reasonable, direct moving costs
of the Licensee from the Shared Facility to the Relocated Premises;
and
(d) In the event of such relocation, the location of the Shared Facility
shall be amended and the Relocated Premises shall deemed to be the
Shared Facility;
(e) the Licensee shall have the right (to be exercised within thirty days
of receiving notice of such intended relocation) to terminate this
License as of the date of the intended relocation; and
(f) If the Licensor shall be vacating the Shared Facility without
surrendering its lease of the Shared Facility to the Landlord
(otherwise than by way of assignment or sublease to an assignee or
subtenant who covenants and agrees to perform the obligations of the
Licensor pursuant to this License) the Licensor shall first provide
the opportunity to the Licensee to negotiate a sublease from the
Licensor (on terms no more onerous than this agreement) of the portion
of the Shared Facility designated as the Intrinsix Premises as set
forth in Schedule C attached hereto.
The Licensor acknowledges that relocation of the Licensee would cause
disruption to the business of the Licensee, and accordingly, the Licensor
will use reasonable efforts (not involving the expenditure of money) to
avoid such relocation including, if practical, providing the Licensee with
an opportunity to negotiate a lease of the Shared Facility with the
Landlord.
(6) NO PRESUMPTION. The Licensee and the Licensor understand, agree and
acknowledge that;
(a) the license has been freely negotiated by both parties; and
(b) that in any controversy, dispute or contest over the meaning,
interpretation, validity or enforceability of this license or of any
of its terms and conditions, there shall be no inference, presumption
or conclusion drawn whatsoever against either party by virtue of that
party having drafted this license or any portion thereof.
(7) ASSIGNMENT BY LICENSOR. In the event of the assignment, sale, lease or
sublease by the Licensor of its interest in the Premises or the portion of
it containing the Shared Facility or the assignment by the Licensor of this
license or any interest of
-7-
<PAGE>
the Licensor hereunder, and to the extent that the purchaser, lessee or
assignee has assumed the covenants and obligations of the Licensor under
this license, the Licensor shall, without further written agreement, be
freed and relieved of liability upon such covenants and obligations, and
the Licensee shall from time to time at the request of the Licensor certify
or acknowledge to any mortgagee, purchaser, lessee or assignee or proposed
mortgagee, purchaser, lessee or assignee the status and validity of this
license and the state of the Licensor's and Licensee's account under it.
(8) NOTICES -- All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request demand, claim or other
communication hereunder shall be deemed duly delivered three business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable
overnight courier service, in each case to the intended recipient as set
forth below:
IF TO THE LICENSOR: Copy to:
Telexis Corporation Bulger, Young
Tower B, Suite 530 310-411 Roosevelt Avenue
555 Legget Drive Ottawa, ON K2A 3X9
Kanata, Ontario K2K 2X3
Attention: President Attention: Donald S. Duncan
If to the Licensee: Copy to:
Intrinsix Corp. Hale and Dorr LLP
33 Lyman Street 60 State Street
Westboro, MA 01581 Boston, MA 02109
Attention: President Attention: William C. Benjamin
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party
may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other
Party or Parties notice in the manner herein set forth.
(9) SUBORDINATION OF LICENSE. This license is subject and subordinate to all
mortgages, deeds of trust, or security interests which may now or at any
time after it takes effect affect the license in whole or in part or the
Licensor's interest in the Shared Facility in whole or in part, and whether
any such mortgages, deeds of trust, or security interests shall affect only
the license or the Licensor's interest in the Shared Facility or shall
affect other premises as well, and the Licensee shall at any time upon
notice from the Licensor become a licensee of a mortgagee or trustee under
any such mortgage or deed of trust upon the same terms and
-8-
<PAGE>
conditions as are herein set forth. This license shall also be subject and
subordinate to all renewals, modifications, consolidations, replacements
and extensions of any mortgages, deeds of trust, or security interests and
in confirmation of such subordination the Licensee shall execute promptly
upon request by the Licensor all certificates, instruments of postponement
or other instruments which may from time to time be requested, to give
effect thereto.
(10) CONTINUANCE OF LICENSE. If the Licensee continues to exercise the license
granted after the expiration of its term without objection by the Licensor
and without any written agreement providing otherwise, it shall be deemed
to be a licensee from month to month terminable on 30 days written notice,
and subject to the provisions of this license in so far as the same are
applicable (including fees), but it shall be lawful for the Licensor to
cancel and determine the license granted by delivering to the Licensee
notice to that effect, and upon delivery of such notice the license shall
cease without prejudice to any rights of the Licensor under this license
accrued before the cancellation.
(11) ACCESS TO SHARED FACILITY -- Each Party covenants and agrees that it will
not (and will instruct all of its employees, agents and representatives who
have access to the Shared Facility not to):
(i) interfere with the business or property of each Party, except as
expressly provided;
(ii) disclose any confidential information which was made available to it
as a result of its access to the Shared Facility pursuant to this
Agreement or
(iii) make any material alterations to the Facility without the prior
written consent of the other Party.
Either Party will be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction in the event of
any breach by the other of this proviso. The rights and remedies provided
by this proviso are cumulative and in addition to any other rights and
remedies either Party may have at law or equity.
(12) NON-WAIVER OF DEFAULT. The waiver or acquiescence by the Licensor or the
Licensee of or in any breach by the other party of any covenant or
condition shall not be deemed to be a waiver of the covenant or condition
or any subsequent or other breach of any covenant or condition of this
license.
(13) SEVERABILITY. Any term or provision of this License that is invalid or
unenforceable in any situation in Ontario shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation
or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and
-9-
<PAGE>
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this License shall be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
(14) AREA - The Licensor and the Licensee acknowledge that the Shared Facility
has an area of approximately 10,808.5 rentable square feet and that the
Premises contain an area of approximately 44,416.2 rentable square feet,
and accordingly (subject to adjustment in area pursuant to the provisions
of Lease) unless otherwise provided herein, the fee payable to the Licensor
by the Licensee shall be 12.1673% of the total occupancy costs payable by
the Licensor in connection with the Premises.
(15) INTEREST -- In the event that either of the Parties defaults in its
obligation to make any payment hereunder, the defaulting Party shall pay
the other Party interest at the prime rate in effect from time to time at
the Royal Bank of Canada for Canadian dollar loans, plus two percent.
(16) Renewal - Provided that the Licensee is not in default in the performance
of its obligations under this License, the Licensee shall have the option
(to be exercised no later than September 20, 2000) of renewing this license
for a period of one year upon the same terms and conditions as are
contained herein, save and except for this right of renewal.
(17) Waiver of Subrogation - In the event of damage to the property of the
Licensor or the Licensee from fire, lightning, explosion and all perils
defined in a standard policy of fire insurance and additional perils, the
parties agree to look solely to their respective insurers, and each party
hereby waives any right of subrogation which their respective insurers may
have against the other party, whether or not such damage results from the
negligence or other fault of the other party, its servants, agents, or
contractors.
(18) ALLOCATION OF SPACE - Unless otherwise agreed, the Licensor and the
Licensee shall have exclusive use of those portions of the Shared Facility
designated as "Telexis Premises" and "Intrinsix Premises" respectively on
Schedule C attached hereto, and shall each have free access to the portion
of the Shared Facility designated as "Common Premises" thereon.
(19) LAW. This License Agreement shall be governed by the laws of the Province
of Ontario.
(20) HEADINGS. The section headings contained in this License are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
-10-
<PAGE>
WITNESS our hands and seals.
TELEXIS CORPORATION
Per: /s/ Andre Rancourt
--------------------------------
Per: /s/ David Rothwell
--------------------------------
INTRINSIX CANADA CO.
Per: /s/ Jim Gobes
---------------------------------
-11-
<PAGE>
SCHEDULE A
Floor Plan
----------
3rd Floor, 555 Legget, Tower B
Approximately 10,808.5 rentable square feet
-12-
<PAGE>
SCHEDULE "B"
RULES AND REGULATIONS
1. CLEANLINESS AND TIDINESS. Neither the Licensor nor the Licensee shall
perform acts or carry on any practices which may injure the buildings, and each
of them shall keep the Shared Facility at all times orderly and tidy and free
from rubbish and dirt.
2. INSTALLATIONS. Neither party shall install any lighting or plumbing
fixtures, radio or television antennae, loudspeakers, sound amplifiers, or any
mechanical, electrical or other means of sound reproduction or any similar
device except with the advance written consent of the other party.
3. ALTERATIONS. Neither party shall make any alterations or additions without
the consent of the other. If alterations become necessary because of the
application of laws or government regulations to the business carried on by the
Licensee, or because of any act or default of the Licensee, or because the
Licensee has overloaded any facility, the Licensee shall make such alterations
at its own expense after first obtaining the Licensor's written approval of
plans and specifications and furnishing such indemnification against liens,
costs, damages and expenses as the Licensor may reasonably require.
4. NOISE, LIGHTS AND ODORS. Neither party shall cause or permit any unusual or
objectionable noises, lights or odours to emanate throughout and from the Shared
Facility.
5. ADVERTISING. The Licensee shall not conduct merchandising, display or
advertising in connection with its business except in a dignified manner and in
conformity with the highest standards and practices prevailing among others
dealing in the same or similar business.
6. REPUTATION. Any business conduct or practice promulgated, carried on or
maintained by the Licensee which may harm or tend to harm the business or
reputation of the Licensor, or reflect or tend to reflect unfavorably on the
Licensor or which might confuse or mislead or tend to confuse or mislead the
public, shall be immediately discontinued by the Licensee at the request of the
Licensor.
7. PARKING. If rates or charges are imposed by the Landlord for the use of
parking areas or facilities the Licensee shall pay, as an additional license
fee, its proper share of such rates and charges.
8. INSURANCE. The Licensee shall not carry or omit to do or suffer to be done
anything in or about the Shared Facility which will in any way impair or
invalidate the obligation of any policy of insurance effected by the Licensor on
the Shared Facility.
9. INCREASE IN INSURANCE PREMIUM. If the insurance rates in respect of the
building or any part of it or any tenant or any Licensee in it shall be
increased by reason of the Licensee's use of the Shared Facility, the Licensee
shall indemnify the Licensor from all costs, charges and expenses imposed upon
the Licensor as a result thereof.
-13-
<PAGE>
Exhibit 10.20
AGREEMENT
THIS AGREEMENT made effective this 1st day of October, 1994 by and between
GINTARAS SUBATIS whose principal address is 59 Dayton Street, Quincy, MA 02169
(hereinafter "Stockholder") and INTRINSIX CORPORATION, a Massachusetts
corporations, with its principal address is 33 Lyman Street, Westboro, MA 01581
(hereinafter "Company") contains the agreed upon terms and conditions under
which Stockholder shall sell back to the Company and the Company shall
repurchase all the shares of Company stock owned and held in the name of the
Stockholder as well as to define other aspects of the former and continuing
relationship between the Stockholder and the Company.
BACKGROUND
The Stockholder is currently serving as the Treasurer and as a Director of
the Company and is the owner of Forty One Thousand Eight Hundred and Ninety One
(41,891) shares of the Company's common stock, no par value ("Shares").
The Company desires to repurchase and the Stockholder desires to sell to
the Company the Shares currently owned by the Stockholder and to effect the
repurchase is willing to execute a Promissory Note and grant a security interest
in certain assets as set forth herein and in the Exhibits attached hereto.
The parties have concluded negotiations with respect to the terms of such
repurchase and the terms governing the restructuring of the Stockholder's
relationship with Company and wish to document such understandings.
NOW, THEREFORE, and in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the parties, intending to
be legally bound, hereby agree as follows:
1. Sale of Stock. The Stockholder hereby sells, transfers, and assigns all
of his right, title and interest in and to all Forty One Thousand Eight Hundred
and Ninety One (41,891) shares of stock in the Company currently held in the
name of the Stockholder for an effective price of Twelve ($12.00) Dollars per
share (of which Two ($2.00) Dollars shall be allocated to the Non-Compete
provision below) and in payment therefore, the Company agrees to execute, and
deliver to the Stockholder the Promissory Note attached hereto as Exhibit A. The
Stockholder represents that the foregoing is all of the shares and options as to
which he has any interest.
2. Security. As security for the payment of such Promissory Note, the
Company agrees to execute the UCC Financing Statement and Security Agreement
attached hereto as Exhibit B.
3. Resignation. The Stockholder will execute a resignation of his position
as Treasurer of the Company, a copy of which is attached hereto as Exhibit C and
the Company shall execute and file with the Secretary of State of the
Commonwealth of Massachusetts a Change of Officers and Directors form attached
hereto as Exhibit D.
<PAGE>
4. Non-Competition. In consideration of the repurchase of the Shares, and
the Stockholder's resignation as Treasurer of the Company, the Stockholder
agrees that so long as the payments under the Note are made, and until the Note
is either paid in full or an event of default has occurred, not to accept
employment with any entity or engage in any activities, directly or indirectly,
which will be competitive with the current business or with demonstrably
anticipated business of the Company as of the date hereof. The foregoing will
not prevent the Stockholder from taking an equity position in any company which
may be involved in providing similar activities as part of a normal investment
program.
5. Indemnification. In consideration of the Stockholder's resignation as
an Officer of the Company, the Company agrees to indemnify and save harmless the
Stockholder from any and all claims, demands, cause of action, or proceedings,
including reasonable attorney fees based on any actions or inactions while the
Stockholder was listed as Treasurer of the Company.
6. Director. So long as the Promissory Note is in effect, the Company
shall retain the Stockholder as a Director of the Company.
7. Governing Law. This Agreement shall be governed exclusively by the laws
of the Commonwealth of Massachusetts.
8. Notices. All notices, requests, demands, or directions hereunder shall
be in writing and deemed effective three (3) business days after sent by
registered mail, postage prepaid, or Federal Express addressed as follows:
(a) To Stockholder: Gintaras Subatis
59 Dayton Street
Quincy, MA 02169
(b) With copy to: John G. Ganick, Esq.
Vacovec, Mayotte & Singer
255 Washington Street, Suite 340
Newton, MA 02158
(c) To Company: Intrinsix Corporation
ATT: President
33 Lyman Street
Westboro, MA 01581
or to such other address as may be stated by one party to the other in a notice
given in the same manner herein provided.
9. Waiver. No failure by either party to take any action or assert any
right hereunder shall be deemed to be a waiver of such right in the event of the
continuation or repetition of the circumstances giving rise to such right.
2
<PAGE>
10. Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be contrary to law, the remaining provisions of this
Agreement will remain in full force and effect.
11. Successors. This Agreement shall be binding on and shall inure to the
benefit of the parties hereto as well as their respective heirs, executors,
successors and assigns.
12. Assignment. Neither party shall have the right to assign or otherwise
transfer its rights or obligations under this Agreement except with the prior
written consent of the other party.
13. Entire Agreement. This Agreement, including the Exhibits, constitutes
the entire agreement of the parties with respect to the subject matter hereof,
and supersedes all previous agreements be and between the parties as well as all
proposals, oral or written, and all negotiations, conversations or discussions
heretofore had between the parties related to the subject matter. Any
modifications or additions to this Agreement must be in writing and signed by
both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
STOCKHOLDER
BY: /s/ Gintaras R. Subatis
--------------------------------
DATE: 11/22/94
---------
COMPANY
BY: /s/ Jim Gobes
--------------------------------
DATE: 11/22/94
---------
3
<PAGE>
Exhibit 10.21
PROMISSORY NOTE
$502,692.00 October 1, 1994
FOR VALUE RECEIVED, INTRINSIX CORPORATION, 33 Lyman Street, Westboro,
Massachusetts 01581, ("Maker"), promises to pay to the order of GINTARAS
SUBATIS, of 59 Dayton Street, Quincy, Massachusetts 02169, the principal sum of
FIVE HUNDRED TWO THOUSAND SIX HUNDRED AND NINETY TWO 00/100 ($502,692.00)
DOLLARS, with interest thereon from the date hereof, until paid, at a rate equal
to Eight (8%) Percent per annum.
This Note shall be payable in Ninety Six (96) monthly installments of
SEVEN THOUSAND ONE HUNDRED AND SIX 40/100 ($7,106.40) DOLLARS, commencing
October 1st, 1994 and on the first day of each calendar month thereafter until
September 1st, 2002 or until all principal and interest due hereunder are fully
paid.
The undersigned agrees to pay all costs and expenses, including all
attorneys' fees, for the collection of this Note upon default, and to pay
interest on all amounts not paid when due (pursuant to the terms hereof, by
acceleration or otherwise) at the rate of one and one-half (1.5%) percent per
month of the overdue payment until paid in full. All payments shall be made at
such place or to such person as the Holder may from time to time designate in
writing.
At the option of the Holder, this Note shall become immediately due and
payable upon notice or demand of the Holder, in the event that any of the
following events shall have occurred and not been cured within fifteen (15) days
thereafter: (1) Default in any payment or in the performance or observance of
the terms or conditions of a certain Stock Repurchase Agreement by and between
the undersigned and Gintaras Subatis of even date herewith (the "Agreement");
(2) Default in connection with the Security Agreement and Financing Statement
(including amendments and extensions thereof) securing this Note; (3) Such a
change in the management or ownership of Maker which causes the Holder to
believe that his risks of non-performance are increased or the sale of all or
substantially all of the assets of the Maker; (4) If the Maker makes an
assignment for benefit of creditors, or if a receiver shall be appointed or if a
petition in bankruptcy or other similar proceeding under any law for relief of
debtors shall be filed by or against the Maker; or (5) The current principal
officers of the Maker become owners or principals in a company offering services
in competition with those currently or reasonably anticipated to be offered by
the Maker.
Any notice of default required under this Note will be given by the Holder
to the Maker by delivering it or mailing it by first class mail to the Maker's
principal place of business or at a different address if Maker gives the Holder
a notice of a different address.
Each and every party liable hereon, either as maker, endorser, guarantor,
surety or otherwise, hereby: (1) waives presentment, demand, protest and notice
of every kind and description and specifically assents to any and all extensions
and postponements of the time of payment and all other indulgences and
forbearances which may be granted by the Holder to any party liable hereon; (2)
agrees to any substitution, exchange, release, surrender or other
<PAGE>
delivery of any collateral held hereunder and to the addition or release of any
other party or person primarily or secondarily liable; and (3) agrees that the
obligations and agreements of all such parties shall be joint and several.
This Note may be subordinated to other Promissory Notes or Credit Lines
from an institutional lender only upon the written consent of the Holder, which
will not be unreasonably withheld. Failure to obtain the Holder's prior written
consent shall constitute a default and, at the Holder's option, Holder may
demand immediate payment in full of all sums due under this Note. If Holder
exercises its option to require immediate payment in full, the Holder shall
notify Maker as herein provided.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
Holder, nor shall any delay, omission or waiver on any one occasion be deemed as
a bar to or waiver of the same or any other right on any future occasion.
All property (including tangible, intangible, real, personal, and other
property of every kind, nature and description) and security delivered to or
held by the Holder as security for the payment of this Note to the Holder or any
party liable hereon, either as maker, endorser, guarantor, surety or otherwise,
or for which any such party is liable to the Holder, and all guaranties and
endorsements hereof shall be deemed (insofar as it is legally possible to do so
by agreement of the undersigned) to be security for and guaranties and
endorsements assuring the payment of this Note and all other said notes and the
performance of all said obligations and liabilities of all such parties liable
thereon to the Holder whether now existing or hereafter arising, due or to
become due, absolute or contingent, joint or several, primary or secondary.
No single or partial exercise of any power hereunder or under the
Agreement, any security agreement securing this Note shall preclude other or
future exercise thereof or the exercise of any other power. The Holder hereof
shall at all times have the right to proceed against any portion of the security
held therefor in such order and in such manner as the Holder may see fit,
without waiving any rights with respect to any other security.
All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts, and this Note is executed as and shall have the
effect of a sealed instrument. Notwithstanding any provision herein or in any
instrument now or hereafter securing this Note, the total liability for payments
in the nature of interest shall not exceed the limitations now imposed by the
applicable laws of the state whose laws are controlling on the subject as shall
be determined by final order of a court of competent jurisdiction.
This Note may be prepaid in whole or part at any time by the maker without
penalty.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note, by its
President, duly authorized this 22nd day of November, 1994.
Witness:
/s/ Mark A. Beal INTRINSIX CORPORATION
- ---------------------
BY: /s/ Jim Gobes
------------------------------
TITLE: President
----------------------------
<PAGE>
Exhibit 10.22
SECURITY AGREEMENT
INTRINSIX CORPORATION. of 33 Lyman Street, Westboro, Massachusetts 01581,
(hereinafter called "Debtor"), hereby grants to GINTARAS SUBATIS, 59 Dayton
Street, Quincy, Massachusetts 02169 (hereinafter called "Secured Party"), to
secure the payment and performance of all obligations of Debtor to Secured
Party, whether direct or indirect, absolute or contingent, now due or to become
due, now existing or hereinafter arising, (hereinafter called the
"Obligations"), a security interest in the following personal property of Debtor
and any and all additions, substitutions, accessions and proceeds thereto or
thereof (all of the same being hereinafter called the "Collateral"):
A. All goods, now existing or hereafter acquired or arising, including
all machinery, equipment, furniture, fixtures, and inventory
(including all goods, merchandise and other personal property, now
owned or hereafter acquired by the Debtor, which are held for sale
or lease or are furnished under a contract of service or are raw
materials, work in process or materials used or consumed in the
Debtor's business).
B. All present and future Accounts Receivable, contract rights, all
interest in goods as to which an Account Receivable shall have
arisen, all other rights to the payment of money, chattel paper,
instruments, tax refunds, insurance premiums, rebates or insurance
proceeds of any nature, rights as Lessee under Leases of equipment,
choses in action, computer programs, data processing software,
documents and general intangibles, now existing or hereafter
acquired or arising, including, without limiting the generality of
the foregoing, good will, trade secrets, customer lists, trade
names, trade marks and patents. The claim of the Secured Party to
the proceeds hereunder shall not be deemed a consent to the sale or
other disposition of any of the above Collateral.
C. Proceeds and products of all of the foregoing.
Debtor hereby warrants and covenants that:
1. The Collateral and Debtor's records with respect to its Accounts
Receivable will be kept at Debtor's address shown above until such
time as written consent to a change of location is obtained from
Secured Party.
2. Except for the security interest granted hereby, and the items
listed on Schedule A, Debtor is the owner of the Collateral free
from all encumbrances and will defend the same against the claims
and demands of all persons. Debtor will not pledge, mortgage or
create, or suffer to exist, a security interest in the Collateral in
favor of any person other than Secured Party, and will not sell or
transfer the Collateral or any interest to except any person other
than the Secured Party, and will not sell or transfer the Collateral
or any interest therein except in the ordinary course of its
business without the prior written consent of Secured Party.
<PAGE>
3. The Collateral shall remain personal property irrespective of the
manner of its attachment to any real estate. If the Collateral is
attached to real estate prior to the perfection of the security
interest granted hereby, Debtor will on demand of Secured Party
furnish to Secured Party a disclaimer or disclaimers, signed by all
persons having an interest in the real estate, of any interest in
the Collateral which is prior to Secured Party's interest. Debtor
will notify Secured Party in writing of any intended sale, mortgage
or conveyance of any real estate to which the Collateral is at any
time attached, and will give written notice of the terms and
conditions of this Agreement to any prospective purchaser,
mortgagee, grantee or other transferee of the real estate or any
interest therein.
4. Debtor will immediately notify Secured Party in writing of any
change in address from that shown in this Agreement, shall at all
reasonable times and from time to time allow Secured Party, by or
through any of its officers, agents, attorneys or accountants to
examine inspect or make extracts from Debtor's books and records,
and shall do, make, execute and deliver all such additional and
further acts, things, deeds, assurances, and instruments as Secured
Party may require more completely to vest in and assure to Secured
Party its rights hereunder or in any of the Collateral.
5. Debtor will keep the Collateral at all times insured by such
insurance as Secured Party may from time to time require, and in any
event and without specific request by Secured Party, will insure the
Collateral against, fire, including so-called extended coverage,
theft, and, in the case of any motor vehicles, collision, all
insurance to be with such insurance companies as Secured Party shall
approve, with loss thereon to be payable to Secured Party and Debtor
as their respective interests may appear. All policies of insurance
shall provide for not less than ten days notice of cancellation or
change in form to Secured Party and, if requested by Secured Party,
shall be delivered to and held by it until all of the Obligations
have been fully performed.
6. Debtor will keep the Collateral in good order and repair, and will
not use the same in violation of law or any policy of insurance
thereon. Secured Party may inspect the Collateral at any reasonable
time, wherever located. Debtor will pay promptly when due all taxes
and assessments upon the Collateral or for its use or operation or
upon this Agreement.
7. In its discretion, Secured Party may discharge taxes and other
encumbrances at any time levied or placed on the Collateral, make
repairs, thereof and place and pay for insurance thereon and pay any
necessary filing fees. Debtor agrees to reimburse Secured Party on
demand for any and all expenditures so made, and until paid the
amount thereof shall be a debt secured by the Collateral. Secured
Party shall have no obligation to Debtor to make any such
expenditures nor shall the making thereof relieve Debtor of any
default. Secured Party may act as attorney for Debtor in making,
adjusting and settling claims under any insurance covering the
Collateral.
2
<PAGE>
8. Debtor may have possession and use of the Collateral until default.
Upon the happening of any of the following events or conditions,
namely: (a) default in the payment or performance of any of the
Obligations, of any liability or obligation to Secured Party of any
endorser, guarantor or surety of or for any of the Obligations, or
of any covenant or liability contained or referred to herein or in
any note, instrument, document or Agreement evidencing any
Obligations; (b) any representation or warranty of Debtor in this
Agreement or made to Secured Party by Debtor to induce it to enter
into this Agreement or to extend credit terms to Debtor proving
false or erroneous in any material respect; (c) materially
significant loss, theft, material damage, destruction, sale or
encumbrance of or to the Collateral, or the making of any levy,
thereon or seizure or attachment thereof by legal process; (d)
death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver of any part of the property of,
assignment for the benefit of creditors by, or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against
Debtor, or any endorser, guarantor or surety of or for any
Obligation; (e) such a change in the management or ownership of
Debtor as in the opinion of Secured Party increases its risk;
thereupon, and as long as such default continues, Secured Party may
upon notice or demand declare all of the Obligations to be
immediately due and payable, and Secured Party shall then have in
any jurisdiction where enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code of Massachusetts, including
without limitation thereto the right to take immediate possession of
the Collateral, and for the purpose Secured Party may, so far as
Debtor can give authority therefor, enter upon any premises on which
the Collateral, or any part thereof, may be situated and remove the
same therefrom. Debtor will upon demand make the Collateral
available to Secured Party at a place and time designed by Secured
Party which is reasonably convenient to both parties. Secured Party
will give Debtor at least five days' prior written notice of the
time and place of any public sale of the Collateral or of the time
after which any private sale thereof is to be made. From the
proceeds of the sale, Secured Party shall be entitled to retain (i)
all sums secured hereby, (ii) its reasonable expenses of retaking,
holding, preparing for sale and selling or (iii) reasonable legal
expenses incurred by it in connection herewith and with such sale.
No waiver by Secured Party of any default shall be effective unless
in writing nor operate as a waiver of any other default or of the
same default on another occasion. Any notice of default required
under this Security Agreement will be given by the Secured Party to
the Debtor by delivering it or mailing it by first class mail to the
Debtor's principal place of business or at a different address if
Debtor gives the Secured Party a notice of a different address.
9. Debtor waives, protest, notice of acceptance of this Agreement,
notice of loans made, credit extended, collateral received or
delivered or other action taken in reliance hereon and all other
demands and notices of any description other than the notice of
default previously referred to in Paragraph 8 above. With respect
both to the Obligations and the Collateral, Debtor assents to any
extension or
3
<PAGE>
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, to the addition or
release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement,
compromising or adjusting of any thereof, all in such manner and at
such time or times as Secured Party may deem advisable. Secured
Party shall have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of
rights against prior parties, nor as to the preservation of any
right pertaining thereto beyond the safe custody thereof. Secured
Party may exercise its rights with respect to the Collateral without
resorting or regard to other collateral or sources of reimbursement
for liability. Secured Party shall not he deemed to have waived any
of its rights upon or under the Obligations or the Collateral unless
such wavier be in writing and signed by Secured Party. No delay or
omission on the part of Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any
right on any future occasion. All rights and remedies of Secured
Party on the Obligations or the Collateral, whether evidenced hereby
or by any other instrument or paper, shall be cumulative and may be
exercised separately or concurrently.
10. This Agreement and all rights and obligations hereunder, including
matters of construction, validity and performances, shall be
governed by the law of Massachusetts. This Agreement is intended to
take effect as a sealed instrument.
11. Only in the event of default and after notice as provided herein,
the Debtor shall, at the request of the Secured Party, notify
account debtors of the security interest of the Secured Party in any
account and the Secured Party may, itself, at any time, so notify
account debtors. Until the Secured Party requests that debtors on
Account Receivables of the Debtor be notified of the Secured Party's
security interest, the Debtor shall continue to collect them. The
Secured Party may require Debtor to hold the proceeds received from
collection, in trust for the Secured Party, without commingling the
same with other funds of the Debtor, and to turn the same over to
the Secured Party immediately upon receipt, in the identical form
received. Insofar as Collateral shall consist of Accounts Receivable
or Insurance Policies, instruments, chattel paper, choses in action
or the like, the Secured Party may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose or realize upon
Collateral, as the Secured Party may determine, and, for the purpose
of realizing the Secured Party's rights therein, the Secured Party
may receive, open and dispose of mail addressed to the Debtor and
endorse Notes, checks, drafts, money orders, documents of title or
other evidences of payment, shipment or storage or any form of
collateral on behalf of and in the name of the Debtor.
12. In the event, at any time, whether prior or concurrently or
subsequently to the execution of this Security Agreement, the
Debtor, or any person, firm, corporation or any entity has
guaranteed the Debtor's obligation to the Secured Party and has
executed and delivered to the Secured Party a Real Estate Mortgage
to secure the payment and performance of any Obligation to the
Secured Party, whether direct
4
<PAGE>
or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising (all of the foregoing, including, said
Notes and Guarantees, being hereinafter called the "Obligation"),
then, and in that event, the Debtor agrees that a default under the
provisions of said Real Estate Mortgage, or other Obligation, shall
constitute a breach of this Security Agreement and that all rights,
remedies and paper granted to the Secured Party in this Security
Agreement and to the Secured Party under said Real Estate Mortgage,
Promissory Note and Guaranty shall be cumulative and may be
exercised singly, jointly or concurrently and in any order and
sequence.
In the event of the Secured Party's exercising any of its rights and
remedies of a Secured Party under the Uniform Commercial Code of Massachusetts,
or under any Real Estate Mortgage given to the Secured Party by the Debtor, or
by any person, firm, corporation or other entity who has guaranteed the Debtor's
Obligations to the Secured Party, the Holder of this Security Agreement and/or
any Real Estate Mortgage or Promissory Note shall have the right to conduct a
sale under this Security Agreement and to foreclose any such Real Estate
Mortgage or Promissory Note, singly, jointly or concurrently, and in such order
as, in the opinion of the Holder thereof, it deems best to protect the interest
of said Secured Party. The Secured Party, in the event of a sale under this
Security Agreement or a Foreclosure Sale under any such Mortgage or Promissory
Note, shall have the right to offer all, or a portion, of the secured assets
hereunder and all, or a portion, of the real estate for sale, separately, or as
an entirety, or in any combination thereof, and the proceeds of such sale
accounted for in one account, without distinction between the items of security,
or without assigning to them any proportion of such proceeds, the Debtor hereby
waiving the application of any doctrine of marshaling.
IN WITNESS WHEREOF, Debtor has executed this Agreement on this 22nd day of
November, 1994.
/s/ Jim Gobes
----------------------------------
WITNESS:
/s/ Mark A. Beal
- -----------------------------
5
<PAGE>
Exhibit 10.23
SEVA TECHNOLOGIES, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Seva Technologies, Inc., a California corporation.
(h) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
<PAGE>
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the, case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
- 2 -
<PAGE>
(r) "Option Agreement" means a written or electronic agreement between
the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1997 Stock Plan.
(x) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of a Stock Purchase Right under Section 11 below.
(y) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(z) "Service Provider" means an Employee, Director or Consultant.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "Stock Purchase Right" means a right to purchase Common
Stock pursuant to Section 11 below.
(cc) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 8,000,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock
- 3 -
<PAGE>
are repurchased by the Company at their original purchase price, such Shares
shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and,
in the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or Stock Purchase
Right or the Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having
a Fair Market Value equal
- 4 -
<PAGE>
to the amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
- 5 -
<PAGE>
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon exercise
of an Option shall be such price as is determined by the Administrator, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any other Service Provider, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
- 6 -
<PAGE>
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. Except in the case of Options granted to Officers, Directors
and Consultants, Options shall become exercisable at a rate of no less than 20%
per year over five (5) years from the date the Options are granted. Unless the
Administrator provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 12 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement).
- 7 -
<PAGE>
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (of at least six (6) months) to the extent that the Option is vested
on the date of death (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement) by the Optionee's estate or by
a person who acquires the right to exercise the Option by bequest or
inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically of the terms, conditions and restrictions related to
the offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer. The terms of the offer shall comply in all respects with
Section 260.140.42 of Title 10 of the California Code of Regulations. The offer
shall be accepted by execution of a Restricted Stock purchase agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or disability). The
purchase
- 8 -
<PAGE>
price for Shares repurchased pursuant to the Restricted Stock purchase agreement
shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at such rate as the Administrator may determine. Except with
respect to Shares purchased by Officers, Directors and Consultants, the
repurchase option shall in no case lapse at a rate of less than 20% per year
over five years from the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have rights equivalent to those of a shareholder and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have the right to
exercise his or her Option until fifteen (15) days prior to such transaction as
to all of the Optioned Stock covered thereby, including Shares as to which the
Option would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase
- 9 -
<PAGE>
option applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall (i) be assumed,
(ii) exchanged for an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation or (iii)
terminate, all as provided for herein. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, to the extent that 20% of the Optioned Stock has not already vested,
Optionee shall vest in and have the right to exercise the Option or Stock
Purchase Right as to 20% of the Optioned Stock. If 20% of an Option or Stock
Purchase Right becomes vested and exercisable, as provided for in the preceding
sentence, in lieu of assumption or substitution in the event of a merger or sale
of assets, the Administrator shall notify the Optionee in writing or
electronically that 20% of the Option or Stock Purchase Right shall be
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. All Optioned Stock that is not assumed or accelerated as provided for
herein, shall terminate and be of no further force and effect. For the purposes
of this paragraph, the Option or Stock Purchase Right shall be considered
assumed if, following the merger or sale of assets, the option or right confers
the right to purchase or receive, for each Share of Optioned Stock subject to
the Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
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<PAGE>
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option unless the exercise of such Option and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more
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<PAGE>
Options or Stock Purchase Rights outstanding, and, in the case of an individual
who acquires Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. The Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF INTRINSIX CORP.
Jurisdiction of Name(s) Under Which
Subsidiary Organization Business is Conducted
---------- --------------- ---------------------
Intrinsix Canada Co. Nova Scotia, Canada Intrinsix
SEVA Technologies, Inc. Massachusetts Intrinsix
<PAGE>
Exhibit 23.2
The consolidated financial statements give effect to the completion of a 3-for-2
stock split of the Company's outstanding common stock which will take place
prior to the effective date of the offering. The following consent is in the
form which will be provided by Deloitte & Touche LLP upon the completion of the
3-for-2 stock split of the Company's outstanding common stock described in Note
2 to the consolidated financial statements and assuming that from March 31, 2000
to the date of such completion no other material events have occurred that would
affect the consolidated financial statements or require disclosure therein.
"INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
Intrinsix Corp.
Westboro, Massachusetts
We consent to the use in this Registration Statement of Intrinsix Corp. on Form
S-1 of our report dated March 17, 2000 (April , 2000 as to the effects of the
stock split described in Note 2) (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the restatement of the
consolidated financial statements to reflect a merger accounted for as a pooling
of interests), appearing in the Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
Boston, Massachusetts
, 2000"
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 31, 2000
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Intrinsix Corp.
on Form S-1 of our report dated March 29, 2000 (relating to the statement of
revenues and direct expenses of the Design Division of Telexis Corporation) for
the year ended December 31, 1999, appearing in the Prospectus, which is a part
of this Registration Statement, and to the reference to us under the heading
"Experts" in such Registration Statement.
Deloitte & Touche LLP
Chartered Accountants
Ottawa, Ontario
April 3, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF INTRINSIX CORP. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 235,504 231,302
<SECURITIES> 0 0
<RECEIVABLES> 2,504,237 3,462,033
<ALLOWANCES> 15,000 133,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,959,755 4,850,279
<PP&E> 2,416,858 3,066,368
<DEPRECIATION> 1,115,618 1,716,843
<TOTAL-ASSETS> 4,378,640 7,633,413
<CURRENT-LIABILITIES> 1,751,154 3,214,462
<BONDS> 236,375 1,374,901
0 0
0 0
<COMMON> 226,510 272,798
<OTHER-SE> 2,160,583 3,130,464
<TOTAL-LIABILITY-AND-EQUITY> 4,378,640 7,633,413
<SALES> 23,474,943 30,656,863
<TOTAL-REVENUES> 23,474,943 30,656,863
<CGS> 14,176,582 18,500,931
<TOTAL-COSTS> 22,474,062 29,043,480
<OTHER-EXPENSES> (31,865) (19,404)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 49,303 35,345
<INCOME-PRETAX> 983,443 1,597,442
<INCOME-TAX> 382,709 669,331
<INCOME-CONTINUING> 600,734 928,111
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 600,734 928,111
<EPS-BASIC> 0.06 0.09
<EPS-DILUTED> 0.06 0.08
</TABLE>
