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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered into as
of the 28th day of February, 2000, by and among TRW Milliwave Inc., a California
corporation (the "Company"), TRW Inc., an Ohio corporation ("TRW"), and Endgate
Corporation, a Delaware corporation, as surviving company ("Surviving Company").
RECITALS
WHEREAS, Surviving Company, TRW and the Company have determined that it is in
the best interests of each for Surviving Company to acquire the Company upon the
terms and subject to the conditions set forth herein; and
WHEREAS, the Company is the wholly-owned subsidiary of TRW; and
WHEREAS, Surviving Company will merge with the Company, with Surviving Company
as the surviving entity;
NOW, THEREFORE, for and in consideration of the premises and covenants set forth
below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Surviving Company, TRW and the
Company hereby agree as follows:
ARTICLE 1
THE MERGER
1.01. THE MERGER. On the Closing Date (as defined in Section 2.01
hereof), upon and subject to the terms and conditions set forth in this
Agreement, the Company shall be merged with and into Surviving Company, and the
separate corporate existence of the Company shall thereupon cease (the
"Merger"). Surviving Company shall be the surviving corporation in the Merger
and shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of Surviving Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger, except as set forth in this Agreement. The Merger shall have the effects
specified in the Delaware General Corporation Law (the "GCL") and the California
General Corporation Law ("CAGCL").
1.02. TAX EFFECTS. This Agreement is intended to be (a) a "plan of
reorganization" and the transactions contemplated hereby are intended to be a
tax free reorganization under section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"); and (b) a "plan of recapitalization" and the
Conversion (as defined in Section 4.03 hereof) is intended to constitute a
recapitalization under Section 368(a)(1)(E) of the Code.
1.03. ALTERNATIVE STRUCTURE. Promptly after the execution of this
Agreement, the parties will jointly consider the desirability of effecting the
business combination contemplated hereby through a reverse triangular merger
resulting in the same post-Merger ownership of Surviving Company's capital stock
as contemplated hereby but involving a merger of a newly-
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formed wholly-owned subsidiary of Surviving Company with and into the
Company, with the Company surviving as a wholly-owned subsidiary of Surviving
Company, rather than the merger of the Company with and into Surviving Company
as presently contemplated hereby. If the parties determine this alternative
structure to be mutually desirable, Surviving Company will organize the
necessary subsidiary and the parties will amend this agreement to add the
subsidiary as a party and to make such other changes (which are not expected to
be material) as may be necessary or desirable to reflect the alternative
structure.
ARTICLE 2
CLOSING; EFFECTIVE TIME
2.01. CLOSING DATE, CLOSING. The closing of the Merger shall take place
(i) at the offices of Cooley Godward LLP as promptly as practicable following
the satisfaction of all of the conditions to closing set forth in Article 11
hereof or (ii) at such other place and time and/or on such other date as the
Company and Surviving Company may hereafter agree in writing. The date of the
closing of the Merger and such closing are, respectively, hereinafter referred
to as the "Closing Date" and the "Closing."
2.02. EFFECTIVE TIME. As soon as practicable following the Closing, the
Company and Surviving Company will cause a certificate of merger to be executed
and filed with (i) the Secretary of State of the State of Delaware as provided
in the GCL and (ii) the Secretary of State of the State of California as
provided in Chapter 11 of the CAGCL. The Merger shall become effective on the
date on which (i) a certificate of merger for the Merger of the Company with and
into Surviving Company shall have been filed with the Delaware Secretary of
State pursuant to Section 252 of the GCL and (ii) the Certificate of Merger has
been duly filed with the Secretary of State of the the State of California and
such time is hereinafter referred to as the "Effective Time".
ARTICLE 3
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION; OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.01. CERTIFICATE OF INCORPORATION. The Amended and Restated
Certificate of Incorporation (the "Certificate") of Surviving Company, in the
form attached hereto as Exhibit 3.01 and which Certificate shall change the name
of Surviving Company to "Endwave Corporation", shall be the Certificate of
Surviving Company at and after the Effective Time, until duly amended in
accordance with the terms thereof and the GCL. Surviving Company agrees that all
rights to indemnification now existing in favor of any current or former
officers and directors of the Company as provided in the charter documents of
the Company as of the date hereof and in the Agreement and Plan of Merger, dated
as of as of the 5th day of September, 1997, by and between MilliWave
Technologies, Corp. and TRW shall survive the Merger and shall continue in full
force and effect from and after the Effective Time in accordance with their
terms, as such terms exist on the date hereof.
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3.02. BYLAWS. The Amended and Restated Bylaws of Surviving
Company, in the form attached hereto as Exhibit 3.02, shall be the Bylaws of
Surviving Company at and after the Effective Time, until duly amended in
accordance with the terms thereof and the GCL.
3.03. OFFICERS AND DIRECTORS. The following directors of Surviving
Company and the following officers of Surviving Company shall be the directors
and officers of Surviving Company at and after the Effective Time, until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with Surviving Company's
Certificate and Bylaws:
Officers:
Ed Keible President and Chief Executive Officer
Don Dodson Chief Operating Officer
Doug Lockie Executive Vice President
John Rosenberg Executive Vice President
Julie Biagini Vice President--Finance and Secretary
Jim Bybokas Vice President--Marketing and Sales
Lionel Kirton Vice President--Operations
John Mikulsky Vice President--Product Engineering
Cliff Mohwinkel Vice President and Chief Technology Officer
Mike Roush Vice President---Manufacturing
Directors:
Tim Hannemann
Wes Bush
Ed Keible
Esfandiar Lohrasbpour
Robert Pavey
ARTICLE 4
CONVERSION OF SHARES
4.01. CONVERSION OF COMPANY COMMON. Shares of the common stock of
the Company shall be converted in the Merger as follows: at the Effective Time,
all of the shares of the Company's common stock, no par value (the "Company
Common"), issued and outstanding immediately prior to the Effective Time shall
by virtue of the Merger and without any action on the part of the holder
thereof, be converted in the aggregate into a total of 55,852,228 shares of the
Series T-1 Preferred Stock, par value $0.001 per share, of the Surviving Company
(the "TRW Shares"). The TRW Shares shall represent at the Closing 52.6% of the
outstanding equity of Surviving Company (on an undiluted, but as converted into
common stock, basis, taking into account only issued and outstanding common and
preferred shares of Surviving Company, warrants that are exercisable into
preferred shares of
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Surviving Company and indebtedness of Surviving Company that is
convertible into preferred shares of Surviving Company, but not taking into
account common stock repurchases and stock option exercises occurring between
the date hereof and the Closing); to the extent that the number of shares set
forth in the preceding sentence does not represent this percentage, the number
of shares of Series T-1 Preferred Stock that comprise the TRW Shares shall be
adjusted so that the TRW Shares do represent such percentage at Closing. In
light of the foregoing automatic adjustment provision, the Company and TRW agree
that this Agreement will be amended upon Surviving Company's request to reflect
changes or corrections in Surviving Company's pre-Merger capitalization and/or
the exchange ratios applicable in the Conversion (as defined below). At the
Closing, Surviving Company will present TRW a stock certificate representing the
TRW Shares.
4.02. NO EFFECT ON SURVIVING COMPANY STOCK. Shares of the common stock
of Surviving Company shall remain outstanding and be unaffected by the Merger.
4.03. CONVERSION OF SURVIVING COMPANY PREFERRED STOCK. Shares of
the preferred stock of Surviving Company shall be converted in the Merger at the
Effective Time as follows (collectively, such conversions shall be referred to
herein as the "Conversion"):
(a) all of the shares of the
Company's Series A Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exercise or conversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 1,705,000 shares of the
Series E-1 Preferred Stock, par value $0.001 per
share, of Surviving Company;
(b) all of the shares of the
Company's Series B Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or coversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 3,465,610 shares of the
Series E-2 Preferred Stock, par value $0.001 per
share, of Surviving Company;
(c) all of the shares of the
Company's Series C Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or conversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
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virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 4,033,361 shares of the
Series E-3 Preferred Stock, par value $0.001 per
share, of Surviving Company;
(d) all of the shares of the
Company's Series D Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or conversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 5,001,538 shares of the
Series E-4 Preferred Stock, par value $0.001 per
share, of Surviving Company;
(e) all of the shares of the
Company's Series E Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or coversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 9,951,752 shares of the
Series E-5 Preferred Stock, par value $0.001 per
share, of Surviving Company;
(f) all of the shares of the
Company's Series F Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or coversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 14,609,415 shares of the
Series E-6 Preferred Stock, par value $0.001 per
share, of Surviving Company; and
(g) all of the shares of the
Company's Series G Preferred Stock, par value $0.001
per share, issued and outstanding (including, for
purposes of determining the per-share exchange ratio,
any such shares issuable upon exchange or coversion
of options, warrants or convertible securities)
immediately prior to the Effective Time shall by
virtue of the Merger and without any action on the
part of the holder thereof, be converted in the
aggregate into a total of 10,197,029 shares of the
Series E-7 Preferred Stock, par value $0.001 per
share, of Surviving Company.
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4.04. NO FRACTIONAL SHARES. No fractional shares of the Preferred
Stock of Surviving Company will be issued in connection with the conversions
described in Sections 4.01 and 4.03 above and no certificate therefor will be
issued. In lieu of such fractional shares, if any, any holder of Surviving
Company Preferred Stock (as defined in Section 7.01) who would otherwise be
entitled to a fraction of a share of the Series T-1 Preferred Stock or the
Series E-1 Preferred Stock through Series E-7 Preferred Stock of Surviving
Company shall, upon surrender of his certificate or certificates representing
preferred stock of Surviving Company, be paid an amount in cash (without
interest) determined by multiplying the fraction by $2.53.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND TRW
Each of the Company and TRW hereby represents and warrants to Surviving
Company that at the time of this Agreement and as of the Closing Date except as
set forth in the correspondingly numbered Sections of the Company Disclosure
Schedule, attached hereto (the "Company Disclosure Schedule"):
5.01. CAPITALIZATION OF THE COMPANY. The authorized capital stock
of the Company consists of 300,000 shares of Company Common, of which 100 shares
are issued and outstanding as of the date hereof (the "Shares"). All Shares are
beneficially owned and held by TRW. All of the Shares are validly issued, fully
paid, and nonassessable and have not been issued in violation of the preemptive
rights of any person, and have been issued in accordance with applicable state,
federal and foreign securities laws. There are no existing options, warrants,
rights, calls, or commitments of any kind obligating the Company to issue or
otherwise transfer any of its capital stock. Except as described in this
Agreement, there are no contracts, commitments, agreements, understandings,
arrangements or restrictions to which the Company is a party or by which it is
bound relating to any shares of capital stock or other securities of the
Company, whether or not outstanding.
5.02. ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority and any
necessary governmental approval to own, lease and operate its properties and to
carry on the design, development, manufacture, marketing and sale of radio and
millimeter wave frequency communications equipment (the "Company Business") to
do business in each jurisdiction in which the character of the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a Company Material Adverse Effect (it being understood that,
for purposes of this Agreement, any state of facts, change, event or inaccuracy
(or the effects thereof) will be deemed to have and constitute a Company
Material Adverse Effect if it has had, or would reasonably be expected to have,
a material adverse effect on the business, assets, financial condition or
results of operations of the Company) or prevent or delay the consummation of
the transactions contemplated hereby.
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5.03. FINANCIAL STATEMENTS. Attached hereto as Exhibit 5.03(a) are
the Company's unaudited balance sheet, as of December 31, 1999, and the related
unaudited statement of earnings for the year then ended (hereinafter
collectively referred to as the "Company Financial Statements"). The Company
Financial Statements are complete and accurate and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis and present fairly the financial position and results of operation of the
Company at the date and for the period reflected thereon. As of December 31,
1999, the Company did not have any material liabilities or obligations of any
nature, absolute, contingent or otherwise, not properly reflected or reserved
against in the Company Financial Statements that are required to be reported in
such balance sheets in accordance with generally accepted accounting principles.
The Company does not now have any liabilities except those reflected or reserved
against in such Company Financial Statements, those incurred since December 31,
1999, in the ordinary course of business, or those which would not constitute a
Company Material Adverse Effect. Except for the adjustments described in this
Section 5.03, there are no material changes to the Company's financial
condition, and the Company has operated in the ordinary course of business,
consistent with past practice, since December 31, 1999. Attached hereto as
Exhibit 5.03(b) is the unaudited trial balance corresponding to the Company
Financial Statements, provided herein to identify the specific asset and
liability accounts which are referred to in this Section 5.03 and elsewhere in
this Agreement. Prior to the Closing Date, the Company shall (i) reclassify the
intercompany note payable as equity, (ii) transfer to TRW the accrued
liabilities for federal and state income taxes, and (iii) transfer to TRW those
current and long-term deferred tax balances not relating to Company accounts
being assumed by Surviving Company. In addition, as late as practicable but
prior to the Closing Date, TRW shall implement the following changes with
respect to commerce transacted between TRW and the Company: (i) revise the
purchase orders from TRW to the Company associated with the Assigned Contracts
(as defined in Section 10.04 hereof) as set forth in Section 10.04 hereof, if
and as necessary, (ii) bill the Company for any intercompany services and/or
allocations not reflected in the Company Financial Statements, and (iii) net all
intercompany receivable and intercompany payable accounts to reflect one net
balance either due from, or payable to, TRW.
5.04. SUBSIDIARIES. The Company does not have any subsidiaries.
5.05. AUTHORIZATION; BINDING AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Company's Board of Directors and the Company's sole
shareholder and no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes the legal,
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
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5.06. GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Consent") any nation
or government, any state or other political subdivision thereof, any entity,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any governmental or regulatory authority, agency, department, board,
commission, administration or instrumentality, any court, tribunal or arbitrator
and any self-regulatory organization, domestic or foreign ("Governmental
Authority"), on the part of the Company is required to be obtained, made or
given by the Company in connection with the execution, delivery or performance
by the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby other than (i) filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") and similar foreign
requirements, to the extent any such filings are required, (ii) such filings as
may be required in any jurisdiction where the Company is qualified or authorized
to do business as a foreign corporation in order to maintain such qualification
or authorization, (iii) such export licenses and similar Consents as may be
necessary in order to continue the Company Business after the Merger and (iv)
those Consents that, if they were not obtained or made, individually or in the
aggregate, would not have a Company Material Adverse Effect, or prevent or
materially delay consummation of the transactions contemplated herein or the
Company from performing in all material respects its obligations under this
Agreement.
5.07. NO VIOLATIONS. The execution, delivery and performance by
the Company of this Agreement, the consummation by the Company of the
transactions contemplated hereby and compliance by the Company with any of the
provisions hereof will not (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of the Company, (ii)
require any Consent under or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any material contract of the Company, (iii) result
in any breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could become a default) or result in the loss of
a material benefit under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
note, bond, mortgage, indenture, contract (other than contracts terminable at
will), agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or its
properties are bound, (iv) result in the creation or imposition of any lien or
encumbrance of any kind upon any of the assets of the Company or (v) subject to
obtaining the Consents from Governmental Authorities referred to in Section 5.06
hereof, contravene any applicable provision of any statute, law, rule or
regulation or any order, decision, injunction, judgment, award or decree ("Law")
to which the Company or its assets or properties are subject, except in cases of
clauses (ii), (iii) and (iv) as would not have a Company Material Adverse
Effect.
5.08 WARRANTIES. The Company has issued no warranties other than
in connection with the Company Business. All warranties that have been issued by
the Company in
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connection with the Company Business are consistent with those offered
in the same industry. All warranty claims are consistent with past practice of
the Company. Except for claims which individually or in the aggregate will not
constitute a Company Material Adverse Effect, there is no claim against the
Company in connection with all items previously sold, or services previously
provided, by the Company related to the Company Business (the "Company
Products") that has not been fully reserved therefor on the Company Financial
Statements, and, to the best of the Company's knowledge after due inquiry, there
is no basis for any such claim on account of defective products heretofore
designed, developed, manufactured, distributed or sold which is not consistent
with past practices of the Company.
5.09. LITIGATION. There are no actions, claims, investigations or
proceedings pending against the Company before any court or governmental agency
or authority, domestic or foreign, and, to the best knowledge of the Company,
after due inquiry, no actions, suits, claims or investigations have been
threatened. The Company does not know of any valid basis for any such action,
proceeding, claim or investigation that (i) involves any claim not fully covered
by insurance or provided for by adequate reserves (and which insurance coverage
or reserves are being transferred to the Company), (ii) questions or challenges
the validity of this Agreement or any action taken or to be taken by the Company
pursuant to this Agreement or in connection with the transactions contemplated
hereby, or (iii) involves any violation of any law, rule, regulation, bylaw or
ordinance relating to the protection of the environment with regard to the
Company Business. The Company is not subject to any judgment, order or decree
entered in any lawsuit or proceeding that has had or that can reasonably be
expected to have a material adverse effect on the Company Business or on its
ability to consummate the transactions contemplated hereby. The Company is not
in default with respect to any order, injunction or decree of any governmental
or regulatory agency or authority, domestic or foreign.
5.10 CONDITION AND SUFFICIENCY OF THE COMPANY'S ASSETS. Except
where such condition or sufficiency would not constitute, individually or in the
aggregate, a Company Material Adverse Effect, the Company's physical assets are
sufficient for the operation of the Company Business, as presently conducted,
are in good condition and repair for their intended use in the ordinary course
of business and conform in all material respects with all applicable ordinances,
regulations and other laws and there are no known latent defects therein.
5.11. ZONING. Any real property owned or leased by the Company is zoned
for the Company Business.
5.12. NO DEFAULTS. The Company has performed in all material
respects all obligations required to be performed by it and is not in default
under any agreement, operating lease, loan agreement or other document to which
it is a party or by which any of its assets are bound, has not received notice
of any claim or default or facts or circumstances that would constitute,
individually or in the aggregate, a Company Material Adverse Effect.
5.13. TITLE TO PROPERTIES; LIENS. The Company owns outright all
property and assets of every nature reflected in the Company Financial
Statements, all subject to no liens, claims,
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mortgages, pledges, security interests, easements, restrictions,
encumbrances or charges of any kind (collectively "Liens"), except for Liens
that do not, in the aggregate, in any material respect detract from the value of
the asset encumbered or interfere with or impair the present and continued use
thereof in the normal course of business or the purposes for which the asset was
acquired.
5.14. CONTRACTS AND COMMITMENTS. The Company is not a party to any
written or oral contract, commitment, agreement, indenture or other contractual
obligation by which it or any of its assets are bound that is material (for the
purposes of this Section 5.14, "material" shall be defined as an obligation on
the part of any party thereto in excess of U.S.$250,000) or that relates to (i)
matters that are material to and not in the ordinary course of business,
consistent with past practices, of the Company; (ii) capital expenditures that
are material to and are not in the ordinary course of business, consistent with
past practices, of the Company; (iii) any obligation of the Company to make any
contributions or dedication of money or land; or (iv) any contract to which any
director, officer or employee of the Company is a party. Except where such
deviations would not constitute, individually or in the aggregate, a Company
Material Adverse Effect, all of the Company's contracts are valid and in full
force and effect and, to the best knowledge of the Company, after due inquiry,
neither the Company nor other party to the contract has breached any material
provision of, is in violation or in default in any material respect under the
terms of, and no event has occurred which with the lapse of time or action by a
party or both would result in a violation or default in any material respect
under the terms of, or acceleration of any payments due under, any such
contract.
5.15. PERMITS. The Company has all permits, authorizations,
certificates, approvals, registrations, legal status, variances, exemptions,
rights of way, franchises, privileges, immunities, grants, ordinances, licenses
and other rights of every kind and character (collectively, "Permits") necessary
or appropriate to conduct the Company Business, except where such failure to
have would not constitute, individually or in the aggregate, a Company Material
Adverse Effect. All such Permits are valid and subsisting and in full force and
effect, except where such failures would not constitute, individually or in the
aggregate, a Company Material Adverse Effect. There are no proceedings pending,
or, to the best knowledge of the Company, after due inquiry, threatened that
seek the revocation, cancellation, suspension or adverse modification of any
such Permit or conditions that would reasonably be expected to give rise to such
a proceeding.
5.16. EMPLOYEE BENEFIT PLANS. (a) The Company Disclosure Schedule
contains a complete and accurate list of all material Benefit Plans (as
hereinafter defined) maintained or contributed to by the Company. A "Benefit
Plan" shall include (i) an employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, together with
all regulations thereunder ("ERISA"), even if, because of some other provision
of ERISA, such plan is not subject to any or all of ERISA's provisions, and (ii)
whether or not described in the preceding clause, any material pension, profit
sharing, severance, employment, change-in-control, bonus, stock bonus, deferred
or supplemental compensation, retirement, thrift, stock purchase or stock option
plan or any other material compensation, welfare, fringe benefit or retirement
plan, perquisite arrangement, program,
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policy or arrangement including any funding mechanism now in effect or
required as a result of this Agreement or otherwise, whether formal or informal,
oral or written, legally binding or not, which the Company maintains or
administers, or to which the Company contributes or is required to contribute,
or with respect to which the Company has incurred or would reasonably be
expected to incur any present or future obligation; provided that Benefit Plans
shall not include any Multiemployer Plan, as defined in Section 3(37) of ERISA
(a "Multiemployer Plan").
(b) With respect to each material Benefit Plan, the Company has
delivered or made available to Surviving Company a current, accurate and
complete copy (or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable: (i) any related trust agreement or other
funding instrument; (ii) the most recent IRS determination letter, if
applicable; (iii) any summary plan description; and (iv) (A) the most recent
Form 5500 and attached schedules, to the extent required to be filed by ERISA or
the Internal Revenue Code of 1986, as amended (the "Code"), (B) the most recent
audited financial statements, with attached opinions of independent accountants,
(C) the most recent actuarial valuation reports, and (D) the most recent Form
PBGC-1 for any Benefit Plan required to file such Form. The financial statements
so delivered fairly present in all material respects the financial condition and
the results of operations of each of such plans as of such date, in accordance
with generally accepted accounting principles.
(c) (i) Each Benefit Plan has been established and administered in
accordance with its terms, applicable provisions of ERISA, the Code, and other
applicable laws, rules and regulations; each Benefit Plan which is intended to
be qualified within the meaning of Code section 401(a) has received a favorable
determination letter as to its qualification (except as otherwise set forth in
Exhibit 5.16), and to the knowledge of the Company nothing has occurred, whether
by action or failure to act, that would cause the loss of such qualification;
(iii) to the knowledge of the Company no event has occurred and no condition
exists that would subject the Company, either directly or by reason of their
affiliation with an ERISA Affiliate of the Company, as hereinafter defined, to
any material (individually or in the aggregate) tax, fine, lien or penalty
imposed by ERISA, the Code or other applicable laws, rules and regulations; (iv)
for each material Benefit Plan with respect to which a Form 5500 has been filed,
no material change has occurred with respect to the matters covered by the most
recent Form since the date thereof; and (v) no "reportable event" (as such term
is defined in ERISA section 4043), "prohibited transaction" (as such term is
defined in ERISA section 406 and Code section 4975), "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code section 412
(whether or not waived)) or failure to make by its due date a required
installment under Code section 412(m) has occurred with respect to any Benefit
Plan or any other plan maintained for employees of any ERISA Affiliate of the
Company. "ERISA Affiliate," as applied to any person, means (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Code section 414(b) of which that person is a member, (ii) any trade or business
(whether or not incorporated) which is a member of a group of trades or
businesses under common control within the meaning of Code section 414(c) of
which that person is a member, and (iii) any member of an affiliated service
group within the meaning of Code section 414(m) and (o) of which that person,
any
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corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member.
(d) No plan listed in the Company Disclosure Schedule is a
"Multiemployer Plan". The Company has never contributed to or had an obligation
to contribute to any Multiemployer Plan. No ERISA Affiliate of the Company has
withdrawn from any such Multiemployer Plan in a complete or partial withdrawal
under Subtitle E of Title IV of ERISA with respect to which there is any
outstanding liability as of the date hereof, or received notice from any such
Multiemployer Plan that it is in reorganization or insolvency pursuant to ERISA
sections 4241A or 4045 or that it intends to terminate or has terminated under
ERISA section 4041 or 4042.
(e) With respect to any Benefit Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of the Company, threatened, and (ii) no facts or
circumstances exist, to the knowledge of the Company, that would reasonably be
expected to give rise to any such actions, suits or claims.
(f) No Benefit Plan or other agreement exists that would
reasonably be expected to result in the payment to any present or former
employee of the Company of any money or other property or accelerate or provide
any other rights or benefits to any present or former employee of the Company as
a result of the transactions contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Code section
280G.
(g) Each of the Benefit Plans can be terminated by the Company
within a period of 30 days, without payment of any additional compensation or
amount of the additional vesting or acceleration of any such benefits.
(h) All group health plans of the Company and any ERISA
Affiliate of the Company have been operated in compliance in all material
respects with Parts 6 and 7 of Title I of ERISA, to the extent such requirements
are applicable. Except to the extent required under ERISA section 601, the
Company does not provide health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employees.
5.17. TAXES AND RETURNS. (a) The Company and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company is or
has been a member (i) have timely filed, or caused to be timely filed all Tax
Returns (as hereinafter defined) required to be filed by it (except where such
failure to file would not, individually or in the aggregate, have a Company
Material Adverse Effect), and (ii) paid, collected or withheld, or caused to be
paid, collected or withheld, all Taxes (including, without limitation, in
connection with amounts paid or owing to any employee) required to be paid,
collected or withheld, other than such Taxes for which adequate reserves in the
Company Financial Statements have been established in accordance with generally
accepted accounting principles, consistently applied, or which are being
contested in good faith, except where such failure to pay, collect or withhold
would not, individually or in the aggregate, have a Company Material Adverse
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Effect. All such Tax Returns were true, correct and complete in all
material respects. To the knowledge of the Company, there are no claims or
assessments pending against, and received by, the Company for any alleged
deficiency in any Tax, and the Company has not been notified in writing of any
proposed Tax claims or assessments against the Company (other than in each case,
claims or assessments for which adequate reserves in the Company Financial
Statements have been established or which are being contested in good faith;
provided, that if such claims or assessments are being contested in good faith
and are not immaterial in amount, such claims or assessments are set forth in
the Company Disclosure Schedule). The Company does not have any waivers or
extensions of any applicable statute of limitations to assess any Taxes. There
are no outstanding requests by the Company for any extension of time within
which to file any Tax Return or within which to pay any material amounts of
Taxes shown to be due on any return. To the knowledge of the Company, there are
no liens for Taxes on the assets of the Company except for statutory liens for
current Taxes not yet due and payable.
(b) All Taxes of the Company accrued but not yet due are accrued on the
Company Financial Statements. The charges, accruals and reserves for such Taxes
with respect to the Company (excluding any provision for deferred income taxes)
reflected on the books of the Company are adequate to cover such Taxes. No claim
has ever been made by a Governmental Authority in a jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to Taxes
assessed by such jurisdiction. The Company will not be required to include any
amount in taxable income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of (A) a change in method of accounting for a taxable period ending
on or prior to the Closing Date, (B) any "closing agreement," as described in
Section 7121 of the Code (or any corresponding provision of state, local or
foreign income Tax law), (C) any deferred intercompany gain described in
Treasury Regulation Sections 1.1502-13 or former Treasury Regulations Section
1.1502-14 or any excess loss account described in Treasury Regulation Sections
1.1502-19 and 1.1502-32 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax law), (D) any
sale reported on the installment method where such sale occurred on or prior to
the Closing Date, or (E) any prepaid amount received on or prior to the Closing
Date. The Company is not a party to or bound by any Tax allocation or Tax
sharing agreement, has no current or potential contractual obligation to
indemnify any other person with respect to Taxes, and has no liability for the
Taxes of any Person other than the Company (A) under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local or foreign law), (B)
as a transferee or successor, or (C) otherwise.
(c) For purposes of this Agreement, the term "Tax" shall mean any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, alternative or
added minimum, ad valorem, withholding, unemployment transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "Tax Return" shall mean a report, return or
other information (including any attached schedules or any amendments to such
report, return or
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other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
5.18. ENVIRONMENTAL MATTERS, ETC. (a) (i) The Company is, and within
the period of all applicable statutes of limitation has been, in compliance with
all Environmental Laws (as hereinafter defined) applicable to any of its current
or former operations in all material respects;
(ii) (A) The Company holds all Environmental Permits (as
hereinafter defined) (each of which is in full force and effect) required for
any of its current operations of the Company Business and for any property
owned, leased, or otherwise operated by it, and are, and within the period of
all applicable statues of limitation have been, in compliance with the terms of
all such Environmental Permits in all material respects; and (B) the Company
does not have knowledge that any of its Environmental Permits will not be, or
will entail material expense to be, timely renewed or complied with; any
additional Environmental Permits required of it for current operations or for
any property owned, leased, or otherwise operated by any of them, or for any of
its planned operations, will not be timely granted or complied with in any
material respect; or any transfer or renewal of, or reapplication for, any
Environmental Permit required as a result of the transactions contemplated
herein will not be timely effected;
(iii) no review by, or approval of, any Governmental
Authority or other person is required under any Environmental Law in connection
with the execution or delivery by the Company of this Agreement;
(iv) The Company has not received any Environmental
Claim (as hereinafter defined) against it, and the Company has no knowledge of
any such Environmental Claim being threatened or contemplated, except for such
Environmental Claims which, individually or in the aggregate, have not had a
Company Material Adverse Effect; and
(v) Hazardous Materials that are reasonably likely to
form the basis of any Environmental Claim against the Company are not present on
any property owned, leased, or operated by it, except for such Environmental
Claims which, individually or in the aggregate, have not had a Company Material
Adverse Effect.
(b) For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any claim, demand, action, suit, complaint,
proceeding, directive, investigation, lien, demand letter, or notice (written or
oral) of alleged noncompliance, violation, or liability, by any person or entity
asserting liability or potential liability (including without limitation,
liability or potential liability for enforcement, investigatory costs,
remediation costs, operation and maintenance costs, governmental
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response costs, natural resource damages, property damage, personal
injury, fines or penalties), regardless of legal theory, arising out of, based
on or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, (ii)
circumstances forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (iii) otherwise relating to
obligations or liabilities under any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirement (including, without limitation, common law) of any
foreign government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of human health (including, without
limitation, employee health and safety) or the environment (including without
limitation indoor air, ambient air, surface water, groundwater, land surface,
subsurface, strata, or plant or animal species).
"Environmental Permits" means all permits, licenses, registrations,
approvals, exemptions and other filings with or authorizations by any
Governmental Authority under any Environmental Law.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof),
petroleum products, asbestos, asbestos-containing materials, pollutants,
contaminants, radioactivity, electromagnetic fields and all other materials,
whether or not defined as such, that are regulated pursuant to any Environmental
Laws or that could result in liability under any applicable Environmental Laws.
5.19 INTELLECTUAL PROPERTY. (a) The Company owns or is licensed
to use all patents, trademarks, copyrights, know-how and other product, process
and other intellectual property (collectively, the "Intellectual Property") that
would reasonably be considered necessary for the conduct of the Company
Business. With regard to the Company's registered trademarks and registered
copyrights (collectively, the "Registered Property"), all necessary and
appropriate filings have been made to fully register such Registered Property
with the appropriate authorities in the jurisdictions in which such intellectual
property is registered (the "IP Authorities") and such Registered Property are
fully registered in such jurisdictions, except where such failures would not
constitute, individually or in the aggregate, a Company Material Adverse Effect.
The Company has not received any notice from the IP Authorities questioning or
otherwise casting doubt upon the registrations of the Registered Property. No
claim has been asserted by any person to the ownership of or right to use any
Intellectual Property or challenging or questioning the ownership by the Company
thereof, and the Company does not know of any valid basis for any such claim or
that any such claim has been threatened by a third party. Each of the
Intellectual Property is subsisting, and has not been canceled, abandoned or
otherwise terminated. The Company does not have any knowledge or notice of any
claim that any product, activity or operation of the Company infringes, or will
infringe, upon or results, or will result, in the infringement of any
Intellectual Property of any
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third party; and no proceedings have been instituted, are pending or,
to the best knowledge of the Company, after due inquiry, are threatened which
claim that any product, activity or operation of the Company infringes, or will
infringe, upon or results, or will result, in the infringement of any
Intellectual Property of any third party. Except with respect to any rights that
may have been granted to the United States Government as a result of contractual
activities, Company has not previously granted any rights or licenses to any
third party with respect to any Intellectual Property. Company is not a party to
any agreement pursuant to which the conduct of Company Business requires any
payment by Company or any of its customers at any tier, of any royalty or other
payment for the use of any third party Intellectual Property.
(b) The Company has taken reasonable measures and precautions to
protect and maintain the confidentiality, secrecy and value of all of its
material Intellectual Property (except Intellectual Property whose value would
be unimpaired by disclosure). Without limiting the generality of the foregoing,
all current and former employees of the Company who are or were involved in, or
who have contributed to, the creation or development of any material
Intellectual Property of the Company have executed and delivered to the Company
an agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of TRW Invention Agreement
previously delivered by the Company to Surviving Company, and (ii) all current
and former consultants and independent contractors to the Company who are or
were involved in, or who have contributed to, the creation or development of any
material Intellectual Property of the Company have executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of TRW Invention
Agreement previously delivered to Surviving Company. Prior to the Closing, TRW
will assign to the Company any rights that it obtained pursuant to the execution
of TRW Invention Agreements by employees of the Company. No current or former
employee, officer, director, shareholder, consultant or independent contractor
has any right, claim or interest in or with respect to any Intellectual Property
of the Company.
5.20. INSURANCE. All the insurable portions of the Company's
assets are insured for the Company's benefit under valid and enforceable
policies issued by insurers of recognized responsibility in amounts and against
such risks and losses as is customary in the the Company's industry. Exhibit
5.20 sets forth the insurance policies, along with their premiums, coverage and
renewal dates, for the Company's assets.
5.21. U.S. FOREIGN CORRUPT PRACTICES ACT. There have been no
violations of the U.S. Foreign Corrupt Practices Act of 1977, as amended, by the
Company or any of its agents in connection with the Company.
5.22. LABOR MATTERS. The Company is not a party to any collective
bargaining agreement, memorandum of understanding, settlement or other labor
agreement with any union or labor organization and no union or labor agreement
with any union or labor
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organization has been recognized by the Company as an exclusive
bargaining representative for employees of the Company. To the knowledge of the
Company, there is no current union representation matter involving employees of
the Company. To the Company's knowledge, there is no any significant activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any employees of the Company; there is no material labor
dispute, strike, picketing or work stoppage, or any lockout, involving employees
of the Company pending or, to the Company's knowledge, threatened against or
involving the Company. There is no (i) arbitration, unfair labor practice,
investigation, employment discrimination or other labor or employment related
charge, complaint or claim against the Company pending or, to the Company's
knowledge, threatened before any court, arbitrator, mediator or governmental
agency or tribunal, or (ii) adjudication by any court, arbitrator, mediator or
governmental agency or tribunal that, in the case of either clause (i) or (ii)
above, has had a Company Material Adverse Effect.
5.23. YEAR 2000 COMPLIANCE. (a) The Information Technology (as
defined below) of the Company is Year 2000 Compliant (as defined below) and will
not cause an interruption in the ongoing operations of the Company Business or
give rise to liability, including product liability, due to a problem arising
from a failure of the Information Technology relating to Year 2000 Compliance
(as defined below), except where such failures individually or in the aggregate,
do not constitute a Company Material Adverse Effect. To the Company's knowledge,
the Company Disclosure Schedule sets forth correct and complete lists of all of
the hardware, software, firmware, network systems, embedded systems,
telecommunication systems, and other Information Technology of the Company which
is not Year 2000 Compliant.
(b) As used in this Agreement, "Year 2000 Compliant" and "Year
2000 Compliance" mean, with respect to Information Technology, that the
Information Technology accurately processes date/time data and date-related data
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and during the
twenty-first century, the years 1999 and 2000 and leap year calculations, to the
extent that Information Technology is used in combination with other Information
Technology, such Information Technology properly exchanges date/time data with
such other Information Technology.
(c) As used in this Agreement, "Information Technology" means
all owned or used software, hardware, firmware, telecommunications systems,
network systems, embedded systems, and other systems or components.
(d) The Company (i) has made a full and complete assessment of
the Year 2000 Issues (as defined below) and (ii) does not reasonably anticipate
that Year 2000 Issues associated with its Information Technology will have a
Company Material Adverse Effect.
(e) As used in this Agreement, "Year 2000 Issues" means
anticipated costs, problems and uncertainties associated with being Year 2000
Compliant, including the ability of certain computer applications to effectively
handle data including dates on and after January 1, 2000.
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5.24 LIABILITIES. The Company Disclosure Schedule sets
forth all material indebtedness of the Company for borrowed money, including
without limitation any credit facilities, equipment leases, leasing lines of
credit and promissory notes, any material assumptions, guarantee or
endorsements, or other accommodations of the Company to become responsible for,
the obligations of any person, whether formal or informal. For the purposes of
this Section 5.24, "material" shall mean any facility, lease, note, instrument,
assumption, guarantee, endorsement and the like which is in excess of $25,000,
whether or not at the time hereof Company's liability thereunder is in excess of
$25,000.
5.25 ABSENCE OF CHANGES. Since December 31, 1999: (a) the
Company has not (i) entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent with
past practice (for the purposes of this Section 5.25, "material transaction" and
"material action" shall be any transaction or action with a value in excess of
$250,000) or (ii) committed to enter into any such transaction or take any such
action; and (b) there has not occurred any state of facts, change or event that
constitutes a Company Material Adverse Effect.
5.26 REORGANIZATION REPRESENTATIONS. For the purpose of ensuring
that the Merger constitutes a reorganization under Section 368(a)(1) of the
Code, TRW and the Company represent and warrant as follows:
(a) the terms of this Agreement and the related agreements are the product
of arms' length negotiations;
(b) the principal reasons of TRW and the Company for participating in the
Merger are bona fide business purposes not related to taxes;
(c) the Merger will be consummated in compliance with the material terms of
the Agreement, none of the material terms and conditions therein have
been waived or modified, and neither TRW nor the Company has any plan
or intention to waive or modify any such material condition;
(d) the fair market value of the Surviving Company Series T-1 Preferred
Stock received by TRW in the Merger will be approximately equal to the
fair market value of the stock of the Company surrendered in exchange
therefor, and the aggregate consideration received by TRW in exchange
for its stock of the Company will be approximately equal to the fair
market value of all of the outstanding shares of stock of the Company
immediately prior to the Merger;
(e) neither TRW nor the Company is an "investment company" within the
meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code;
(f) TRW is not acting as agent for Surviving Company in connection with the
Merger or the approval thereof and will accept no reimbursement from
Surviving Company for
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any stock of the Company it may have purchased or for other obligations
TRW may have incurred;
(g) one hundred percent (100%) of the shares of stock of the Company
outstanding immediately prior to the Merger will be exchanged solely
for shares of Surviving Company Series T-1 Preferred Stock; TRW intends
that no consideration be paid or received (directly or indirectly,
actually or constructively) for shares of stock of the Company other
than shares of Surviving Company Series T-1 Preferred Stock; and the
total fair market value of all consideration other than Surviving
Company Series T-1 Preferred Stock received by TRW in the Merger will
be less than fifty percent (50%) of the aggregate fair market value of
stock of the Company outstanding immediately prior to the Merger;
(h) during the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote
any Such shares have, directly or indirectly, been owned by Surviving
Company or, to TRW's or the Company's knowledge, affiliates of
Surviving Company;
(i) there is no intercorporate indebtedness existing between TRW and the
Company, Surviving Company and the Company, or Surviving Company and
TRW, that was issued, acquired or will be settled at a discount as a
result of the Merger;
(j) TRW and the Company will each pay separately their own expenses
relating to the Merger (other than expenses directly related to the
transaction within the guidelines set forth in Revenue Ruling 73-54,
1973-1 C.B. 187);
(k) following the Merger, TRW will comply with the record-keeping and
information filing requirements of Treasury Regulations Section
1.368-3;
(1) the total adjusted basis of the assets of the Company transferred to
Surviving Company will equal or exceed the sum of the liabilities
assumed by Surviving Company, plus the amount of liabilities, if any,
to which the transferred assets are subject;
(m) the fair market value of the assets of the Company transferred to
Surviving Company will equal or exceed the sum of the liabilities
assumed by Surviving Company plus the amount of liabilities, if any, to
which the transferred assets are subject;
(n) TRW has no plan or intention to sell, transfer or dispose of to
Surviving Company or any "related person" (as such term is defined by
Treasury Regulations Section 1.368-1(e)(3)) any Surviving Company stock
received in the Merger either directly or through any transaction,
agreement or arrangement with any other person;
(o) the Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code and
the fair market value of the Company's assets will, at the Effective
Time of the Merger, exceed the aggregate
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liabilities of the Company plus the amount of liabilities, if any, to
which such assets are subject;
(p) the liabilities of the Company assumed by Surviving Company and to
which the transferred assets of the Company are subject were incurred
by the Company in the ordinary course of its business;
(q) other than in the ordinary course of business or pursuant to its
obligations under this Agreement, the Company has made no transfer of
any of its assets (including any distribution of assets with respect
to, or in redemption of, stock) in contemplation of the Merger or
during the period ending at the Effective Time of the Merger and
beginning with the commencement of negotiations (whether formal or
informal) with Parent regarding the Merger (the "Pre-Merger Period");
(r) at the Effective Time of the Merger, the Company will have no
outstanding equity interests other than those set forth in Section 5.01
of this Agreement and only TRW has owned equity interests of the
Company during the Pre-Merger Period;
(s) the Company has made no extraordinary distributions within the meaning
of Temporary Treasury Regulations Section 1.368-IT(e) with respect to
its stock, prior to and in connection with the Merger; and
(t) prior to and in connection with the Merger, the Company has not
redeemed any Company stock and no "related person" with respect to the
Company, as such term is defined by Treasury Regulations Section
1.368-1(e)(3) (without regard to Section 1.368-1 (e)(3)(i)(A)), has
purchased any Company stock.
ARTICLE 6
INVESTMENT REPRESENTATIONS AND WARRANTIES OF TRW
TRW hereby represents and warrants to Surviving Company that at the
time of this Agreement and as of the Closing Date:
6.01. INVESTMENT. TRW is acquiring the TRW Shares for its own account,
for investment, and not with a view to any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
6.02. RESTRICTIONS ON TRANSFER. TRW understands that because the
TRW Shares have not been registered under the Securities Act, it cannot dispose
of any or all of the TRW Shares unless such TRW Shares are subsequently
registered under the Securities Act or exemptions from such registration are
available. TRW acknowledges and understands that it has no
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independent right to require Surviving Company to register the TRW
Shares. TRW is aware that Surviving Company may not accomplish a public offering
of its stock. TRW further understands that Surviving Company may, as a condition
to the transfer of any of the TRW Shares, require that the request for transfer
be accompanied by opinion of counsel, in form and substance satisfactory to
Surviving Company, to the effect that the proposed transfer does not result in
violation of the Securities Act, unless such transfer is covered by an effective
registration statement under the Securities Act. TRW understands that each
certificate representing the TRW Shares will bear the following legend or one
substantially similar thereto:
The shares represented by this certificate have not been registered
under the Securities Act of 1933. These shares have been acquired for
investment and not with a view to distribution or resale, and may not
be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares under the
Securities Act of 1933, or an opinion of counsel satisfactory to the
corporation that registration is not required under such Act.
6.03. SOPHISTICATION. TRW is knowledgeable and experienced in
business and financial matters and capable of evaluating the merits and risks of
loss of its investment in Surviving Company, has been granted the opportunity to
make a thorough investigation of the affairs of Surviving Company, and has
availed itself of such opportunity either directly or through its authorized
representative.
6.04. PRIVATE OFFERING. TRW has been advised that the TRW Shares
have not been and are not being registered under the Securities Act or under the
"blue sky" laws of any jurisdiction and that Surviving Company in issuing the
TRW Shares is relying upon, among other things, the representations and
warranties of TRW contained in this Article 6 in concluding that each such
issuance is a "private offering" and does not require compliance with the
registration provisions of the Securities Act.
6.05. ACCREDITED INVESTOR. TRW is an "accredited investor" within the
meaning of Rule 501 under the Securities Act.
6.06 DISCLOSURE OF INFORMATION. TRW believes that it has received
all the information it considers necessary or appropriate for deciding whether
to acquire the TRW Shares. TRW further represents that it has had the
opportunity to ask questions and receive answers from Surviving Company
regarding the business, properties, prospects and financial condition of
Surviving Company.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SURVIVING COMPANY
Surviving Company hereby represents and warrants to TRW and the Company
that at the time of this Agreement and as of the Closing Date except as set
forth in the correspondingly numbered Sections of the Surviving Company
Disclosure Schedule, attached hereto (the "Surviving Company Disclosure
Schedule"):
7.01. CAPITALIZATION OF SURVIVING COMPANY. The authorized capital stock
of the Surviving Company consists of 49,640,531 shares of Common Stock, par
value $0.001 per share (the "Surviving Company Common"), and 37,580,752 shares
of Preferred Stock, designated as follows: 1,705,000 authorized shares of Series
A Preferred Stock, 3,525,000 authorized shares of Series B Preferred Stock,
3,000,000 authorized shares of Series C Preferred Stock, 2,750,000 authorized
shares of Series D Preferred Stock, 10,100,752 authorized shares of Series E
Preferred Stock and 16,500,000 authorized shares of Series F Preferred Stock.
There are issued and outstanding as of the date hereof 1,367,010 shares of
Surviving Company Common, 1,705,000 shares of Series A Preferred Stock,
3,465,610 shares of Series B Preferred Stock, 2,733,669 shares of Series C
Preferred Stock, 2,688,682 shares of Series D Preferred Stock, 9,926,752 shares
of Series E Preferred Stock and 13,825,619 shares of Series F Preferred Stock
(collectively, along with the Series G Stock referenced below, the "Outstanding
Surviving Company Shares"). In addition, 9,798,605 shares of Surviving Company's
Series G Preferred Stock, par value $0.001 per share ("Series G Stock") will be
issued prior to the Effective Time (the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock, the Series F Preferred Stock and the Series G Stock
are herein referred to as the "Surviving Company Preferred Stock"). At the
Effective Time, each share of Surviving Company Preferred Stock will be
convertible into one share of Surviving Company Common. All of the Outstanding
Surviving Company Shares are or will be validly issued, fully paid, and
nonassessable and have not been or will not be issued in violation of the
preemptive rights of any person, and have been issued in accordance with
applicable state, federal and foreign securities laws. Appropriate Form D
filings and related state securities filings have been, or will be, made in
connection with the offer and sale of all of the Surviving Company Preferred
Stock. Except for the employee stock options of Surviving Company representing
the rights to acquire a total of 6,526,212 shares of Surviving Company Common
and warrants of Surviving Company representing the rights to acquire a total of
863,954 shares of Surviving Company Preferred Stock or 892,240 shares of
Surviving Company Common (on an as converted basis), there are no existing
options, warrants, rights, calls, or commitments of any kind obligating
Surviving Company to issue or otherwise transfer any of its capital stock. The
Surviving Company Disclosure Schedule contains a complete listing as of the date
hereof of all options and warrants, their exercise prices, the dates of grant,
the holders thereof and whether such options and warrants are exercisable.
Except as described in this Agreement, there are no contracts, commitments,
agreements, understandings, arrangements or restrictions to which Surviving
Company is a party or by which it is bound relating to any shares of capital
stock or other securities of Surviving Company, whether or not outstanding.
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7.02. ORGANIZATION AND GOOD STANDING. Surviving Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
and any necessary governmental approval to own, lease and operate its properties
and to carry on the business of the development, design, production and
marketing of millimeter wave outdoor units, radio frequency heads, transceiver
modules and specialized antennas (the "Surviving Company Business"). Surviving
Company is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a Surviving Company Material Adverse Effect (it being understood
that, for purposes of this Agreement, any state of facts, change, event or
inaccuracy (or the effects thereof) will be deemed to have and constitute a
Surviving Company Material Adverse Effect if it has had, or would reasonably be
expected to have, a material adverse effect on the business, assets, financial
condition or results of operations of Surviving Company) or prevent or delay the
consummation of the transactions contemplated hereby.
7.03. FINANCIAL STATEMENTS. Attached hereto as Exhibit 7.03 are
Surviving Company's audited consolidated balance sheets, as of June 30, 1999,
and the related audited statements of earnings for the year then ended, as well
as its unaudited quarterly consolidated balance sheets, as of December 31, 1999,
and the related unaudited statements of earnings for the six months then ended
(hereinafter collectively referred to as the "Surviving Company Financial
Statements"). The Surviving Company Financial Statements are complete and
accurate and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis and present fairly the financial
position and results of operation of Surviving Company as at the respective
dates and for the periods reflected thereon. As of December 31, 1999, Surviving
Company did not have any material liabilities or obligations of any nature,
absolute, contingent or otherwise, not properly reflected or reserved against in
the Surviving Company Financial Statements as of that date that are required to
be reported in such balance sheets in accordance with generally accepted
accounting principles. Surviving Company does not now have any liabilities
except those reflected or reserved against in such Surviving Company Financial
Statements, those incurred since December 31, 1999, in the ordinary course of
business, or those which would not constitute a Surviving Company Material
Adverse Effect. There are no material changes to Surviving Company's financial
condition, and Surviving Company has operated in the ordinary course of
business, consistent with past practice, since December 31, 1999.
7.04. SUBSIDIARIES AND MINORITY INTERESTS. Except as set forth on
the Surviving Company Disclosure, Surviving Company does not have any
subsidiaries or, directly or indirectly, equity investments (other than
investments as part of a Benefit Plan in the ordinary course of business) in any
other person. To the extent that Suviving Company does have a subsidiary, such
subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization and has all requisite
corporate power
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and authority and any necessary governmental approval to own, lease and
operate its properties and to carry on such subsidiary's business. Such
subsidiary is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a Surviving Company Material Adverse Effect. Except as set forth
on the Surviving Company Disclosure Schedule, Surviving Company's subsidiary has
no operations and has no assets.
7.05. AUTHORIZATION; BINDING AGREEMENT. Except for the approval of
its shareholders of the transactions contemplated hereby, Surviving Company has
all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by Surviving Company's Board of Directors and,
except for the approval of Surviving Company's shareholders, no other corporate
proceedings on the part of Surviving Company are necessary to authorize the
execution and delivery of this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Surviving Company and constitutes the legal, valid and binding
agreement of Surviving Company, enforceable against Surviving Company in
accordance with its terms.
7.06. GOVERNMENTAL APPROVALS. No Consent of any Governmental
Authority, on the part of Surviving Company is required to be obtained, made or
given by Surviving Company in connection with the execution, delivery or
performance by Surviving Company of this Agreement or the consummation by
Surviving Company of the transactions contemplated hereby other than (i) filings
under the HSR Act and similar foreign requirements, to the extent such filings
are required, (ii) such filings as may be required in any jurisdiction where
Surviving Company is qualified or authorized to do business as a foreign
corporation in order to maintain such qualification or authorization and (iii)
those Consents that, if they were not obtained or made, individually or in the
aggregate, would not have a Surviving Company Material Adverse Effect, or
prevent or materially delay consummation of the transactions contemplated herein
or Surviving Company from performing in all material respects its obligations
under this Agreement.
7.07. NO VIOLATIONS. The execution, delivery and performance by
Surviving Company of this Agreement, the consummation by Surviving Company of
the transactions contemplated hereby and compliance by Surviving Company with
any of the provisions hereof will not (i) conflict with or result in any breach
of any provision of the Articles of Incorporation or Bylaws of Surviving
Company, (ii) require any Consent under or result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any material contract of Surviving
Company, (iii) result in any breach or violation of or constitute a default (or
an event which with notice or lapse of time or both could become a default) or
result in the loss of a material benefit under, or give
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rise to any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Surviving Company pursuant to, any note, bond, mortgage, indenture,
contract (other than contracts terminable at will), agreement, lease, license,
permit, franchise or other instrument or obligation to which Surviving Company
is a party or by which Surviving Company or its properties are bound, (iv)
result in the creation or imposition of any lien or encumbrance of any kind upon
any of the assets of Surviving Company or (v) subject to obtaining the Consents
from Governmental Authorities referred to in Section 7.06 hereof, contravene any
applicable provision of any Law to which Surviving Company or its assets or
properties are subject, except in cases of clauses (ii), (iii) and (iv) as would
not have a Surviving Company Material Adverse Effect.
7.08 WARRANTIES. The Surviving Company has issued no warranties
other than in connection with the Surviving Company Business. All warranties
that have been issued by Surviving Company in connection with the Surviving
Company Business are consistent with those offered in the same industry. All
warranty claims are consistent with past practice of Surviving Company. Except
for claims which individually or in the aggregate will not consitute a Surviving
Company Material Adverse Effect, there is no claim against Surviving Company in
connection with all items previously sold, or services previously provided, by
Surviving Company related to the Surviving Company Business (the "Surviving
Company Products") that has not been fully reserved therefor on the Surviving
Company Financial Statements, and, to the best of Surviving Company's knowledge
after due inquiry, there is no basis for any such claim on account of defective
products heretofore designed, developed, manufactured, distributed or sold which
is not consistent with past practices of Surviving Company.
7.09. LITIGATION. There are no actions, claims, investigations or
proceedings pending against Surviving Company before any court or governmental
agency or authority, domestic or foreign, and, to the best knowledge of
Surviving Company, after due inquiry, no actions, suits, claims or
investigations have been threatened. Surviving Company does not know of any
valid basis for any such action, proceeding, claim or investigation that (i)
involves any claim not fully covered by insurance or provided for by adequate
reserves (and which insurance coverage or reserves are being transferred to
Surviving Company), (ii) questions or challenges the validity of this Agreement
or any action taken or to be taken by Surviving Company pursuant to this
Agreement or in connection with the transactions contemplated hereby, or (iii)
involves any violation of any law, rule, regulation, bylaw or ordinance relating
to the protection of the environment with regard to the Surviving Company
Business. Surviving Company is not subject to any judgment, order or decree
entered in any lawsuit or proceeding that has had or that can reasonably be
expected to have a material adverse effect on the Surviving Company Business or
on its ability to consummate the transactions contemplated hereby. Surviving
Company is not in default with respect to any order, injunction or decree of any
governmental or regulatory agency or authority, domestic or foreign.
7.10 CONDITION AND SUFFICIENCY OF SURVIVING COMPANY'S ASSETS.
Except where such condition or sufficiency would not constitute, individually or
in the aggregate, a
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Surviving Company Material Adverse Effect, Surviving Company's physical
assets are sufficient for the operation of the Surviving Company Business as
presently conducted, are in good condition and repair for their intended use in
the ordinary course of business and conform in all material respects with all
applicable ordinances, regulations and other laws and there are no known latent
defects therein.
7.11. ZONING. Any real property owned or leased by Surviving Company is
zoned for the Surviving Company Business.
7.12. NO DEFAULTS. Surviving Company has performed in all material
respects all obligations required to be performed by it and is not in default
under any agreement, operating lease, loan agreement or other document to which
it is a party or by which any of its assets are bound, has not received notice
of any claim or default or facts or circumstances that would constitute,
individually or in the aggregate, a Surviving Company Material Adverse Effect.
7.13. TITLE TO PROPERTIES; LIENS. Surviving Company owns outright
all property and assets of every nature reflected in the Surviving Company
Financial Statements, all subject to no Liens, except for Liens that do not, in
the aggregate, in any material respect detract from the value of the asset
encumbered or interfere with or impair the present and continued use thereof in
the normal course of business or the purposes for which the asset was acquired.
7.14. CONTRACTS AND COMMITMENTS. Surviving Company is not a party
to any written or oral contract, commitment, agreement, indenture or other
contractual obligation by which it or any of its assets are bound that is
material (for the purposes of this Section 7.14, "material" shall be defined as
an obligation on the part of any party thereto in excess of U.S.$250,000) or
that relates to (i) matters that are material to and not in the ordinary course
of business, consistent with past practices, of Surviving Company; (ii) capital
expenditures that are material to and are not in the ordinary course of
business, consistent with past practices, of Surviving Company; (iii) any
obligation of Surviving Company to make any contributions or dedication of money
or land; or (iv) any contract to which any director, officer, employee or
stockholder of Surviving Company is a party. Except where such deviations would
not constitute, individually or in the aggregate, a Surviving Company Material
Adverse Effect, all of Surviving Company's contracts are valid and in full force
and effect and, to the best knowledge of Surviving Company, after due inquiry,
neither Surviving Company nor other party to the contract has breached any
material provision of, is in violation or in default in any material respect
under the terms of, and no event has occurred which with the lapse of time or
action by a party or both would result in a violation or default in any material
respect under the terms of, or acceleration of any payments due under, any such
contract.
7.15. PERMITS. Surviving Company has all Permits necessary or
appropriate to conduct the Surviving Company Business, except where such failure
to have would not constitute, individually or in the aggregate, a Surviving
Company Material Adverse Effect. All such Permits are valid and subsisting and
in full force and effect, except where such failures would not constitute,
individually or in the aggregate, a Surviving Company Material Adverse Effect.
There are no proceedings pending, or, to the best knowledge of Surviving
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Company, after due inquiry, threatened that seek the revocation, cancellation,
suspension or adverse modification of any such Permit or conditions that would
reasonably be expected to give rise to such a proceeding.
7.16. EMPLOYEE BENEFIT PLANS. (a) The Surviving Company Disclosure
Schedule contains a complete and accurate list of all material Benefit Plans (as
hereinafter defined) maintained or contributed to by Surviving Company. A
"Benefit Plan" shall include (i) an employee benefit plan as defined in Section
3(3) of ERISA, even if, because of some other provision of ERISA, such plan is
not subject to any or all of ERISA's provisions, and (ii) whether or not
described in the preceding clause, any material pension, profit sharing,
severance, employment, change-in-control, bonus, stock bonus, deferred or
supplemental compensation, retirement, thrift, stock purchase or stock option
plan or any other material compensation, welfare, fringe benefit or retirement
plan, perquisite arrangement, program, policy or arrangement including any
funding mechanism now in effect or required as a result of this Agreement or
otherwise, whether formal or informal, oral or written, legally binding or not,
which Surviving Company maintains or administers, or to which Surviving Company
contributes or is required to contribute, or with respect to which Surviving
Company has incurred or would reasonably be expected to incur any present or
future obligation; provided that Benefit Plans shall not include any
Multiemployer Plan, as defined in Section 3(37) of ERISA (a "Multiemployer
Plan").
(b) With respect to each material Benefit Plan, Surviving Company has
delivered or made available to the Company a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate description) thereof and, to
the extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent IRS determination letter, if applicable; (iii)
any summary plan; and (iv) (A) the most recent Form 5500 and attached schedules,
to the extent required to be filed by ERISA or the Code, (B) the most recent
audited financial statements, with attached opinions of independent accountants,
(C) the most recent actuarial valuation reports, and (D) the most recent Form
PBGC-1 for any Benefit Plan required to file such Form. The financial statements
so delivered fairly present in all material respects the financial condition and
the results of operations of each of such plans as of such date, in accordance
with generally accepted accounting principles.
(c) (i) Each Benefit Plan has been established and administered in
accordance with its terms, applicable provisions of ERISA, the Code, and other
applicable laws, rules and regulations; each Benefit Plan which is intended to
be qualified within the meaning of Code section 401(a) has received a favorable
determination letter as to its qualification, and to the knowledge of Surviving
Company nothing has occurred, whether by action or failure to act, that would
cause the loss of such qualification; (iii) to the knowledge of Surviving
Company no event has occurred and no condition exists that would subject
Surviving Company, either directly or by reason of their affiliation with an
ERISA Affiliate of Surviving Company, as hereinafter defined, to any material
(individually or in the aggregate) tax, fine, lien or penalty imposed by ERISA,
the Code or other applicable laws, rules and regulations; (iv) for each material
Benefit Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date
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thereof; and (v) no "reportable event" (as such term is defined in ERISA section
4043), "prohibited transaction" (as such term is defined in ERISA section 406
and Code section 4975), "accumulated funding deficiency" (as such term is
defined in ERISA section 302 and Code section 412 (whether or not waived)) or
failure to make by its due date a required installment under Code section 412(m)
has occurred with respect to any Benefit Plan or any other plan maintained for
employees of any ERISA Affiliate of Surviving Company. "ERISA Affiliate," as
applied to any person, means (i) any corporation which is a member of a
controlled group of corporations within the meaning of Code section 414(b) of
which that person is a member, (ii) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common
control within the meaning of Code section 414(c) of which that person is a
member, and (iii) any member of an affiliated service group within the meaning
of Code section 414(m) and (o) of which that person, any corporation described
in clause (i) above or any trade or business described in clause (ii) above is a
member.
(d) No plan listed in the Surviving Company Disclosure Schedule is a
"Multiemployer Plan". Surviving Company has never contributed to or had an
obligation to contribute to any Multiemployer Plan. No ERISA Affiliate of the
Company has withdrawn from any such Multiemployer Plan in a complete or partial
withdrawal under Subtitle E of Title IV of ERISA with respect to which there is
any outstanding liability as of the date hereof, or received notice from any
such Multiemployer Plan that it is in reorganization or insolvency pursuant to
ERISA sections 4241A or 4045 or that it intends to terminate or has terminated
under ERISA section 4041 or 4042.
(e) With respect to any Benefit-Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of Surviving Company, threatened, and (ii) no facts
or circumstances exist, to the knowledge of Surviving Company, that would
reasonably be expected to give rise to any such actions, suits or claims.
(f) No Benefit Plan or other agreement exists that would
reasonably be expected to result in the payment to any present or former
employee of Surviving Company of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee of
Surviving Company as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
(g) Each of the Benefit Plans can be terminated by Surviving
Company within a period of 30 days, without payment of any additional
compensation or amount of the additional vesting or acceleration of any such
benefits.
(h) All group health plans of Surviving Company and any ERISA
Affiliate of Surviving Company have been operated in compliance in all material
respects with Parts 6 and 7 of Title I of ERISA, to the extent such requirements
are applicable. Except to the extent
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required under ERISA section 601, Surviving Company does not provide
health or welfare benefits (through the purchase of insurance or otherwise) for
any retired or former employees.
7.17. TAXES AND RETURNS. (a) Surviving Company and any consolidated,
combined, unitary or aggregate group for tax purposes of which Surviving Company
is or has been a -member have (i) timely filed, or caused to be timely filed all
Tax Returns required to be filed by it (except where such failure to file would
not, individually or in the aggregate, have a Surviving Company Material Adverse
Effect), and (ii) paid, collected or withheld, or caused to be paid, collected
or withheld, all Taxes (including, without limitation, in connection with
amounts paid or owing to any employee) required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the Surviving
Company Financial Statements have been established in accordance with generally
accepted accounting principles, consistently applied, or which are being
contested in good faith, except where such failure to pay, collect or withhold
would not, individually or in the aggregate, have a Surviving Company Material
Adverse Effect. All such Tax Returns were true, correct and complete in all
material respects. To the knowledge of Surviving Company, there are no claims or
assessments pending against, and received by, Surviving Company for any alleged
deficiency in any Tax, and Surviving Company has not been notified in writing of
any proposed Tax claims or assessments against Surviving Company (other than in
each case, claims or assessments for which adequate reserves in the Surviving
Company Financial Statements have been established or which are being contested
in good faith; provided, that if such claims or assessments are being contested
in good faith and are not immaterial in amount, such claims or assessments are
set forth in the Surviving Company Disclosure Schedule). Surviving Company does
not have any waivers or extensions of any applicable statute of limitations to
assess any Taxes. There are no outstanding requests by Surviving Company for any
extension of time within which to file any Tax Return or within which to pay any
material amounts of Taxes shown to be due on any return. To the knowledge of
Surviving Company, there are no liens for Taxes on the assets of Surviving
Company except for statutory liens for current Taxes not yet due and payable.
(b) All Taxes of Surviving Company accrued but not yet due are
accrued on Surviving Company Financial Statements. The charges, accruals and
reserves for such Taxes with respect to Surviving Company (excluding any
provision for deferred income taxes) reflected on the books of Surviving Company
are adequate to cover such Taxes. No claim has ever been made by a Governmental
Authority in a jurisdiction where Surviving Company does not file Tax Returns
that Surviving Company is or may be subject to Taxes assessed by such
jurisdiction. Surviving Company will not be required to include any amount in
taxable income or exclude any item of deduction or loss from taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of (A) a change in method of accounting for a taxable period ending on or
prior to the Closing Date, (B) any "closing agreement," as described in Section
7121 of the Code (or any corresponding provision of state, local or foreign
income Tax law), (C) any deferred intercompany gain described in Treasury
Regulation Sections 1.1502-13 or former Treasury Regulations Section 1.1502-14
or any excess loss account described in Treasury Regulation Sections 1.1502-19
and 1.1502-32 (or any corresponding or similar provision or administrative rule
of federal, state, local or
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foreign income tax law), (D) any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, or (E) any prepaid amount
received on or prior to the Closing Date. Surviving Company is not a party to or
bound by any Tax allocation or Tax sharing agreement, has no current or
potential contractual obligation to indemnify any other person with respect to
Taxes, and has no liability for the Taxes of any Person other than Surviving
Company (A) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (B) as a transferee or successor, or
(C) otherwise.
7.18. ENVIRONMENTAL MATTERS, ETC. (a) Surviving Company is, and
within the period of all applicable statutes of limitation has been, in
compliance with all Environmental Laws applicable to any of its current or
former operations in all material respects;
(b) (i) Surviving Company holds all Environmental Permits (each
of which is in full force and effect) required for any of its current operations
of the Surviving Company Business and for any property owned, leased, or
otherwise operated by it, and are, and within the period of all applicable
statues of limitation have been, in compliance with the terms of all such
Environmental Permits in all material respects; and (ii) Surviving Company does
not have knowledge that any of its Environmental Permits will not be, or will
entail material expense to be, timely renewed or complied with; any additional
Environmental Permits required of it for current operations or for any property
owned, leased, or otherwise operated by any of them, or for any of its planned
operations, will not be timely granted or complied with in any material respect;
or any transfer or renewal of, or reapplication for, any Environmental Permit
required as a result of the transactions contemplated herein will not be timely
effected;
(c) no review by, or approval of, any Governmental Authority or
other person is required under any Environmental Law in connection with the
execution or delivery by Surviving Company of this Agreement;
(d) Surviving Company has not received any Environmental Claim
against it, and the Company has no knowledge of any such Environmental Claim
being threatened or contemplated, except for such Environmental Claims which,
individually or in the aggregate, have not had a Surviving Company Material
Adverse Effect; and
(e) Hazardous Materials that are reasonably likely to form the
basis of any Environmental Claim against Surviving Company are not present on
any property owned, leased, or operated by it, except for such Environmental
Claims which, individually or in the aggregate, have not had a Surviving Company
Material Adverse Effect.
7.19 INTELLECTUAL PROPERTY. (a) Surviving Company owns or is
licensed to use all Intellectual Property that would reasonably be considered
necessary for the conduct of the Surviving Company Business. With regard to
Surviving Company's Registered Property, all necessary and appropriate filings
have been made to fully register such Registered Property with the IP
Authorities and such Registered Property are fully registered in such
jurisdictions,
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except where such failures would not constitute, individually or in the
aggregate, a Surviving Company Material Adverse Effect. Surviving Company has
not received any notice from the IP Authorities questioning or otherwise casting
doubt upon the registrations of the Registered Property. No claim has been
asserted by any person to the ownership of or right to use any Intellectual
Property or challenging or questioning the ownership by Surviving Company
thereof, and Surviving Company does not know of any valid basis for any such
claim or that any such claim has been threatened by a third party. Each of the
Intellectual Property is subsisting, and has not been canceled, abandoned or
otherwise terminated. Surviving Company does not have any knowledge or notice of
any claim that any product, activity or operation of Surviving Company
infringes, or will infringe, upon or results, or will result, in the
infringement of any Intellectual Property of any third party; and no proceedings
have been instituted, are pending or, to the best knowledge of Surviving
Company, after due inquiry, are threatened which claim that any product,
activity or operation of the Surviving Company infringes, or will infringe, upon
or results, or will result, in the infringement of any Intellectual Property of
any third party. Except with respect to any rights that may have been granted to
the United States Government as a result of contractual activities, Surviving
Company has not previously granted any rights or licenses to any third party
with respect to any Intellectual Property. Surviving Company is not a party to
any agreement pursuant to which the conduct of Surviving Company Business
requires any payment by Surviving Company or any of its customers at any tier,
of any royalty or other payment for the use of any third party Intellectual
Property.
(b) Surviving Company has taken reasonable measures and precautions
to protect and maintain the confidentiality, secrecy and value of all of its
material Intellectual Property (except Intellectual Property whose value would
be unimpaired by disclosure). Without limiting the generality of the foregoing,
all current and former employees of Surviving Company who are or were involved
in, or who have contributed to, the creation or development of any material
Intellectual Property of the Company have executed and delivered to Surviving
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered by Surviving
Company to the Company, and (ii) all current and former consultants and
independent contractors to Surviving Company who are or were involved in, or who
have contributed to, the creation or development of any material Intellectual
Property of Surviving Company have executed and delivered to Surviving Company
an agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered to the
Company. No current or former employee, officer, director, shareholder,
consultant or independent contractor has any right, claim or interest in or with
respect to any Intellectual Property of Surviving Company.
7.20. INSURANCE. All the insurable portions of Surviving Company's
assets are insured for Surviving Company's benefit under valid and enforceable
policies issued by insurers of recognized responsibility in amounts and against
such risks and losses as is
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customary in the the Company's industry. Exhibit 7.20 sets forth the insurance
policies, along with their premiums, coverage and renewal dates, for Surviving
Company's assets.
7.21. U.S. FOREIGN CORRUPT PRACTICES ACT. There have been no
violations of the U.S. Foreign Corrupt Practices Act of 1977, as amended, by
Surviving Company or any of its agents in connection with Surviving Company.
7.22. LABOR MATTERS. Surviving Company is not a party to any
collective bargaining agreement, memorandum of understanding, settlement or
other labor agreement with any union or labor organization and no union or labor
agreement with any union or labor organization has been recognized by Surviving
Company as an exclusive bargaining representative for employees of Surviving
Company. To the knowledge of Surviving Company, there is no current union
representation matter involving employees of Surviving Company. To Surviving
Company's knowledge, there is no any significant activity or proceeding of any
labor organization (or representative thereof) or employee group to organize any
employees of Surviving Company; there is no material labor dispute, strike,
picketing or work stoppage, or any lockout, involving employees of Surviving
Company pending or, to Surviving Company's knowledge, threatened against or
involving Surviving Company. There is no (i) arbitration, unfair labor practice,
investigation, employment discrimination or other labor or employment related
charge, complaint or claim against Surviving Company pending or, to Surviving
Company's knowledge, threatened before any court, arbitrator, mediator or
governmental agency or tribunal, or (ii) adjudication by any court, arbitrator,
mediator or governmental agency or tribunal that, in the case of either clause
(i) or (ii) above, has had a Surviving Company Material Adverse Effect.
7.23. YEAR 2000 COMPLIANCE. (a) The Information Technology of
Surviving Company is Year 2000 Compliant and will not cause an interruption in
the ongoing operations of the Surviving Company Business or give rise to
liability, including product liability, due to a problem arising from a failure
of the Information Technology relating to Year 2000 Compliance, except where
such failures individually or in the aggregate, do not constitute a Surviving
Company Material Adverse Effect. To Surviving Company's knowledge, the Surviving
Company Disclosure Schedule sets forth correct and complete lists of all of the
hardware, software, firmware, network systems, embedded systems,
telecommunication systems, and other Information Technology of Surviving Company
which is not Year 2000 Compliant.
(b) Surviving Company (i) has made a full and complete assessment of
the Year 2000 Issues and (ii) does not reasonably anticipate that Year 2000
Issues associated with its Information Technology will have a Surviving Company
Material Adverse Effect.
7.24 LIABILITIES. The Surviving Company Disclosure Schedule sets
forth all material indebtedness of Surviving Company for borrowed money,
including without limitation any credit facilities, equipment leases, leasing
lines of credit and promissory notes, any material assumptions, guarantee or
endorsements, or other accommodations of Surviving Company to become responsible
for, the obligations of any person, whether formal or
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informal. For the purposes of this Section 7.24, "material" shall mean
any facility, lease, note, instrument, assumption, guarantee, endorsement and
the like which is in excess of $25,000, whether or not at the time hereof
Surviving Company's liability thereunder is in excess of $25,000.
7.25 ABSENCE OF CHANGES. Since December 31, 1999: (a) Surviving
Company has not (i) entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent with
past practice (for the purposes of this Section 7.25, "material transaction" and
"material action" shall be any transaction or action with a value in excess of
$250,000) or (ii) committed to enter into any such transaction or take any such
action; and (b) there has not occurred any state of facts, change or event that
constitutes a Surviving Company Material Adverse Effect.
7.26. EXEMPT FROM REGISTRATION. The issuance of the TRW Shares
will be exempt from the registration requirements of the Securities and Exchange
Commission (the "SEC") and of any state or foreign securities agencies. No
filings, notices or other actions are required with the SEC or any foreign or
state securities agency in connection with the issuance of the TRW Shares, other
than post-issuance notices by Surviving Company pursuant to Regulation D
promulgated under the Securities Act and similar state securities filings. When
issued, the TRW Shares will be validly issued, fully paid, and nonassessable and
will not have been issued in violation of the preemptive rights of any person.
7.27 REORGANIZATION REPRESENTATIONS. For the purpose of ensuring
that the Merger constitutes a reorganization under Section 368(a)(1) of the
Code, Surviving Company represents and warrants as follows:
(a) the terms of this Agreement and the related agreements are the product
of arms' length negotiations;
(b) Surviving Company's principal reasons for participating in the Merger
are bona fide business purposes not related to taxes;
(c) the Merger will be consummated in compliance with the material terms of
the Agreement, none of the material terms and conditions therein have
been waived or modified, and Surviving Company has no plan or intention
to waive or modify any such material condition;
(d) the fair market value of the Surviving Company Series T-1 Preferred
Stock received by TRW in the Merger will be approximately equal to the
fair market value of the stock of the Company surrendered in exchange
therefor, and the aggregate consideration received by TRW in exchange
for its stock of the Company will be approximately equal to the fair
market value of all of the outstanding shares of stock of the Company
immediately prior to the Merger;
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(e) Surviving Company is not an "investment company" within the meaning of
Section 368(a)(2)(F)(iii) and (iv) of the Code;
(f) TRW is not acting as agent for Surviving Company in connection with the
Merger or the approval thereof and Surviving Company will not reimburse
TRW for any stock of the Company it may have purchased or for other
obligations TRW may have incurred;
(g) one hundred percent (100%) of the shares of stock of the Company
outstanding immediately prior to the Merger will be exchanged solely
for shares of Surviving Company Series T-1 Preferred Stock; Surviving
Company intends that no consideration be paid or received (directly or
indirectly, actually or constructively) for shares of stock of the
Company other than shares of Surviving Company Series T-1 Preferred
Stock; and the total fair market value of all consideration other than
Surviving Company Series T-1 Preferred Stock paid to TRW in the Merger
will be less than fifty percent (50%) of the aggregate fair market
value of stock of the Company outstanding immediately prior to the
Merger;
(h) during the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote
any such shares have, directly or indirectly, been owned by Surviving
Company or, to Surviving Company's knowledge, affiliates of Surviving
Company;
(i) there is no intercorporate indebtedness existing between TRW and the
Company, Surviving Company and the Company, or Surviving Company and
TRW, that was issued, acquired or will be settled at a discount as a
result of the Merger;
(j) Surviving Company will pay separately its own expenses relating to
the Merger (other than expenses directly related to the
transaction within the guidelines set forth in Revenue Ruling
73-54, 1973-1 C.B. 187);
(k) following the Merger, Surviving Company will comply with the
record-keeping and information filing requirements of Treasury
Regulations Section 1.368-3;
(1) the total adjusted basis of the assets of the Company transferred to
Surviving Company will equal or exceed the sum of the liabilities
assumed by Surviving Company, plus the amount of liabilities, if any,
to which the transferred assets are subject;
(m) the fair market value of the assets of the Company transferred to
Surviving Company will equal or exceed the sum of the liabilities
assumed by Surviving Company plus the amount of liabilities, if any, to
which the transferred assets are subject;
(n) Surviving Company has no obligation, understanding, plan or intention
to sell or otherwise dispose of any of the assets of the Company
acquired in the transaction, except for dispositions made in the
ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code and Treasury Regulations Section
1.368-2(k)(1);
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(o) Surviving Company will continue the historic business or the Company or
use a significant portion of the Company's historic business assets in
a business following the Merger;
(q) Surviving Company has no plan or intention to reacquire any of its
stock issued in the Merger; and
(r) except for repurchases or redemptions of Surviving Company stock that:
(1) are consistent with past practices and pursuant to pre-existing,
seasoned and systematic purchase programs that were not created or
modified in connection with the Merger; or (2) are made in connection
with the termination of employees in the ordinary course of business,
neither Surviving Company nor any "related person" with respect to
Surviving Company (as such term is defined by Treasury Regulations
Section 1.368-l(e)(3)) will repurchase or redeem any of the Surviving
Company stock to be issued to TRW in connection with the Merger either
directly or through any transaction, agreement or arrangement with any
other person.
ARTICLE 8
ADDITIONAL COVENANTS OF THE COMPANY AND TRW
The Company and TRW covenant and agree as follows:
8.01. CONDUCT OF BUSINESS OF THE COMPANY. (a) During the period from
the date of this Agreement to the Effective Time, (i) the Company shall conduct
the Company Business in the ordinary course and consistent with past practice,
and the Company shall use commercially reasonable efforts to preserve intact its
business organization, keep available the services of its officers and employees
and preserve intact the present commercial relationships of the Company with all
persons with whom it does business and (ii) without limiting the generality or
effect of the foregoing, the Company will not (except as contemplated by the
financial adjustments described in Section 5.03 hereof):
(A) amend or propose to amend its Articles of Incorporation or
Bylaws (or comparable governing instruments), except as contemplated by
this Agreement;
(B) except as provided herein, authorize for issuance, issue,
deliver, grant, sell, pledge, dispose of or propose to issue, deliver,
grant, sell, pledge or dispose of any shares of, or any options,
warrants, commitments, subscriptions or rights of any kind to acquire
or sell any shares of, the capital stock or other securities of the
Company including, but not limited to, stock appreciation rights,
phantom stock, any securities convertible into or exchangeable for
shares of stock of any class of the Company;
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(C) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or directly or indirectly redeem,
purchase or otherwise acquire or offer to acquire, directly or
indirectly, any shares of its capital stock or other securities;
(D) (a) other than in the ordinary course of business
consistent with past practice, (i) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any person or (ii)
make any loans, advances or capital contributions to, or investments
in, any other person (other than customary travel, relocation or
business advances to employees); (b) acquire the stock or the assets
of, whether by merger, consolidation or otherwise, any other person;
(c) voluntarily incur any material liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary course of
business and in a manner consistent with past practice; (d) sell,
transfer, mortgage, pledge or otherwise dispose of, or encumber, or
agree to sell, transfer, mortgage, pledge or otherwise dispose of or
encumber, any assets or properties, real, personal or mixed material to
the Company other than sales of products in the ordinary course of
business and in a manner consistent with past practice; (e) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person; or (f) enter into a
commitment to make any single capital expenditure which is in excess of
$250,000 or enter into commitments to make capital expenditures (during
any two-month period) which are, in the aggregate, in excess of
$750,000 for the Company (provided that, prior to the Closing, TRW
shall purchase on behalf of the Company the H-P test set previously
disclosed to Surviving Company);
(E) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer,
director, other employee, agent, consultant or affiliate other than
increases in salaries of employees made in the ordinary course of
business consistent with past practice;
(F) except as may be required as a result of a change in Law
or in generally accepted accounting principles, change any of the
accounting practices or principles used by it;
(G) make any material Tax election, settle or compromise any
material federal, state, local or foreign Tax liability, or waive any
statute of limitations for any Tax claim or assessment or change its
fiscal year;
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(H) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to the transactions
contemplated hereby;
(I) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company (other than the Merger);
(J) pay, discharge, satisfy or materially change the terms of
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction (a) in the ordinary course of business of liabilities
reflected or reserved against in the financial statements of the
Company or incurred in the ordinary course of business and (b) of
liabilities required to be paid, discharged or satisfied pursuant to
the terms of any contract in existence on the date hereof;
(K) permit any material insurance policy naming the Company as
a beneficiary or a loss payable payee to be cancelled or terminated
without the prior consent of the Company, except in the ordinary course
of business;
(L) directly or indirectly, solicit or encourage any proposal
from, or provide any financial or statistical data with respect to the
Company or its business or assets to any other person or entity, for
the acquisition of all or any substantial portion of the business,
assets, or common stock or other securities of the Company without the
prior written consent of Surviving Company; or
(M) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 8.01 (a).
(b) The Company shall use commercially reasonable efforts to comply in
all material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Permits
necessary for, or otherwise material to, such business.
8.02. NOTIFICATION OF CERTAIN MATTERS. The Company or TRW, as
applicable, shall give prompt notice to Surviving Company if any of the
following occur after the date of this Agreement and prior to the Closing Date:
(i) receipt by the Company or TRW of any notice or other communication in
writing from any third party alleging that the Consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement; (ii) the occurrence of an event which would or would be reasonably
likely in the future to cause any condition (as set forth in Article 11) to be
unsatisfied at any time prior to the consummation of the transactions
contemplated herein; or (iii) the commencement or written threat of any
Litigation involving or affecting the Company, or any of its properties or
assets, or, to the knowledge of the Company or TRW, any employee, agent,
director or officer, in his or her capacity as such, of the Company which, if
pending on the date hereof, would have been required to have been disclosed
herein or which relates to the consummation of the transactions contemplated
herein.
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8.03. ACCESS AND INFORMATION. Between the date of this Agreement
and the Closing Date, the Company will give, and shall cause its accountants and
legal counsel to give, Surviving Company and its authorized representatives
(including, without limitation, its financial advisors, accountants and legal
counsel), at all reasonable times and upon reasonable notice, access as
reasonably requested to all personnel, offices and other facilities and to all
contracts, agreements, commitments, books and records (including Tax Returns) of
or pertaining to the Company, will permit the foregoing to make such reasonable
inspections as they may require and will cause its officers promptly to furnish
Surviving Company with such financial and operating data and other information
with respect to the business and properties of the Company as Surviving Company
may from time to time reasonably request.
8.04 COMMERCIALLY REASONABLE EFFORTS. SUBJECT to the terms and
conditions herein provided, each of TRW and the Company agrees to use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including, but not limited to, (i) obtaining all
Consents from Governmental Authorities and other third parties required for the
consummation of the transactions contemplated hereby, (ii) timely making all
necessary filings under the HSR Act and any required filings under applicable
foreign antitrust requirements and (iii) having vacated, dismissed or withdrawn
any order, stay, decree, judgment or injunction of any Governmental Authority
which temporarily, preliminarily or permanently prohibits or prevents the
transactions contemplated by this Agreement. Upon the terms and subject to the
conditions hereof, each of TRW and the Company agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
Closing set forth herein.
8.05. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, neither TRW nor the Company shall, and each shall cause its affiliates
not to, issue or cause the publication of any press release or any other
announcement with respect to the transactions contemplated hereby without the
consent of Surviving Company, except as TRW or the Company determines is
required by applicable Law, in which case TRW or the Company, prior to making
such announcement, will, if practicable in the circumstances, consult with
Surviving Company regarding the same.
8.06. COMPANY FINANCIAL STATEMENTS. (a) At least five business
days prior to the Closing Date, the Company will deliver to Surviving Company an
audited balance sheet of the Company as of December 31, 1999 reflecting assets
and liabilities that do not differ in any material respect from the assets and
liabilities reflected on the December 31, 1999 balance sheet included in the
Company Financial Statements.
(b) At least two business days prior to the Closing Date, the
Company will (i) deliver to Surviving Company an unaudited balance sheet of the
Company (the "Estimated Closing Date Balance Sheet") reflecting the good faith
estimate of the Company and TRW of
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the assets to be acquired and liabilities to be assumed by Surviving
Company at the Effective Time as a result of the Merger, except for such assets
and liabilities as are not required to be reported in a balance sheet prepared
in accordance with generally accepted accounting principles and (ii) demonstrate
to Surviving Company's reasonable satisfaction that the Estimated Closing Date
Balance Sheet conforms to the requirements set forth herein.
(c) After the Closing, TRW, at its own expense, will provide
Surviving Company such financial and other data and assistance, including to the
assistance of TRW's auditors, as Surviving Company may reasonably require in
order to prepare, not later than May 31, 2000, such audited and unaudited
financial statements of the Company as may be necessary to enable Surviving
Company to register Surviving Company Common for sale under the Securities Act.
(d) If requested by Surviving Company in connection with an
underwritten public offering of Surviving Company Common, TRW, at its own
expense, will use commercially reasonable efforts to cause its auditors to
provide such assistance, including delivery of customary "comfort" letters, as
Surviving Company or its underwriters may require for "due diligence" purposes.
ARTICLE 9
ADDITIONAL COVENANTS OF SURVIVING COMPANY
Surviving Company covenants and agrees as follows:
9.01. CONDUCT OF BUSINESS OF SURVIVING COMPANY. (a) During the period
from the date of this Agreement to the Effective Time, except as set forth in
the Surviving Company Disclosure Schedule, (i) Surviving Company shall conduct
its or their businesses in the ordinary course and consistent with past
practice, and Surviving Company shall use commercially reasonable efforts to
preserve intact its business organization, keep available the services of its
officers and employees and preserve intact the present commercial relationships
of Surviving Company with all persons with whom it does business and (ii)
without limiting the generality or effect of the foregoing, Surviving Company
will not:
(A) except as provided in this Agreement, amend or propose to
amend its Certificate of Incorporation or Bylaws (or comparable
governing instruments) or any of the Certificates of Designations for
the preferred stock of Surviving Company;
(B) authorize for issuance, issue, deliver, grant, sell,
pledge, dispose of or propose to issue, deliver, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of,
the capital stock or other securities of the Surviving Company,
including, but not limited to, stock appreciation rights, phantom
stock, any securities convertible into or exchangeable for shares of
stock of any class of the Surviving Company,
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except for (i) the issuance of shares of Surviving Company
Common pursuant to the exercise of either incentive or non-qualified
stock options, including management stock options, outstanding on the
close of business on the day immediately preceding the date of this
Agreement and listed in Section 7.01 hereof in accordance with their
present terms, (ii) the issuance of incentive or non-qualified options
to purchase an aggregate of not more than 750,000 shares of Surviving
Company Common to employees of and consultants to Surviving Company
pursuant to Surviving Company's 1992 Stock Option Plan in the ordinary
course of business and consistent with past practice; and (iii) the
issuance of Series G Stock;
(C) except as provided in this Agreement, split, combine or
reclassify any shares of its capital stock or declare, pay or set aside
any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, or
directly or indirectly redeem, purchase or otherwise acquire or offer
to acquire, directly or indirectly, any shares of its capital stock or
other securities (other than the repurchase of shares of Surviving
Company Common Stock at cost pursuant to contractual rights to do so in
connection with the cessation of service of employees of or consultants
to Surviving Company);
(D) (a) other than in the ordinary course of business
consistent with past practice, (i) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations Of any person or (ii)
make any loans, advances or capital contributions to, or investments
in, any other person (other than customary travel, relocation or
business advances to employees); (b) acquire the stock or the assets
of, whether by merger, consolidation or otherwise, any other person
(other than the Merger); (c) voluntarily incur any material liability
or obligation (absolute, accrued, contingent or otherwise) other than
in the ordinary course of business and in a manner consistent with past
practice; (d) sell, transfer, mortgage, pledge or otherwise dispose of,
or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or
mixed material to Surviving Company other than sales of products in the
ordinary course of business and in a manner consistent with past
practice; (e) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person; or
(f) enter into a commitment to make any single capital expenditure
which is in excess of $250,000 or enter into commitments to make
capital expenditures (during any two-month period) which are, in the
aggregate, in excess of $750,000 for Surviving Company;
(E) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity,
pension, retirement, vacation, severance, deferred compensation or
other compensation
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or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, other
employee, agent, consultant or affiliate other than (i) as required
pursuant to the terms of agreements in effect on the date of this
Agreement, and set forth in the Surviving Company Disclosure Schedule
or (ii) increases in salaries of employees or the establishment or
modification of consulting relationships in the ordinary course of
business consistent with past practice;
(F) except as may be required as a result of a change in Law
or in generally accepted accounting principles, change any of the
accounting practices or principles used by it;
(G) make any material Tax election, settle or compromise any
material federal, state, local or foreign Tax liability, or waive any
statute of limitations for any Tax claim or assessment or change its
fiscal year;
(H) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to the transactions
contemplated hereby;
(I) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Surviving Company (other than the Merger);
(J) pay, discharge, satisfy or materially change the terms of
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction (a) in the ordinary course of business of liabilities
reflected or reserved against in the financial statements of Surviving
Company or incurred in the ordinary course of business and (b) of
liabilities required to be paid, discharged or satisfied pursuant to
the terms of any contract in existence on the date hereof;
(K) permit any material insurance policy naming Surviving
Company as a beneficiary or a loss payable payee to be cancelled or
terminated without the prior consent of the Company, except in the
ordinary course of business;
(L) except as required pursuant to this Agreement, modify or
change the vesting rights, the exercise rights or the exercise prices
of any Surviving Company stock option or warrant;
(M) directly or indirectly, solicit or encourage any proposal
from, or provide any financial or statistical data with respect to
Surviving Company or its business or assets to any other person or
entity, for the acquisition of all or any substantial portion of the
business, assets, or common stock or other securities of Surviving
Company without the prior written consent of the Company (other than in
connection with the offer and sale of Series G Stock contemplated
hereby); or
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(N) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 9.01(a).
(b) Surviving Company shall use commercially reasonable efforts to
comply in all material respects with all Laws applicable to it or any of its
properties, assets or business and maintain in full force and effect all the
Permits necessary for, or otherwise material to, such business.
9.02. NOTIFICATION OF CERTAIN MATTERS. Surviving Company shall
give prompt notice to the Company if any of the following occur after the date
of this Agreement and prior to the date of Closing: (i) receipt of any notice or
other communication in writing from any third party alleging that the Consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement; (ii) the occurrence of an event which would or
would be reasonably likely in the future to cause any condition (as set forth in
Article 11) to be unsatisfied at any time prior to the consummation of the
transactions contemplated herein; or (iii) the commencement or written threat of
any Litigation involving or affecting Surviving Company, or any of its
properties or assets, or, to its knowledge, any employee, agent, director or
officer, in his or her capacity as such, of Surviving Company which, if pending
on the date hereof, would have been required to have been disclosed herein or
which relates to the consummation of the transactions contemplated herein.
9.03. ACCESS AND INFORMATION. Between the date of this Agreement
and the Closing Date, Surviving Company will give, and shall cause its
accountants and legal counsel to give, the Company and its authorized
representatives (including, without limitation, its financial advisors,
accountants and legal counsel), at all reasonable times and upon reasonable
notice, access as reasonably requested to all personnel, offices and other
facilities and to all contracts, agreements, commitments, books and records
(including Tax Returns) of or pertaining to Surviving Company, will permit the
foregoing to make such reasonable inspections as they may require and will cause
its officers promptly to furnish the Company with such financial and operating
data and other information with respect to the business and properties of
Surviving Company as the Company may from time to time reasonably request.
9.04 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, Surviving Company agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including, but not limited to, (i) obtaining all Consents from
Governmental Authorities and other third parties required for the consummation
of the transactions contemplated hereby, (ii) timely making all necessary
filings under the HSR Act and any required filings under applicable foreign
antitrust requirements and (iii) having vacated, dismissed or withdrawn any
order, stay, decree, judgment or injunction of any Governmental Authority which
temporarily, preliminarily or permanently prohibits or prevents the transactions
contemplated by this Agreement. Upon the terms and subject to the conditions
hereof, Surviving Company agrees to use commercially reasonable efforts to take,
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or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions of the Closing set forth
herein.
9.05. PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, Surviving Company shall not, and shall cause its affiliates not to,
issue or cause the publication of any press release or any other announcement
with respect to the transactions contemplated hereby without the consent of the
Company, except as Surviving Company determines is required by applicable Law,
in which case Surviving Company, prior to making such announcement, will, if
practicable in the circumstances, consult with the Company regarding the same.
9.06. HIRING OF COMPANY RETIREES. For as long as TRW owns any equity in
Surviving Company, without the prior written consent of TRW, neither Surviving
Company nor any affiliate of Surviving Company will offer employment to any
current or former employee of the TRW within six (6) months of such person's
retirement under the TRW Salaried Pension Plan.
9.07 SURVIVING COMPANY FINANCIAL STATEMENTS. At least two business
days prior to the Closing Date, Surviving Company will (i) deliver to TRW and
the Company an unaudited balance sheet of Surviving Company (the "Surviving
Company Estimated Closing Date Balance Sheet") reflecting the good faith
estimate of Surviving Company of the assets to be acquired and liabilities of
Surviving Company at the Effective Time as a result of the Merger, except for
such assets and liabilities as are not required to be reported in a balance
sheet prepared in accordance with generally accepted accounting principles and
(ii) demonstrate to TRW's and the Company's reasonable satisfaction that the
Surviving Company Estimated Closing Date Balance Sheet shall be prepared in
accordance with generally accepted accounting principles.
ARTICLE 10
ADDITIONAL AGREEMENTS
10.01. STOCKHOLDER ACTIONS. (a) Surviving Company shall have a
stockholder vote to approve the Merger and this Agreement within 20 days of the
date hereof and shall recommend approval of the Merger and this Agreement to its
stockholders. The stockholder vote required for the adoption of this Agreement
and the Merger shall be as required by the GCL. Surviving Company will use all
reasonable efforts to solicit from its stockholders proxies in favor of adoption
and approval of the Merger and to take all other action necessary or, in the
reasonable judgment of the Company, helpful to secure the vote of stockholders
required by the GCL to effect the Merger. Any proxy documentation related to the
stockholders' approval of the Merger and this Agreement shall not contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not false or misleading, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to
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such exchange offer, which earlier statement has since become false or
misleading. Surviving Company will provide TRW the opportunity to review such
stockholder meeting documentation prior to its dissemination and TRW and the
Company will ensure that any information provided by either of them in writing
for the purpose of inclusion in such stockholder meeting documentation conforms
to the standard set forth in the immediately preceding sentence.
(b) Prior to the Closing Date, TRW, as sole shareholder of the
Company, shall take such action as may be necessary under the CAGCL to approve
the Merger and this Agreement. So long as this Agreement remains in effect, TRW
shall not, and shall not permit the Company to, solicit, negotiate or approve
any proposal for a business combination, sale of substantial assets or sale of
shares of the Company.
10.02. TERMINATION OF TRW MILLIWAVE INCENTIVE COMPENSATION PLAN. Prior
to the Effective Time, the Company shall terminate the TRW Milliwave Incentive
Compensation Plan and pay to the participants any amounts that would be owing to
such participants as of the Effective Time.
10.03 ASSUMPTION OF LIABILITIES. Except as otherwise expressly set
forth herein, Surviving Company shall assume any and all liabilities of the
Company as of the Effective Time, even to the extent that such liabilities were
incurred and could be deemed payable prior to the Effective Time, including,
without limitation, any accrued vacation of employees of the Company, any
accrued and unpaid salary, bonuses and other compensation for periods prior to
the Effective Time, and any rental, utility and similar obligations of the
Company for the period prior to the Effective Time. To the extent that, after
the Effective Time, TRW makes any such payments for liabilities, Surviving
Company shall promptly reimburse TRW for such payments.
10.04 NOVATION OF TRW CONTRACTS. Prior to or on the Closing Date,
TRW shall either (i) novate to either the Company or Surviving Company the
following contracts: (i) TRW/Nokia Telecommunications Module Production
Agreement, dated 23 July, 1996, between TRW and Nokia Telecommunications OY
("Nokia"), (ii) 58 GHz Module Development Agreement, dated 14 April, 1999,
between TRW and Nokia (the "MICE Contract"), (iii) OEM Supply Agreement,
effective July 31, 1998, between TRW and Nortel Networks Inc., and (iv) SCAMP
Development and Production Contract No. Y67C-W01365 between TRW and Rockwell
Collins Inc. (collectively, the "Assigned Contracts") or (ii), to the extent
that Nortel or Nokia shall not permit novation of the respective contracts,
enter into contracts with either the Company or Surviving Company that parallel
the Assigned Contracts; provided, however, that with respect to the MICE
Contract, (i) TRW shall retain the payments to be made by Nokia after production
commences in connection with development work on the MICE Contract (the "MICE
Development Payments"), whether or not the MICE Contract is novated, and
Surviving Company agrees to forward the MICE Development Payments promptly to
TRW in the event that it receives it from Nokia and (ii) TRW shall be
responsible for all development, at no charge to Surviving Company, under the
MICE Contract up to and including the E4 module development milestone
thereunder, with
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Surviving Company responsible for all costs of development thereafter; provided,
however, to the extent that Surviving Company agrees to change the E4 module
development milestone criteria at any time after the Effective Time, Surviving
Company shall be responsible for all costs of development under the MICE
Contract immediately following such change. Such post-milestone change work
costs will be at the rates and under the terms of the Services Agreement (as
defined in Section 13.01(d)(ii)) if Surviving Company chooses to engage TRW to
perform such post-change development work. The MICE Development Fee Payments are
as follows: $136,875 paid upon receipt of the certificate of acceptance for the
E4 module delivery; $114,062.50 paid when the first full spec product is
delivered to Nokia, $114,062.50 paid when the 100th full spec product is
delivered to Nokia, $114,062.50 paid when the 500th full spec product is
delivered to Nokia, and $114,062.50 paid when the 1000th full spec product is
delivered to Nokia. To the extent that TRW is unable to novate the Assigned
Contracts prior to the Closing Date, TRW undertakes to use commercially
reasonable efforts to assist Surviving Company in getting the Assigned Contracts
novated after the Closing Date.
10.05 TERMINATION OF CHANGE IN CONTROL PROVISIONS. Prior to or on
the Closing Date, Surviving Company shall have procured from each of Edward
Keible, Douglas Lockie, Julianne Biagini, Jim Bybokas, John Mikulsky and Cliff
Mohwinkel written waivers of change in control provisions of their Surviving
Company stock options (providing for accelerated vesting of Surviving Company
stock options upon either the Merger or the Merger followed by employment
termination).
10.06 TREATMENT OF CONSIGNED INVENTORY. Surviving Company
acknowledges that the Company currently possesses inventory for inclusion in the
Company's products, which has o not yet been sold by TRW to the Company. A
portion of such inventory is included in the Company's works in process. This
consigned inventory includes MMIC chips for the Company's products and housings
specifically for the Company's SCAMP product. With regard to all inventory
contained at the Effective Time in work in process (up to a maximum quantity of
inventory equal to $900,000 at current TRW/Company purchase order pricing),
Surviving Company agrees that, upon the earlier of delivery of each such work in
process to its customer or sixty (60) days after the Effective Time, Surviving
Company shall be deemed to have received an invoice for the inventory contained
therein and shall pay TRW, at current TRW/Company purchase order pricing, the
amount therefor within 30 days of deemed invoicing; with regard to any inventory
in work in process at the Effective Time in excess of such $900,000 amount,
Surviving Company agrees that, upon the earlier of delivery of each such work in
process in which such inventory is incorporated to its customer or sixty (60)
days after the Effective Time, Surviving Company shall be deemed to have
received an invoice for the inventory contained therein and shall pay TRW, at
the pricing set forth in the Supply Agreement (as defined in Section 13.01(d)
hereof), the amount therefor within 30 days of deemed invoiving. Surviving
Company will pay for all other consigned chips within thirty (30) days of their
kitting at the pricing set forth in the Supply Agreement (as defined in Section
13.01 (d)).
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10.07 AUDIT RIGHTS. Prior to the closing of a firmly underwritten
public offering of Surviving Company pursuant to an effective registration
statement under the Securities Act, covering the offer and sale of Surviving
Company Common for the account of Surviving Company, TRW shall have the right,
upon reasonable notice to Surviving Company and at reasonable times, but not
more often than once per year, to conduct a financial audit of Surviving Company
using either external auditors or internal TRW auditors. All costs of third
parties associated with such audit rights shall be borne exclusively by TRW.
10.08 TAX MATTERS. TRW, the Company and Surviving Company will use
all commercially reasonable efforts to avoid any action, either before or after
the Closing, which could reasonably be expected to cause the Merger to fail to
qualify as a reorganization under Section 368(a) of the Code or to cause the
Conversion to fail to qualify as a recapitalization under Section 368(a)(1)(E)
of the Code. For federal income tax purposes, Surviving Company shall report the
Merger as a reorganization within the meaning of Section 368(a) of the Code and
the Conversion as a recapitalization within the meaning of Section 368(a)(1)(E)
of the Code. The parties agree that, notwithstanding any other provisions of
this Agreement or any tax sharing agreement to which the Company may be a party:
(a) Surviving Company shall have no liability for any Taxes attributable to the
Company for the period though and including the Closing Date (except for any
accrued Taxes, which shall not include income taxes, properly reflected on the
Estimated Closing Date Balance Sheet); and (b) TRW shall have no liability for
any Taxes attributable to Surviving Company for any period after the Closing
Date.
ARTICLE 11
CLOSING CONDITIONS
The respective obligations of each party to effect the transactions
contemplated herein shall be subject to the fulfillment or waiver at or prior to
the Closing Date of the following conditions; provided, that the obligation of
each party to effect the transactions contemplated herein shall not be relieved
by the failure of any such conditions if such failure is the proximate result of
any breach by such party of any of its material obligations under this
Agreement:
11.01. NO INJUNCTION OR ACTION. No temporary restraining order,
preliminary injunction or other order issued by any court of competent
jurisdiction or other legal restraint, Law or prohibition shall be in effect (i)
preventing the consummation of the transactions contemplated herein, (ii)
prohibiting or restricting the ownership or operation by Surviving Company of
any material portion of the Company or (iii) compelling Surviving Company to
dispose of or hold separate any material portion of the Company's business or
assets; provided that Surviving Company and the Company, as the case may be,
shall have used commercially reasonable efforts to remove such injunction,
order, restraint or prohibition; nor shall any proceeding brought by any
Governmental Authority of competent jurisdiction seeking any of the foregoing be
pending; nor shall there be any action taken, or any statute,
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rule, regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated hereby, which makes the consummation of such
transactions illegal.
11.02. BANK ACCOUNT BALANCES. On the Closing Date, (a) Surviving
Company shall have at least US$20 million in cash in its bank accounts (which
amount shall be net of Indebtedness, as defined below, and net of the investment
banking fees to be paid by Surviving Company to U.S. Bancorp Piper Jaffray upon
the consummation of the transactions contemplated herein) and (b) the Company
shall have at least US$20 million in cash (which amount shall be net of
Indebtedness). For the purposes of this section 11.02, "Indebtedness" is defined
as any encumbrance, lien, claim, or other interest, or any payment obligation
arising from, incurred by, created in the course of or in connection with
securing the US$20 million in cash described in the foregoing.
11.03. OTHER APPROVALS. On or prior to the Closing Date, the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
(to the extent such filings are required) shall have been terminated or shall
have expired, necessary foreign antitrust approvals shall have been obtained,
the Consents described in sections 5.06 and 7.06 hereof, if any, shall have been
obtained, any U.S. Government export licenses necessary to continue to operate
the Company Business after effecting the Merger, if any, shall have been
obtained and any state, federal or foreign securities approvals and/or filings
in connection with the issuance of the TRW Shares required prior to the issuance
of the TRW Shares shall have been obtained and/or made.
11.04. STOCKHOLDER APPROVAL. The Merger and the other transactions
contemplated hereby shall have been approved at or prior to the Effective Time
by the requisite approval of the stockholders of Surviving Company, by
stockholder vote or written consent, in accordance with the GCL and Surviving
Company's Certificate of Incorporation.
11.05. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the transactions contemplated herein are subject to the
satisfaction of the following conditions (which may be waived in whole or in
part by the Company): (a) Surviving Company shall have performed in all material
respects all of the obligations required to be performed by it under this
Agreement on or before the Closing Date; (b) the representations and warranties
of Surviving Company (without giving effect to any materiality or Surviving
Company Material Adverse Effect qualifications therein) shall be true and
correct as of the date hereof and, except to the extent such representations and
warranties speak as of an earlier date, as of the Closing Date, as though made
at and as of the Closing Date, except (i) for changes contemplated by this
Agreement and (ii) where the failures to be true and correct, in the aggregate,
do not have a Surviving Company Material Adverse Effect and have not had and
would not reasonably be expected to have a material adverse effect upon the
consummation of the transactions contemplated hereby; and (c) the Company shall
have received a certificate dated the Closing Date signed on behalf of Surviving
Company by its Chief Executive Officer or the Chief Financial Officer confirming
the matters set forth in clauses (a) and (b) of this Section 11.05 with respect
to Surviving Company.
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11.06. CONDITIONS OF OBLIGATIONS OF SURVIVING COMPANY. The obligations
of Surviving Company to effect the transactions contemplated hereby are subject
to the satisfaction of the following conditions (which may be waived in whole or
in part by Surviving Company): (a) each of TRW and the Company shall have
performed in all material respects all of the obligations required to be
performed by it under this Agreement on or before the Closing Date; (b) the
representations and warranties of the Company and TRW (without giving effect to
any materiality or Company Material Adverse Effect qualifications therein) shall
be true and correct as of the date hereof and, except to the extent such
representations and warranties speak as of an earlier date, as of the Closing
Date, as though made at and as of the Closing Date, except where the failures to
be true and correct, in the aggregate, do not have a Company Material Adverse
Effect or a Surviving Company Material Adverse Effect and have not had and would
not reasonably be expected to have a material adverse effect upon the
consummation of the transactions contemplated hereby; and (c) Surviving Company
shall have received a certificate dated the Closing Date signed on behalf of TRW
and the Company by a Vice President, Secretary or Assistant Secretary confirming
the matters set forth in clauses (a) and (b) of this Section 11.06 with
respective to their respective companies.
11.07. FILING OF CERTIFICATE. The Certificate shall have been filed
with the Secretary of State of the State of Delaware.
ARTICLE 12
TERMINATION AND ABANDONMENT
12.01. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date, upon the occurrence of any of the following:
(a) by mutual written consent of Surviving Company and the Company
or by the mutual action of their respective Boards of Directors;
(b) by either Surviving Company or the Company if any Governmental
Authority of competent jurisdiction shall have issued an order, decree or ruling
or taken any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement,
and such order, decree or ruling or other action shall have become final and
nonappealable;
(c) by Surviving Company if the Company or TRW shall have committed a
material breach of (i) any of its representations and warranties set forth in
Article 5 hereof such that the closing condition set forth in Section 11.06(b)
would fail to be satisfied or (ii) any of its covenants or other agreements
hereunder such that the closing condition in Section 11.06(a) would fail to be
satisfied and has not cured such material breach within thirty days after
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Surviving Company has given the Company written notice of the material
breach and its intention to terminate this Agreement pursuant to Section 12.01
hereof;
(d) by the Company if Surviving Company shall have committed a material
breach of (i) any of its representations and warranties set forth in Article 7
hereof such that the closing condition set forth in Section 11.05(b) would fail
to be satisfied or (ii) any of its covenants or other agreements hereunder such
that the closing condition set forth in Section 11.05(a) would fail to be
satisfied and has not cured such material breach within thirty days after the
Company has given Surviving Company written notice of the material breach and
its intention to terminate this Agreement pursuant to Section 12.01 hereof;
(e) by Surviving Company if there shall have occurred any event that,
individually or when considered together with any other matter, has had or is
reasonably likely in the foreseeable future to have a Company Material Adverse
Effect;
(f) by the Company if there shall have occurred any event that,
individually or when considered together with any other matter, has had or is
reasonably likely in the foreseeable future to have a Surviving Company Material
Adverse Effect;
(g) by the Company if the stockholders of the Suriving Company do not
approve the terms of this Agreement and the Merger as required under the GCL and
Surviving Company's Certificate of Incorporation prior to on or before the 90th
calendar day after the date hereof; provided that the Company shall not be
permitted to terminate this Agreement pursuant to this Section 12.01 (g) if the
failure of Surviving Company's stockholders to adopt and approve this Agreement
and the Merger is attributable to a failure on the part of the Company to
perform in any material respect any obligation required to have been performed
by it under this Agreement; or
(h) by the Company or Surviving Company if the Closing shall not have
been consummated on or before the 90th calendar day after the date hereof;
provided that the right to terminate this Agreement under this Section 12.01(h)
shall not be available to any party hereto whose failure (or, in the case of the
Company, if TRW's failure) to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such date and further provided that each of the Company, TRW and
Surviving Company shall use commercially reasonable efforts to consummate the
transactions contemplated hereby prior to such date.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs shall give written notice of such termination to the other
party in accordance with Section 14.03 hereof.
12.02 EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 12, this Agreement (other than as specified in Section 14.08 hereof)
shall become void and of no effect with no liability on the part of any party
hereto (or of any of its directors, officers, employees, agents,
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legal or financial advisors or other representatives), except as set forth in
Section 12.02(b) hereof; PROVIDED, HOWEVER, that no such termination shall
relieve any party hereto from any liability for any willful breach of this
Agreement prior to termination. If this Agreement is terminated as provided
herein, each party shall hold in confidence in accordance with the terms and
conditions of the Confidential Disclosure Agreement, dated as of August 27,
1999, by and among TRW, the Company and Surviving Company all materials obtained
from, or based on or otherwise reflecting or generated in whole or in part from
information obtained from, any other party hereto in connection with the
transactions contemplated by this Agreement, and shall not use any such
materials for the purpose of competing with the businesses of the other parties
hereto, whether obtained before or after the execution hereof.
(b) Surviving Company shall pay the Company a fee equal to $3,000,000,
payable by wire transfer in same day funds, if: (i) this Agreement is terminated
pursuant to Section 12.01(g); or (ii) this Agreement is terminated pursuant to
Section 12.01(h) solely due to the failure of Surviving Company to satisfy its
conditions set forth in Sections 11.02(a) or 11.04. The Company shall pay
Surviving Company a fee equal to $3,000,000, payable by wire transfer in same
day funds, if this Agreement is terminated pursuant to Section 12.01 (h) solely
due to the failure of the Company to satisfy its conditions set forth in
Sections 11.02(b). Any payment required to be made pursuant to this Section
12.02(b) shall be paid to the Company or Surviving Company, as the case may be,
no later than two business days after the termination pursuant to Section
12.01(g) or (h). Each of the Company and Surviving Company acknowledges that the
agreements contained in this Section 12.02(b) are an integral part of the
transactions contemplated by this Agreement and that, without these agreements,
the Company and Surviving Company would not enter into this Agreement.
Notwithstanding the foregoing, the fee contemplated hereby shall be paid
pursuant to this Section 12.02(b) regardless of any alleged breach by Surviving
Company or the Company, as the case may be, of its obligations hereunder,
PROVIDED that no payment by Surviving Company the Company made pursuant to this
Section 12.02(b) shall operate or be construed as a waiver by Surviving Company
of any breach of this Agreement by TRW or the Company or of any rights of
Surviving Company in respect thereof or by the Company of any breach of this
Agreement by Surviving Company or of any rights of the Company in respect
thereof.
ARTICLE 13
ITEMS TO BE DELIVERED AT CLOSING
13.01 DELIVERY BY SURVIVING COMPANY. At the Closing, Surviving Company
will deliver to the Company (or TRW, as the case may be) the following
certificates and documents:
(a) STOCK CERTIFICATE. A stock certificate or certificates
representing the TRW Shares which are registered in the name of TRW.
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(b) OFFICER'S CERTIFICATE. The officer's certificates
referenced in Section 11.05(c) hereof.
(c) INVESTORS RIGHTS AGREEMENT. The Investors Rights
Agreement, dated the date hereof, by and among Surviving Company, TRW, and the
investors (the "Investors") listed on Exhibit A thereto (the "Investors Rights
Agreement"), in the form attached hereto as Exhibit 13.01(c) executed on behalf
of Surviving Company and the Investors.
(d) SUPPLY AGREEMENT AND SERVICE AGREEMENT. The Supply
Agreement and the Services Agreement, in the forms attached hereto as Exhibits
13.01(d)(i) and (ii), respectively, executed on behalf of Surviving Company.
(e) EVIDENCE OF FUNDING. Written evidence (which can be in the
form of bank statements or similar documentation) that the condition set forth
in Section 11.02(a) hereof has been satisfied.
(f) EVIDENCE OF WAIVER OF CHANGE IN CONTROL PROVISIONS. Copies
of written waivers referenced in Section 10.05 hereof.
13.02. DELIVERY BY THE COMPANY. At the Closing, the Company (or TRW,
as the case may be) will deliver to Surviving Company the following certificates
and documents:
(a) OFFICER'S CERTIFICATE. The officer's certificates
referenced in Section 11.06(c).
(b) INVESTORS RIGHTS AGREEMENT. The Investors Rights Agreement
executed on behalf of TRW.
(c) SUPPLY AGREEMENT AND SERVICE AGREEMENT. The Supply
Agreement and the Services Agreement, in the forms attached hereto as Exhibits
13.01(d)(i) and (ii), respectively, executed on behalf of TRW.
(d) EVIDENCE OF FUNDING. Written evidence (which can be in the
form of bank statements or similar documentation) that the condition set forth
in Section 11.02(b) hereof has satisfied.
ARTICLE 14
MISCELLANEOUS
14.01. FEES AND COMMISSIONS. Each of the Company and Surviving Company
represent and warrant that it has not incurred any obligation to pay any
brokerage commission or finder's fee with regard to the transactions
contemplated by this Agreement (except for investment banking fees not to exceed
$700,000 to be paid by Surviving Company to U.S. Bancorp Piper Jaffray upon the
consummation of the transactions contemplated hereby).
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14.02. EXPENSES. Surviving Company shall pay its own expenses and costs
(including, without limitation, all counsel fees) in connection with this
Agreement and the transactions contemplated hereby. TRW shall pay all expenses
and costs (including without limitation all investment banking and counsel fees)
of the Company in connection with this Agreement and all transactions
contemplated hereby.
14.03. NOTICES. Any notice required to be given pursuant to this
Agreement must be in writing and shall be given by facsimile transmission or
overnight courier. Such properly given notice shall be deemed to have been given
when actually delivered to and received by the party to whom addressed. Notices
shall be given to the parties hereto at the following addresses
If to Surviving Company:
Endgate Corporation
321 Soquel Way
Sunnyvale, CA 94086
Attention: Chief Executive Officer
Facsimile #: 408.524.9157
With a copy to:
Cooley Godward LLP
One Maritime Plaza, Suite 2000
San Francisco, CA 94111
Attention: Kenneth L. Guernsey
Facsimile #: 415.951.3699
If to the Company:
TRW Milliwave Inc.
6425-C Capital Avenue
Diamond Springs, CA 95619
Attention: Don Dodson
Facsimile #: 592.642.8002
With a copy to:
TRW Inc.
One Space Park
Redondo Beach, CA 90278
Attn: Walter S. Page, III, Esq.
Facsimile #: 310.813.4115
If to TRW:
TRW Inc.
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One Space Park
Redondo Beach, CA 90278
Attention: Jim Myers
Facsimile #: 310.813.0005
With a copy to:
TRW Inc.
One Space Park
Redondo Beach, CA 90278
Attn: Walter S. Page, III, Esq.
Facsimile #: 310.813.4115
Any party hereto may, by giving five days' written notice to the other party,
designate any other address in substitution of the foregoing address to which
notices shall be given.
14.04 ASSIGNMENT. This Agreement shall not be assigned by any
party hereto without the express written consent of the other party.
14.05. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof, supersedes
any prior agreement, and may not be modified or amended except in writing signed
by all the parties hereto.
14.06. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California, except to
the extent that under the laws of the State of Delaware (including conflict of
laws principles thereof) the laws of the State of Delaware would apply, in which
case as to such extent this Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of Delaware.
14.07. WAIVER. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by written instrument of the party charged with such
waiver or estoppel.
14.08. SURVIVAL. The respective representations, warranties, covenants
and agreements of Company, TRW and Surviving Company contained herein or in any
certificates or other documents delivered prior to or at the Closing shall
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other party, but shall
terminate at the Effective Time, except for those contained in Sections 8.06,
9.06, 10.03, 10.04, 10.06, 10.07, 10.08 12.02, 14.02, 14.03, 14.05, 14.06,
14.08, 14.09, 14.12 and 14.13 hereof, which shall survive beyond the Effective
Time.
14.09. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
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court of the United States or any state having jurisdiction, this being
in addition to any other right or remedy to which such party may be entitled
under this Agreement, at law or in equity.
14.10. MULTIPLE COUNTERPARTS. This Agreement may be executed in
separate or multiple counterparts, each of which shall be deemed an original,
but all of which together shall be considered as one and the same agreement.
14.11. SINGULAR, PLURAL, PRONOUNS. ETC. Whenever the context hereof
shall so require, the singular shall include the plural, the male gender shall
include the female gender and the neuter, and vice versa.
14.12. LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions hereof, and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provisions had never been contained herein.
14.13. INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity, (ii)
unless otherwise specified herein, the term "affiliate," with respect to any
person, shall mean and include any person controlling, controlled by or under
common control with such person and (iii) the term "subsidiary" of any specified
person shall mean any corporation 50 percent or more of the outstanding voting
power of which, or any partnership, joint venture, limited liability company or
other entity 50 percent or more of the total equity interest of which, is
directly or indirectly owned by such specified person.
14.14. APPENDICES AND SCHEDULES. All appendices and schedules referred
to herein are
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incorporated herein by reference as though fully set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
The Company:
TRW Milliwave Inc.
By: /s/ WESLEY G. BUSH
----------------------------------------
Surviving Company:
Endgate Corporation
By: /s/ EDWARD A. KEIBLE, JR.
----------------------------------------
TRW:
TRW Inc.
By: /s/ TIMOTHY W. HANNEMANN
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