<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
For the quarterly period ended September 29, 1995 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- -------
Exchange Act of 1934
For the transition period from to
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Commission file number 0-15071
ADAPTEC, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2748530
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(State of Incorporation) (I.R.S. Employer
Identification No.)
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 945-8600
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N/A
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of common stock as of October 20, 1995
was 52,448,217.
This document consists of 16 pages, excluding exhibits, of which this is page 1.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes To Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Results of Operations 10-12
Liquidity and Capital Resources 12-13
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADAPTEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
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Three Month Six Month
Period Ended Period Ended
------------ ------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
(in thousands, except per share data) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net revenues $ 149,110 $ 106,574 $ 287,135 $ 212,635
Cost of revenues 62,659 49,161 119,325 100,334
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Gross profit 86,451 57,413 167,810 112,301
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Operating expenses:
Research and development 18,940 14,893 37,167 28,346
Sales and marketing 18,773 13,771 35,850 27,582
General and administrative 7,593 5,619 14,735 11,137
Write-off of acquired in-process technology 40,554 -- 40,554 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 85,860 34,283 128,306 67,065
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Income from operations 591 23,130 39,504 45,236
Interest income, net of interest expense 2,659 1,480 5,297 2,831
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Income before provision for income taxes 3,250 24,610 44,801 48,067
Provision for income taxes 2,693 6,152 13,081 12,017
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Net income $ 557 $ 18,458 $ 31,720 $ 36,050
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Net income per share $ .01 $ .35 $ .59 $ .67
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Weighted average common and common
equivalent shares outstanding 54,461 53,182 54,201 53,565
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</TABLE>
See accompanying notes.
3
<PAGE> 4
ADAPTEC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
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September 29, March 31,
(in thousands) 1995* 1995*
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 51,119 $ 66,835
Marketable securities 218,640 179,911
Accounts receivable, net 83,101 56,495
Inventories 36,599 31,712
Prepaid expenses and other 15,290 15,519
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Total current assets 404,749 350,472
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Property and equipment, net 72,432 67,863
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Other assets 24,944 17,373
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$ 502,125 $ 435,708
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,400 $ 3,400
Accounts payable 18,359 22,008
Accrued liabilities 53,694 31,006
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Total current liabilities 75,453 56,414
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Long-term debt, net of current portion 5,950 7,650
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Shareholders' equity:
Common stock 163,364 140,191
Retained earnings 257,358 231,453
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Total shareholders' equity 420,722 371,644
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$ 502,125 $ 435,708
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</TABLE>
See accompanying notes.
* Amounts at September 29, 1995 are unaudited. Amounts at March 31, 1995 are
derived from audited annual financial statements.
4
<PAGE> 5
ADAPTEC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
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Six-Month Period Ended
----------------------
September 29, September 30,
(in thousands) 1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,720 $ 36,050
Adjustments to reconcile net income to net cash
provided by operating activities:
Write-off of acquired in-process technology 40,554 --
Depreciation and amortization 8,135 5,921
Deferred taxes (7,923) --
Changes in assets and liabilities:
Accounts receivable (24,128) 4,214
Inventories (2,120) 7,925
Prepaid expenses 1,006 (2,949)
Other assets (271) (4,473)
Accounts payable (5,496) (6,970)
Accrued liabilities 19,099 8,403
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NET CASH PROVIDED BY OPERATING ACTIVITIES 60,576 48,121
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Trillium Research, Inc. and Future Domain
Corporation, less cash acquired (24,489) --
Purchase of property and equipment (11,500) (18,980)
Investment in marketable securities, net (38,729) (7,615)
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NET CASH USED FOR INVESTING ACTIVITIES (74,718) (26,595)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 7,891 3,926
Repurchase of common stock (7,765) (29,005)
Principal payments on long-term debt (1,700) (1,700)
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NET CASH USED FOR FINANCING ACTIVITIES (1,574) (26,779)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (15,716) (5,253)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 66,835 35,387
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,119 $ 30,134
==============================================================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
ADAPTEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 29, 1995
(unaudited)
1. Basis of Presentation
In the opinion of management, the unaudited condensed consolidated
interim financial statements included herein have been prepared on the
same basis as the March 31, 1995 audited consolidated financial
statements and include all adjustments, consisting of only normal
recurring adjustments, necessary to fairly state the information set
forth herein. Certain prior year amounts have been reclassified to
conform to the current year presentation. The statements have been
prepared in accordance with the regulations of the Securities and
Exchange Commission, but omit certain information and footnote
disclosures necessary to present the statements in accordance with
generally accepted accounting principles. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1995. The results of operations for the three- and six-month
periods ended September 29, 1995 are not necessarily indicative of the
results to be expected for the entire year.
2. Supplemental Disclosures of Cash Flows
Cash paid for interest and income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
Six-Month Period Ended
----------------------
September 29, September 30,
1995 1994
---- ----
<S> <C> <C>
Interest $ 421 $ 621
Income taxes $ 14,327 $ 14,222
</TABLE>
3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
September 29, March 31,
1995 1995
---- ----
<S> <C> <C>
Purchased parts and sub-assemblies $ 17,829 $ 12,230
Work in process 4,494 5,839
Finished goods 14,276 13,643
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$ 36,599 $ 31,712
========= ==========
</TABLE>
6
<PAGE> 7
4. Net Income Per Share
Net income per share for the three- and six-month periods ended
September 29, 1995 and September 30, 1994, is computed under the
treasury stock method using the weighted average number of common
shares and common equivalent shares from dilutive stock options
outstanding during the respective periods.
5. Acquisitions
On July 5, 1995, Adaptec, Inc. (the Company) acquired all of the
outstanding capital stock of Trillium Research, Incorporated
(Trillium), a Macintosh developer of RAID software for $3 million in
cash. The amount paid to Trillium shareholders at the date of
acquisition totaled $1.5 million with the remaining amount being paid
to the shareholders over a two-year period ratably at six month
intervals. On July 13, 1995, the Company acquired all of the
outstanding capital stock of Future Domain Corporation (Future Domain)
for $25 million in cash. Future Domain designs, manufactures and
markets desktop I/O products. The amount paid to Future Domain
shareholders totaled $23.8 million with the remaining amount,
exclusive of contingent and unknown liabilities which may have
existed at the date of acquisition, to be paid in July 1996.
On August 23, 1995, the Company acquired all of the outstanding capital
stock of Incat Systems Software USA, Incorporated (Incat) for 385,078
shares of the Company's common stock and for future financial
consideration, contingent upon certain performance criteria. Incat
develops and markets application and I/O software for recordable CD
peripherals.
These acquisitions have been recorded using the purchase method of
accounting and, accordingly, the results of operations and cash flows
of such acquisitions have been included only from the date of
acquisition. Excluding the one-time write-off of in-process technology
of $40.6 million; the aggregate results of operations for the acquired
companies from the dates of the respective acquisitions through
September 29, 1995 were not material to the Company's results of
operations for the three- and six-month periods ended September 29,
1995. Unaudited proforma revenues, net income and net income per share
including the acquired companies mentioned above, were not materially
different from the amounts reported in the accompanying condensed
consolidated statements of operations. The aggregate purchase price of
the acquisitions is shown below (in thousands):
<TABLE>
<S> <C>
Cash paid for Trillium $ 1,500
Cash paid for Future Domain 23,750
Fair market value of stock issued to Incat 17,232
Amounts payable to Trillium and Future
Domain shareholders 2,750
Other acquisition costs 941
---------
$ 46,173
=========
</TABLE>
7
<PAGE> 8
The allocation of the Company's purchase price to the tangible and
identifiable intangible assets acquired and liabilities assumed is
based on preliminary independent appraisals from information currently
available. The preliminary purchase price allocation is summarized as
follows (in thousands):
<TABLE>
<S> <C>
Cash $ 1,702
Accounts receivable 2,478
Inventories 2,767
Prepaid expenses and other 777
Property and equipment 304
In-process technology 40,554
Goodwill 8,200
--------
Assets acquired 56,782
--------
Accounts payable 1,847
Accrued liabilities 839
Deferred tax liability 7,923
--------
Liabilities assumed 10,609
--------
Net assets acquired $ 46,173
========
</TABLE>
6. Income Taxes
The Company recorded a tax provision of $2.7 million (83% of income
before provision for income taxes) for the three-month period ended
September 29, 1995. The higher effective tax rate for this three-month
period primarily resulted from non-deductible goodwill amortization.
The Company's overall effective tax rate for the six-month period ended
September 29, 1995 was 29% which differs from the federal statutory
rate primarily due to non-deductible goodwill amortization offset by
income earned in Singapore where the Company is subject to
significantly lower effective tax rates.
7. Subsequent Events
On October 23, 1995, the Company signed an agreement with Taiwan
Semiconductor Manufacturing Co., Ltd. (TSMC) that will ensure
availability of a portion of the Company's wafer capacity for both
current and future technologies. The contract, which runs through 2001,
provides the Company with a guarantee of increased capacity for wafer
fabrication in return for advance payments. The Company has committed
up to $66 million in advance payments to TSMC over the next three
quarters. This agreement is an addition to an existing contract with
TSMC for guaranteed supply and technology.
8
<PAGE> 9
7. Subsequent Events (continued)
On November 3, 1995, the Company acquired all of the outstanding
capital stock of Power I/O, Inc. (Power I/O) for $7 million in cash.
Power I/O develops high-speed input/output and networking
technologies. This acquisition will be recorded using the purchase
method of accounting. The Company is in the process of evaluating the
allocation of the purchase price to the net assets acquired, which
includes in-process technology that will be written off in the third
quarter of fiscal 1996, and goodwill, which will be amortized over
the benefit period. The interim financial statements as of September
29, 1995 and for the three- and six-month periods then ended do not
include the effects of this transaction.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth the items in the condensed consolidated
statements of income as a percentage of net revenues:
<TABLE>
<CAPTION>
Three Month Six Month
Period Ended Period Ended
------------ ------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 42.0 46.1 41.6 47.2
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Gross profit 58.0 53.9 58.4 52.8
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Operating expenses:
Research and development 12.7 14.0 12.9 13.3
Sales and marketing 12.6 12.9 12.5 13.0
General and administrative 5.1 5.3 5.1 5.2
Write-off of acquired in-process technology 27.2 -- 14.1 --
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57.6 32.2 44.6 31.5
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Income from operations 0.4 21.7 13.8 21.3
Interest income, net 1.8 1.4 1.8 1.3
----- ----- ----- -----
Income before provision for
income taxes 2.2 23.1 15.6 22.6
Provision for income taxes 1.8 5.8 4.6 5.7
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Net income 0.4% 17.3% 11.0% 16.9%
===== ===== ===== =====
</TABLE>
Net Revenues
Net revenues increased 40% to $149 million in the second quarter of fiscal 1996
and 35% to $287 million in the first half of fiscal 1996, from $107 million and
$213 million in the corresponding periods of fiscal 1995. This growth was
primarily attributable to increased shipments of the Company's host adapters
compared to the same period a year ago. This increase in shipments is due to the
continued growth in the high-performance microcomputer markets. Additionally
contributing to the increase in net revenues were increased shipments of the
Company's storage integrated circuits (ICs) compared to the corresponding
periods of fiscal 1995.
10
<PAGE> 11
Gross Margin
Gross margins for the second quarter and the first half of fiscal 1996 were 58%
compared to 54% for the three months ended September 30, 1994 and 53% for the
first half of fiscal 1995. Gross margin was favorably affected by the mix of
products shipped, which included a greater percentage of host adapter shipments.
Additionally, the Company continues to experience increased manufacturing
efficiencies and component cost reductions that contribute to the increased
gross margin. The Company's ability to maintain current gross margin can be
significantly affected by factors such as the mix of products shipped,
competitive price pressures, the timeliness of volume shipments of new products
and the Company's ability to achieve manufacturing cost reductions.
Operating Expenses
Research and development expenses as a percentage of net revenues were 13%
during the second quarter and first half of fiscal 1996 compared to 14% and 13%
in the corresponding periods of fiscal 1995. Actual spending for research and
development increased from the corresponding periods of fiscal 1995 by 27% to
$19 million in the second quarter and 31% to $37 million in the first half of
fiscal 1996. This increased spending was a result of the Company's continued
investment in its core SCSI business together with its ongoing commitment to the
development of new technologies. The Company anticipates that research and
development expenses will continue to increase in absolute dollar amounts over
the remainder of fiscal 1996 as a result of its investment in current and
various future technologies.
Sales and marketing expenses remained consistent at 13% of net revenues for both
the second quarter and first half of each fiscal year. Actual sales and
marketing expenses increased from the corresponding periods of fiscal 1995 by
36% to $19 million in the second quarter and 30% to $36 million in the first
half of fiscal 1996. This spending increase was mainly due to increased staffing
levels and increased advertising and promotional activities aimed at driving
increased demand for the Company's products. The Company anticipates that sales
and marketing expenses will increase in absolute dollar amounts for the
remainder of fiscal 1996 primarily due to advertising and promotional programs
aimed at introducing new technologies and generating demand for the Company's
products and due to increased staffing levels.
General and administrative expenses as a percentage of net revenues remained
consistent at 5% in the second quarter and first half of fiscal 1996 from the
comparable fiscal 1995 periods. Actual spending increased from a year ago
primarily due to costs associated with increased staffing levels to support the
Company's growth.
Interest and Income Taxes
Interest income, net of interest expense, increased 80% to $2.7 million in the
second quarter and 87% to $5.3 million in the first half of fiscal 1996 compared
with the respective periods in fiscal 1995. This was primarily a result of
increased average investment balances compared to the same periods a year ago
and continued principal paydowns on debt.
As discussed under Note 6 of the Notes to Condensed Consolidated Financial
Statements in this report, the Company recorded a tax provision of $2.7 million
(83% of income before provision for income taxes) for the three-month period
ended September 29, 1995. The higher tax rate for this three-month period
primarily resulted from non-deductible goodwill amortization. Accordingly, the
Company's overall effective tax rate for the six-month period ended September
29, 1995 was 29% which differs from the federal statutory rate primarily due
to non-deductible goodwill amortization offset by income earned in Singapore
where the Company is subject to significantly lower effective tax rates.
11
<PAGE> 12
The Company's results of operations may be affected in the future by a variety
of factors, including changes in product mix, competitive pricing pressures,
fluctuations in manufacturing yields, availability of components and capacity
for wafer fabrication, changes in product costs, the timing of new product
introductions and market demand for these products, the cancellation or
rescheduling of orders by its customers, and the accounting effect of
acquisitions of other companies or businesses that the Company may make from
time to time. In addition, the Company's results of operations could be affected
by international and domestic economic conditions and technology changes in the
markets in which it competes. The effect of inflation on the Company's results
of operations has not been material in the periods discussed. Excluding the
one-time write-off of in-process technology, the Company's results of operations
for the three- and six-month periods ended September 29, 1995 were not
materially affected by the acquisitions of Trillium, Future Domain, and Incat.
Management currently believes the Company's results of operations for the
remainder of the fiscal year will not be materially affected by the companies
acquired during the quarter.
Liquidity and Capital Resources
Operating Activities
Net cash generated by operations for the first half of fiscal 1996 was $61
million compared with $48 million for the first half of fiscal 1995. During the
first half of fiscal 1996, the majority of funds generated from operations
resulted from $32 million of net income adjusted by non-cash items including a
non-recurring write-off of acquired in-process technology, net of deferred
taxes, and depreciation and amortization totaling $33 million and $8 million,
respectively. Additionally contributing to favorable operating cash flows was an
increase in accrued liabilities totaling $19 million, resulting from increased
staffing, increased operations, and non-recurring expenses related to the
acquisitions of Trillium, Future Domain, and Incat. Primarily offsetting these
items was an increase in accounts receivable of $24 million resulting from the
timing and increases of shipments during the quarter, and a decrease in accounts
payable of $5 million primarily due to the timing of vendor payments.
During the corresponding period of fiscal 1995, the majority of funds generated
from operations resulted from $36 million of net income adjusted by non-cash
items including depreciation and amortization. Also contributing to positive
cash flows was a decrease in accounts receivable of $4 million, a decrease in
inventories of $8 million, and an increase in accrued liabilities totaling $8
million. Offsetting this was an increase in other assets of $4 million mainly
resulting from a payment in connection with the Company's supply agreement to
support its silicon wafer requirements and a decrease in accounts payable of $7
million primarily due to the timing of vendor payments for inventories and
capital equipment purchases.
Investing Activities
During the first half of fiscal 1996, the Company continued to invest in
equipment for product development, IC testing and board level production. During
the second quarter, the Company added a sixth surface mount technology
production line to its manufacturing facility located in Singapore. Purchases of
property and equipment in the same period a year ago included $8 million
relating to the purchase of land and buildings to support additional staffing
requirements.
In the first half of fiscal 1996, the Company also continued to invest proceeds
from operating activities in marketable securities consisting mainly of various
U.S. government and municipal securities. During the second quarter of fiscal
1996, the Company used $24 million, net of cash acquired for the acquisitions of
Trillium and Future Domain. For further discussion of these acquisitions, see
Note 5 to the Notes to Condensed Consolidated Financial Statements.
12
<PAGE> 13
Investing Activities (continued)
On October 23, 1995, the Company signed an agreement with Taiwan Semiconductor
Manufacturing Co., Ltd. (TSMC) that will ensure availability of a portion of the
Company's wafer capacity for both current and future technologies. The contract,
which runs through 2001, provides the Company with a guarantee of increased
capacity for wafer fabrication in return for advance payments. The Company has
committed up to $66 million in advance payments to TSMC over the next three
quarters. This agreement is an addition to an existing contract with TSMC for
guaranteed supply and technology.
On November 3, 1995, the Company acquired all of the outstanding capital stock
of Power I/O, Inc. (Power I/O) for $7 million in cash. Power I/O develops
high- speed input/output and networking technologies. This acquisition
will be recorded using the purchase method of accounting. The Company is in the
process of evaluating the allocation of the purchase price to the net assets
acquired, which includes in-process technology that will be written off in the
third quarter of fiscal 1996, and goodwill, which will be amortized over the
benefit period. The interim financial statements as of September 29, 1995 and
for the three- and six-month periods then ended do not include the effects of
this transaction.
Financing Activities
During the first half of fiscal 1996 and 1995, the Company received proceeds
from common stock issued under employee stock option and employee stock purchase
plans totaling $8 million and $4 million, respectively. Repurchases of common
stock made by the Company during the same periods totaled $8 million and $29
million, respectively.
The Company anticipates capital expenditures of approximately $15 million for
the remainder of fiscal 1996. The funds for these expenditures are expected to
be generated from operations as well as working capital on hand. The Company may
also require additional funds for increased manufacturing capacity, technology
investments, or acquisitions of complementary businesses, products or
technologies. The Company believes existing working capital, together with
expected cash flows from operations and available sources of bank, equity, debt
and equipment financing, will be sufficient to support the Company's operations
at least through fiscal 1996.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121), which
requires a change in the method used to account for certain long-lived and
identifiable intangible assets. SFAS 121 will be effective for the Company's
fiscal year beginning April 1, 1996. The Company does not believe that adoption
of the standard will have a material impact on its financial position or results
of operations.
13
<PAGE> 14
Part II. OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Security Holders
The Company held its Annual Meeting of shareholders on
August 24, 1995. Out of 51,610,403 shares of Common Stock
entitled to vote at such meeting, there were present in
person or by proxy 44,067,372 shares. At the Annual
meeting, the shareholders of the Company approved the
following matters:
(a) The election of John G. Adler, Laurence B.
Boucher, Robert J. Loarie, B. J. Moore, W. Ferrell
Sanders, F. Grant Saviers and Philip E. White as
directors of the Company for the ensuing year and
until their successors are elected. The vote for
the nominated directors was as follows:
John G. Adler, 44,021,497 votes cast for and
45,875 votes withheld; Laurence B. Boucher,
44,018,581 votes cast for and 48,791 votes
withheld; Robert J. Loarie, 44,063,540 votes cast
for and 3,832 votes withheld; B.J. Moore
44,063,717 votes cast for and 3,655 votes
withheld; W. Ferrell Sanders 44,065,027 votes cast
for and 2,345 votes withheld; F. Grant Saviers,
43,955,281 votes cast for and 112,091 votes
withheld, Phillip E. White 44,060,193 votes cast
for and 7,179 votes withheld;
(b) An amendment to the 1990 Stock Plan to increase
automatically each year the number of shares
reserved for issuance under the plan by 4.25% of
the Common Stock outstanding as of April 1 of each
year starting in 1995 and ending in 2000 upon the
termination of the plan. 28,082,543 votes were
cast for approval; 15,886,188 votes were cast
against and 98,641 votes abstained;
(c) Ratification of the appointment of Price
Waterhouse LLP as the independent accountants of
the Company for the fiscal year ending March 31,
1996. 43,978,100 votes were cast for; 57,728 votes
were cast against and 35,224 votes abstained.
14
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 (a) Stock Purchase Agreement
By and Among Adaptec, Inc.,
Future Domain Corporation,
Jack A. Allweiss, Patricia A.
Allweiss and
Certain Shareholders of
Future Domain Corporation
dated July 13, 1995
2.1 (b) Stock Purchase Agreement By
and Between Adaptec, Inc. and
Certain Shareholders of
Future Domain Corporation
dated July 13, 1995
2.2 Agreement and Plan of
Reorganization By and Among
Adaptec, Inc., Incat Systems
Software USA, Inc., ISS
Acquisition Corporation and
Certain Shareholders of
Incat Systems Software USA,
Inc. dated August 23, 1995
</TABLE>
No Reports on Form 8-K were filed during the quarter.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADAPTEC, INC.
----------------------------------------
Registrant
/s/ PAUL G. HANSEN
----------------------------------------
Paul G. Hansen, Vice-President, Finance
and Chief Financial Officer
(Principal Financial Officer),
Assistant Secretary
Date: November 8, 1995
/s/ ANDREW J. BROWN
----------------------------------------
Andrew J. Brown, Corporate Controller
(Principal Accounting Officer)
Date: November 8, 1995
16
<PAGE> 1
EXHIBIT 2.1(a)
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADAPTEC, INC., FUTURE DOMAIN CORPORATION,
JACK A. ALLWEISS, PATRICIA A. ALLWEISS AND
CERTAIN SHAREHOLDERS OF FUTURE DOMAIN CORPORATION
July 13, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Representations and Warranties Concerning the Transaction . . . . . . . . . . . . . . . . . 4
3.1 Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . 4
3.2 Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . 5
4. Representations and Warranties Concerning the Company . . . . . . . . . . . . . . . . . . . 6
4.1 Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . 6
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Events Subsequent to Most Recent Fiscal Year End . . . . . . . . . . . . . . . . . . 8
4.9 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.12 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.14 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.15 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.16 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.17 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.18 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.20 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.21 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.22 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.23 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.24 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.25 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.26 Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.27 Certain Business Relationships With the Company . . . . . . . . . . . . . . . . . . 21
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4.28 No Adverse Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.29 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Access to Information; Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Conditions to the Buyer's Obligation to Close . . . . . . . . . . . . . . . . . . . 25
7.2 Conditions to the Sellers' Obligation . . . . . . . . . . . . . . . . . . . . . . . 27
8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 28
8.2 Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . 28
8.3 Procedure for Asserting Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5 No Indemnity for Corporate Agents . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.6 Exclusivity of Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . 31
10.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.9 Forum Selection; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 33
10.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.13 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.14 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.15 Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . 34
10.16 Sellers' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.17 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11. Location of Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXHIBITS
Exhibit 3.1 Sellers' Disclosure Schedule
Exhibit 3.2 Buyer's Disclosure Schedule
Exhibit 4 Company Disclosure Schedule
Exhibit 7.1.7(a) Employment and Non-Competition Agreement
Exhibit 7.1.7(b) Consulting Agreement
Exhibit 7.1.8 Opinion of Counsel for Sellers
Exhibit 7.1.12 General Release
Exhibit 7.2.6 Opinion of Counsel for Buyer
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of July 13, 1995, by
and among FUTURE DOMAIN CORPORATION, a California corporation (the "Company"),
the holders of all of the preferred stock and a majority of the common stock of
the Company (the "Sellers"), Jack A. Allweiss ("Jack Allweiss"), Patricia A.
Allweiss ("Patricia Allweiss") and ADAPTEC, INC., a California corporation (the
"Buyer"). As used herein, the "Company" shall mean, unless the context
requires otherwise, FUTURE DOMAIN CORPORATION and the Subsidiary (as defined in
Section 4.6 below). The Company, the Sellers, Jack Allweiss, Patricia Allweiss
and the Buyer are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
RECITALS
The Sellers in the aggregate own all of the outstanding preferred
stock and a majority of the common stock of the Company.
In order to induce Buyer to purchase the shares from Sellers, each of
Jack Allweiss and Patricia Allweiss desires to make certain representations and
warranties, and to enter into certain agreements, as set forth herein.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company owned by them in return for cash.
The consummation of this Agreement and the sale of the shares
hereunder is intended to occur concurrently with the sale of the remaining
shares of common stock of the Company to the Buyer under a separate stock
purchase agreement (the "Minority Shareholder Agreement"), such that upon the
closing of both transactions, the Buyer will own all of the outstanding capital
stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa). Certain other
terms are defined in the text of this Agreement, the location of which is set
forth in Section 11 hereof.
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
<PAGE> 6
"Confidential Information" means any information concerning the
business and affairs of the Company that is designated by the Company as
confidential except for information which (i) was known to, or had been (or was
in the process of being) independently developed by, Buyer or an Affiliate of
Buyer prior to the receipt thereof from the Company; (ii) was at the time of
disclosure by the Company a matter of public knowledge through no fault of the
Buyer or an Affiliate of Buyer; or (iii) was or hereafter is obtained by the
Buyer or an Affiliate of Buyer from a third party under no duty of
confidentiality to the Company.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; (d)
Multiemployer Plan; and (e) any other nonqualified plan providing welfare
benefits, including but not limited to medical, dental, life insurance and
disability benefits.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(l).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Gross Negligence" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the results.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, drawings,
specifications, customer and supplier lists, pricing and cost information,
financial information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Majority Shareholders" shall mean the Allweiss Family Trust and the
Allweiss Charitable Remainder Trust.
"Material Adverse Effect" shall mean a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Company.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
and Code Sec. 414(f).
2
<PAGE> 7
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
2. Purchase and Sale of Company Shares.
2.1 Basic Transaction. Subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of the
Sellers, and each of the Sellers agrees to sell to the Buyer, all of his, her
or its shares of capital stock of the Company (the "Company Shares") at the
Closing for the consideration specified below:
2.1.1 Initial Payment. The Buyer agrees to pay to
the Sellers at Closing the amount of $2.57194971 for each share of Common Stock
of the Company then held and $51.43899425 for each share of Preferred Stock of
the Company then held, for a total initial payment of $20,623,847.48 for all of
such shares, in cash, payable by Buyer's check, subject to the Sellers'
delivery instructions as to certain portions of the initial payment as set
forth in Section 2.5 below. The total purchase price shall be allocated among
the Sellers in proportion to their respective holdings of Preferred and Common
Stock as set forth in Section 4.2.1 of the Company Disclosure Schedule.
2.1.2 Final Payment. The Buyer agrees to pay to
the Sellers not later than the date which is twelve (12) months after the
Closing a final payment equal in the aggregate to $1,325,000 less any amounts
withheld and set off by Buyer pursuant to Section 8 of this Agreement, and
subject to the Sellers' delivery instructions as to four percent (4%) of such
final payment as set forth in the last sentence of this paragraph. Such
payment shall be made in cash by Buyer's check and shall be paid to the
Sellers' in the same proportionate amounts as the initial payment under Section
2.1.1 above. Pursuant to Sellers' request, Buyer shall pay four percent (4%)
of the final payment to L. H. Friend, Weinress, Frankson and Presson ("L. H.
Friend").
2.2 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, CA 94304-1050, on or before July 13, 1995, commencing at 9:00
a.m. local time or, if all required governmental approvals (including any
approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act")) have not been obtained and all closing
conditions satisfied or waived by such
3
<PAGE> 8
date, then on the fifth business day following the receipt of such governmental
approvals and the satisfaction or waiver of all closing conditions set forth in
Section 7 (other than conditions with respect to actions the respective Parties
will take at the Closing itself). The date on which the Closing occurs is
referred to herein as the "Closing Date".
2.3 Deliveries at the Closing. At the Closing, (i) the
Sellers will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 7.1 below; (ii) the Buyer will deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 7.2 below; (iii) each of the Sellers will deliver to the Buyer stock
certificates representing all of such Sellers' Company Shares, endorsed in
blank or accompanied by duly executed assignment documents; and (iv) the Buyer
will deliver the initial payment specified in Section 2.1.1 above as follows:
(A) $455,850.98 to L.H. Friend, (B) $87,495.39 to Cooley Godward Castro
Huddleson & Tatum, plus related costs in the amount specified by the Company to
the Buyer at the Closing and (C) the remainder to the Sellers, pro rata, based
on their respective holdings of Company Shares.
3. Representations and Warranties Concerning the Transaction
3.1 Representations and Warranties of the Sellers. Each
of the Sellers represents and warrants to the Buyer that the statements
contained in this Section 3.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.1) with respect to such Seller, except as
set forth in the disclosure schedule delivered by the Sellers to the Buyer on
the date hereof (and initialed by the Sellers and the Buyer), a copy of which
is attached hereto as Exhibit 3.1 (referred to herein as the "Sellers'
Disclosure Schedule"). The Sellers' Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered paragraphs contained in this Section
3.1.
3.1.1 Organization of Certain Sellers. If the
Seller is a corporation, the Seller is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.
3.1.2 Authorization of Transaction. The Seller has
full power and authority to execute and deliver this Agreement, to consummate
the transactions contemplated hereunder and to perform such Sellers'
obligations hereunder and no other proceedings on the part of such Seller are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions. The
Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
3.1.3 Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the performance of the Sellers' obligations hereunder,
will (A) violate any constitution, statute, regulation, rule,
4
<PAGE> 9
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which the Seller is
subject, or (B) (i) conflict with, (ii) result in a breach of, (iii) constitute
a default under, (iv) result in the acceleration of, (v) create in any party
the right to accelerate, terminate, modify, or cancel, or (vi) require any
notice under, any agreement, contract, lease, license, instrument, franchise,
permit or other arrangement to which the Seller is a party or by which such
Seller is bound or to which any of such Sellers' assets is subject.
3.1.4 Fees. Except as provided in (i) the
Engagement Agreement dated September 14, 1994 between the Company and L.H.
Friend and (ii) Section 10.12 of this Agreement, the Seller has no liability
or obligation to pay any fees or commissions to any broker, finder, agent or
attorney with respect to the transactions contemplated by this Agreement.
3.1.5 Company Shares. The Seller holds of record
and owns beneficially the number of Company Shares set forth next to such
Seller's name in Section 4.2.1 of the Company Disclosure Schedule, free and
clear of any restrictions on transfer, taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands and upon delivery of the stock certificates representing the Company
Shares at Closing and payment therefor as provided in Section 2.2 above, Buyer
will acquire valid title thereto, free and clear of all Security Interests and
restrictions on transfer. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller
to sell, transfer, or otherwise dispose of any capital stock of the Company
(other than this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the Company.
3.2 Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Sellers that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2), except as set forth in the disclosure schedule
delivered by the Buyer to the Sellers on the date hereof (and initialed by the
Buyer and the Sellers), a copy of which is attached hereto as Exhibit 3.2
(referred to herein as the "Buyer's Disclosure Schedule"). The Buyer's
Disclosure Schedule will be arranged in paragraphs corresponding to the
numbered paragraphs contained in this Section 3.2.
3.2.1 Organization of the Buyer. The Buyer is a
corporation duly organized, validity existing, and in good standing under the
laws of the jurisdiction of its incorporation.
3.2.2 Authorization of Transaction. The Buyer has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
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<PAGE> 10
3.2.3 Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws, or (B) (i) conflict with, (ii)
result in a breach of, (iii) constitute a default under, (iv) result in the
acceleration of, (v) create in any party the right to accelerate, terminate,
modify, or cancel, or (vi) require any notice under, any agreement, contract,
lease, license, instrument, or other arrangement to which the buyer is a party
or by which it is bound or to which any of its assets is subject.
3.2.4 Brokers' Fees. Except with respect to an
investment banking fee to be paid to Bear, Stearns & Co., Inc., the Buyer has no
liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement for
which any Seller could become liable or obligated.
3.2.5 Investment. The Buyer is acquiring the
Company Shares for investment and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
4. Representations and Warranties Concerning the Company. The
Company, the Majority Shareholders, Jack Allweiss and Patricia Allweiss hereby
jointly and severally represent and warrant to the Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4), except as set forth in the disclosure
schedule delivered by the Company to the Buyer on the date hereof (and
initialed by the Buyer), a copy of which is attached hereto as Exhibit 4
(referred to herein as the "Company Disclosure Schedule") and except for
events occurring in the Ordinary Course of Business of the Company between the
date of this Agreement and the Closing Date, which events are not material
individually or in the aggregate, do not violate any of the covenants or
agreements of the Company or the Sellers herein in any material respect, and
are disclosed to the Buyer by means of an updated Company Disclosure Schedule
not less than two days prior to the Closing. The Company Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 4.
4.1 Organization, Qualification, and Corporate Power.
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. The Company
is duly authorized to conduct business and is in good standing under the laws
of each jurisdiction where such qualification is required. The Company has
full corporate power and authority, and has all necessary licenses and permits,
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 4.1 of the Company Disclosure
Schedule lists the directors and officers of the Company. The operations now
being conducted by the Company have not been conducted under any other name
during the past five (5) years.
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4.2 Capitalization.
4.2.1 Capital Stock. The entire authorized capital
stock of the Company consists of (i) 150,000 shares of Preferred Stock, all of
which are designated Series A Convertible Preferred Stock, 141,045 of which are
issued and outstanding, and are convertible into an aggregate of 2,820,900
shares of Common Stock, and (ii) 20,000,000 shares of Common Stock, 6,342,880
of which are issued and outstanding. All of the issued and outstanding shares
of capital stock have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the respective Sellers as set forth in
Section 4.2.1 of the Company Disclosure Schedule. All of the outstanding
shares of capital stock have been offered, issued and sold by the Company in
compliance with applicable Federal and state securities laws.
4.2.2 No Other Rights or Agreements. Except for an
option to purchase 1,000 shares of Common Stock, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, preemptive rights or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. The stock option described in the
preceding sentence will be exercised in full prior to the Closing. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
4.3 Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Company is
subject or any provision of its charter or bylaws, or (B) (i) conflict with,
(ii) result in a breach of, (iii) constitute a default under, (iv) result in
the acceleration of, (v) create in any party the right to accelerate,
terminate, modify, or cancel, or (vi) require any notice under, any agreement,
contract, lease, license, instrument, franchise permit or other arrangement to
which the Company is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon
any of its assets). The Company is not required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
4.4 Fees. The Company has no liability or obligation to
pay any fees or commissions to any broker, finder, agent or attorney with
respect to the transactions contemplated by this Agreement.
4.5 Financial Statements. Section 4.5 of the Company
Disclosure Schedule contains the following financial statements (collectively
the "Financial Statements"): (i) audited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for
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the fiscal years ended March 31, 1993, March 31, 1994 and March 31, 1995 (the
"Most Recent Fiscal Year End") for the Company. The audited financial
statements for the fiscal year ended March 31, 1995 are referred to herein as
the "Most Recent Financial Statements." The Financial Statements (including the
notes thereto) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods. The
books of account of the Company reflect as of the dates shown thereon
substantially all items of income and expenses, and all assets, liabilities and
accruals of the Company required to be reflected therein, in accordance with
generally accepted accounting principles consistently applied.
4.6 Subsidiaries. Future Domain Foreign Sales
Corporation (the "Subsidiary") is the only entity in which the Company holds,
directly or indirectly, an equity interest. The Company owns and has good and
valid title to all of the outstanding shares of the capital stock of the
Subsidiary free of any liens or adverse claims (other than any liens or adverse
claims existing by virtue of applicable securities laws). All of the issued
and outstanding shares of capital stock of the Subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, preemptive rights or other
contracts or commitments that could require the Company to sell, transfer, or
otherwise dispose of any capital stock of the Subsidiary or that could require
the Subsidiary to issue, sell, or otherwise cause to become outstanding any of
its own capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of the Subsidiary.
4.7 Title to Assets. The Company has good and marketable
title to, or a valid leasehold interest in, the properties and assets used by
it, located on its premises, or shown on the balance sheet contained within the
Most Recent Financial Statements (the "Most Recent Balance Sheet") or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
Most Recent Fiscal Year End. No Person other than the Company owns any assets
or properties currently utilized in or reasonably necessary to the operations
or business of the Company or situated on any of the premises of the Company.
There are no existing contracts, agreements, commitments or arrangements with
any Person to acquire any of the assets or properties of the Company (or any
interest therein) except for this Agreement and those contracts entered into
during the Ordinary Course of Business for the sale of products and services to
customers of the Company.
4.8 Events Subsequent to Most Recent Fiscal Year End.
Since March 31, 1995, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company. Without limiting the generality of the foregoing,
since that date:
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4.8.1 the Company has not sold, leased,
transferred, or assigned any assets or properties, tangible or intangible,
outside the Ordinary Course of Business,
4.8.2 the Company has not entered into any
agreement, contract, lease, or license outside the Ordinary Course of Business;
4.8.3 no party (including the Company) has
accelerated, terminated, made modifications to, or canceled any agreement,
contract, lease, or license to which the Company is a party or by which it is
bound and the Company has not modified, canceled or waived or settled any debts
or claims held by it, outside the Ordinary Course of Business, or waived or
settled any rights or claims of a substantial value, whether or not in the
Ordinary Course of Business;
4.8.4 none of the assets of the Company, tangible
or intangible, has become subject to any Security Interest;
4.8.5 the Company has not made any capital
expenditures except in the Ordinary Course of Business and not exceeding
$1,000,000 in the aggregate of all such capital expenditures;
4.8.6 the Company has not made any capital
investment in, or any loan to, any other Person;
4.8.7 the Company has not created, incurred,
assumed, or guaranteed any indebtedness for borrowed money and capitalized
lease obligations;
4.8.8 the Company has not granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
4.8.9 there has been no change made or authorized
in the charter or bylaws of the Company;
4.8.10 the Company has not issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
4.8.11 the Company has not declared, set aside, or
paid any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired any
of its capital stock;
4.8.12 the Company has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property in
excess of $25,000 in the aggregate of all such damage, destruction and losses;
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4.8.13 the Company has not suffered any repeated,
recurring or prolonged shortage, cessation or interruption of inventory
shipments, supplies or utility services;
4.8.14 the Company has not made any loan to, or
entered into any other transaction with, any of its Affiliates, directors,
officers, or employees or their Affiliates, and, in any event, any such
transaction was on fair and reasonable terms no less favorable to the Company
than would be obtained in a comparable arm's length transaction with a Person
which is not such a director, officer or employee or Affiliate thereof;
4.8.15 the Company has not entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
4.8.16 the Company has not granted any increase in
the base compensation of any of its directors or officers, or, except in the
Ordinary Course of Business, any of its employees;
4.8.17 the Company has not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its directors,
officers, or employees (or taken any such action with respect to any other
Employee Benefit Plan);
4.8.18 the Company has not made any other change in
employment terms for any of its directors, officers, or employees outside the
Ordinary Course of Business;
4.8.19 the Company has not suffered any adverse
change or any threat of any adverse change in its relations with, or any loss
or threat of loss of, any of its major customers, distributors or dealers;
4.8.20 the Company has not suffered any adverse
change or any threat of any adverse change in its relations with, or any loss
or threat of loss of, any of it major suppliers;
4.8.21 the Company has not received notice or had
knowledge of any actual or threatened labor trouble or strike, or any other
occurrence, event or condition of a similar character;
4.8.22 the Company has not changed any of the
accounting principles followed by it or the method of applying such principles;
4.8.23 the Company has not made a change in any of
its banking or safe deposit arrangements;
4.8.24 the Company has not entered into any
transaction other than in the Ordinary Course of Business; and
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4.8.25 the Company has not committed to any of the
foregoing.
4.9 Undisclosed Liabilities. The Company has no
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes), except for (i) liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) liabilities which
have arisen after the Most Recent Fiscal Year End in the Ordinary Course of
Business.
4.10 Legal Compliance. The Company has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof). No action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, notice or
inquiry has been filed or commenced against, or received by, any governmental
body alleging any failure to so comply. The licenses, permits, approvals,
registrations, qualifications, certificates and other governmental
authorizations that are listed on Section 4.10 of the Company Disclosure
Schedule are the only governmental authorizations that are necessary for the
operations of the Company.
4.11 Tax Matters.
4.11.1 For purposes of this Agreement, "Taxes" means
all federal, state, municipal, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, value added,
license, excise, franchise, employment, withholding, capital stock, levies,
imposts, duties, transfer and registration fees or similar taxes or charges
imposed on the income, payroll, properties or operations of the Company,
together with any interest, additions or penalties, deficiencies or assessments
with respect thereto and any interest in respect of such additions or
penalties.
4.11.2 The Company has filed all reports and returns
with respect to any Taxes ("Tax Returns") that it was required to file. All
such Tax Returns were correct and complete in all respects, and no such Tax
Returns are currently the subject of audit. All Taxes owed by the Company
(whether or not shown on any Tax Return) were paid in full when due or are
being contested in good faith and are supported by adequate reserves on the
Most Recent Balance Sheet. The Company has provided adequate reserves on its
Financial Statements for the payment of any taxes accrued but not yet due and
payable. The Company is not currently the beneficiary of any extension of time
within which to file any Tax Return, and the Company has not waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency.
4.11.3 There is no dispute or claim concerning any
Tax liability of the Company either (A) claimed or raised by any authority in
writing or (B) based upon personal contact with any agent of such authority.
There are no tax liens of any kind upon any property or assets of the Company,
except for inchoate liens for taxes not yet due and payable.
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4.11.4 The Company has not filed a consent under
Sec. 341(f) of the Internal Revenue Code of 1986, as amended (the "Code")
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under any circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any tax allocation or sharing agreement. The Company (A) has
not been a member of any affiliated group within the meaning of Code Sec. 1504
or any similar group defined under a similar provision of state, local, or
foreign law (an "Affiliated Group") filing a consolidated federal Income Tax
Return (other than a group the common parent of which was the Company) and (B)
has no any liability for the taxes of any Person (other than any of the Company
and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
4.11.5 The unpaid Taxes of the Company (A) did not,
as of the Most Recent Fiscal Year End, exceed by any amount the reserve for Tax
liability (rather than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) will not
exceed by any material amount that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of the Company in filing its Tax Returns.
4.12 Properties
4.12.1 The Company owns no real property.
4.12.2 Section 4.12.2 of the Company Disclosure
Schedule lists and describes briefly all real property leased or subleased to
the Company. The Company has delivered to the Buyer correct and complete
copies of the leases and subleases listed in Section 4.12.2 of the Company
Disclosure Schedule (as amended to date), with respect to each lease and
sublease listed in Section 4.12.2 of the Company Disclosure Schedule:
4.12.2.1 the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect in all respects;
4.12.2.2 no party to the lease or sublease
is in breach or default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
4.12.2.3 no party to the lease or sublease
has repudiated any provision thereof;
4.12.2.4 there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease;
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4.12.2.5 the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest
in the leasehold or subleasehold; and
4.12.2.6 all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof, and
have been operated and maintained in accordance with applicable laws, rules,
and regulations in all respects.
4.13 Intellectual Property.
4.13.1 The Company has not interfered with,
infringed upon, misappropriated or violated any Intellectual Property rights of
third parties in any respect, and none of the directors and officers of the
Company has received during the last seven years any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of the Company
must license or refrain from using any Intellectual Property rights of any
third party). No third party has interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of the Company.
4.13.2 Section 4.13.2 of the Company Disclosure
Schedule identifies each patent or registration which has been issued to the
Company with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which the Company
has made with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property (together with any
exceptions). The Company has made available the Buyer correct and complete
copies of all such patents, registrations, applications, licenses, agreements,
and permissions (as amended to date). Section 4.13.2 of the Company Disclosure
Schedule also identifies (i) each trade name or unregistered trademark used by
the Company in connection with any of its businesses and (ii) each unregistered
copyright owned by the Company. With respect to each item of Intellectual
Property required to be identified in Section 4.13.2 of the Company Disclosure
Schedule:
4.13.2.1 the Company possesses all right,
title, and interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
4.13.2.2 the item is legal and valid and in
full force and effect and is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
4.13.2.3 no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending or
threatened which challenges the legality, validity, enforceability, use or
ownership of the item; and
4.13.2.4 The Company has never agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
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4.13.3 Section 4.13.3 of the Company Disclosure
Schedule identifies each item of Intellectual Property that any third party
owns and that the Company uses pursuant to license, sublicense, agreement, or
permission. The Company has made available to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property required
to be identified in Section 4.13.3 of the Company Disclosure Schedule:
4.13.3.1 the license, sublicense,
agreement or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect in all respects;
4.13.3.2 no party to the license,
sublicense, agreement, or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder;
4.13.3.3 no party to the license,
sublicense, agreement, or permission has repudiated any provision thereof; and
4.13.3.4 The Company has not granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
4.14 Tangible Assets. The buildings, machinery,
equipment and other tangible assets that the Company owns and leases are free
from defects (patent and latent), have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
4.15 Inventory. All of the inventory of the Company,
which consists of raw materials and supplies, manufactured and processed parts,
work in process, and finished goods, is usable, merchantable and fit for the
purpose for which it was procured or manufactured, and none of such inventory
is slow-moving, obsolete, damaged, or defective, subject only to the reserve
for inventory write down set forth on the face of the Most Recent Balance Sheet
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company.
4.16 Contracts. Section 4.16 of the Company Disclosure
Schedule lists the following contracts, agreements, commitments and other
arrangements to which the Company is a party or by which it or any of its
assets is bound:
4.16.1 any agreement (or group of related
agreements) for the lease of personal property to or from any Person providing
for lease payments in excess of $12,000 per annum;
4.16.2 any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the
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furnishing or receipt of services, the performance of which will ex-tend over a
period of more than one year or involve consideration in excess of $25,000;
4.16.3 any agreement for the purchase of supplies,
components, products or services from single source suppliers, custom
manufacturers or subcontractors;
4.16.4 any agreement concerning a partnership or
joint venture;
4.16.5 any agreement (or group of related
agreements) under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or any capitalized lease obligation in excess
of $ 1 0, 000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
4.16.6 any agreement concerning confidentiality,
noncompetition or restraint of trade;
4.16.7 any agreement with any Seller or any of such
Sellers' Affiliates (other than the Company) or with any Affiliate of the
Company;
4.16.8 any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of its current or former directors, officers,
and employees;
4.16.9 any collective bargaining agreement;
4.16.10 any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis;
4.16.11 any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees;
4.16.12 any agreement under which the consequences
of a default or termination could have a Material Adverse Effect;
4.16.13 any agreement with any original equipment
manufacturer entered into or performed by the Company within the last three
years;
4.16.14 any agreement pursuant to which the Company
is obligated to provide maintenance, support or training for its products;
4.16.15 any standard form agreement used by the
Company, including, but not limited to, any purchase order, statement of
standard terms and conditions of sale, or employment offer letter;
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4.16.16 any agreement pursuant to which any of the
Company's products is manufactured; and
4.16.17 any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$12,000 or which is expected to continue for more than six months from the date
hereof.
The Company has made available to the Buyer a correct and complete copy of each
written agreement listed in Section 4.16 of the Company Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 4.16 of the Company Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect in all respects; (B)
no party is in breach or default, and no event has occurred, which with notice
or lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; (C) no party has repudiated
any provision of the agreement; and (D) none of the directors or officers of
the Company has any reason to believe that the service called for thereunder
cannot be supplied in accordance with its terms and without resulting in a loss
to any of the Company.
4.17 Notes and Accounts Receivable. All notes and
accounts receivable of the Company, all of which are reflected properly on the
books and records of the Company, are valid receivables subject to no setoffs,
defenses or counterclaims, are current and collectible, and will be collected
in accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of the Company.
4.18 Power of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
4.19 Insurance. Section 4.19 of the Company Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) with respect
to which the Company is a party, a named insured, or otherwise the beneficiary
of coverage:
4.19.1 the name, address, and telephone number of
the agent;
4.19.2 the name of the insurer, the name of the
policyholder, and the name of each covered insured;
4.19.3 the policy number and the period of coverage;
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4.19.4 the scope (including an indication of whether
the coverage is on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
4.19.5 a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all respects (and there
has been no notice of cancellation or nonrenewal of the policy received); (B)
neither the Company nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; (C) no party to the policy has repudiated any
provision thereof, and (D) there has been no failure to give any notice or
present any claim under the policy in due and timely fashion. Section 4.19 of
the Company Disclosure Schedule describes any self-insurance arrangements
affecting any of the Company.
4.20 Litigation. Section 4.20 of the Company Disclosure
Schedule sets forth each instance in which the Company (or any of its assets)
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is or has been within the last three years a party, or, to
the knowledge of the Company, is threatened to be made a party, to any action,
suit, proceeding, hearing, arbitration, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the Company, Jack
Allweiss, Patricia Allweiss and the Majority Shareholders is aware of any facts
or circumstances which would form the basis of any claim against the Company.
4.21 Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by the Company have conformed in all
respects with all applicable contractual commitments and all express and
implied warranties, and the Company has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of the Company. Substantially all of the
products manufactured, sold, leased, and delivered by the Company are subject
to standard terms and conditions of sale or lease. Section 4.21 of the Company
Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for the Company (containing applicable guaranty, warranty, and
indemnity provisions).
4.22 Product Liability. The Company has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury, to
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individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Company.
4.23 Employees. No executive, key employee, or
significant group of employees has advised any of Jack Allweiss, Patricia
Allweiss, Erv Hauck, Mark Robinson, Roger Budris or Madonna Saxton that he, she
or they plan to terminate employment with the Company during the next 12
months. The Company is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strike or grievance, claim of unfair
labor practices, or other collective bargaining dispute within the past three
years. The Company has not committed any unfair labor practice. There is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
4.24 Employee Benefits.
4.24.1 Section 4.24 of the Company Disclosure
Schedule lists each Employee Benefit Plan that the Company maintains or to
which the Company contributes or is obligated to contribute.
4.24.1.1 Each such Employee Benefit Plan
(and each related trust, or fund established by the Company) complies in form
and in operation in all respects with their terms, the applicable requirements
of ERISA, the Code, and other applicable laws.
4.24.1.2 All required reports and
descriptions (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code Sec. 4980B
have been met in all respects with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan. No event has occurred and no
condition exists with respect to any Employee Benefit Plan that would subject
the Company to any tax under Code Sections 4972, 4976 or 4979 or to a fine
under ERISA Sections 502(i) or 502(l).
4.24.1.3 All contributions, premiums or other
payments (including all employer contributions and employee salary reduction
contributions) which are due have been paid to each Employee Benefit Plan and
all contributions, premiums or other payments for any period ending on or
before the Closing Date which are not yet due shall been paid to each such
Employee Benefit Plan or shall be accrued in accordance with the custom and
practice of the Company.
4.24.1.4 Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and which is intended to qualify
under Code Sec. 401(a), has received a favorable determination letter from the
Internal Revenue Service with respect to the qualification of the plan under
Code Section 401(a) and the exemption of any corresponding trust under Code
Section 501, unless the Internal Revenue Service is deemed to have approved the
form of such Plan under applicable IRS Revenue Procedures. A copy of such
determination letters have been provided
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to the Buyer and nothing has occurred since the date of each such determination
letter that would cause such Employee Pension Benefit Plan to lose its ability
to rely on such letter. Each Employee Pension Benefit Plan has been restated
to comply with the 1986 Tax Reform Act and subsequent applicable tax
legislation to the extent required by governing tax law. A copy of any
determination letters applicable to such restatement which have been received
by the Company has been provided to the Buyer.
4.24.1.5 Neither the Company nor any other
Person or entity under common control with the Company within the meaning of
Section 414(b), (c) or (m) of the Code and the regulations thereunder has now
or at any previous time, maintained, established, sponsored, participated in,
or contributed to, any Employee Pension Benefit Plan that is subject to Part 3
of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code. No Employee Welfare Benefit Plan or other Employee Benefit Plan
providing welfare benefits is funded with a trust or other funding vehicle,
other than insurance policies or contracts with a health maintenance
organization or similar health care delivery entity.
4.24.1.6 The Company has made available to
the Buyer correct and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, if any, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each maintained Employee Benefit Plan. The terms of any such
documentation or other communication do not prohibit the Buyer from amending or
terminating any such Employee Benefit Plan.
4.24.2 With respect to each Employee Benefit Plan
that the Company, and/or any controlled group of corporations within the
meaning of Code Sec. 1563 (a "Controlled Group of Corporations") which includes
the Company, maintains or ever has maintained or to which any of them
contributes, ever contributed, or ever has been required to contribute:
4.24.2.1 There have been no prohibited
transactions within the meaning of ERISA Sec. 406 and Code Sec. 4975 with
respect to any such Employee Benefit Plan. No fiduciary within the meaning of
ERISA Sec. 3(21) (a "Fiduciary"), has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is pending or threatened.
4.24.3 Except as disclosed in Schedule 4.24, the
Company does not maintain or contribute to, has never maintained or contributed
to, and has never been required to contribute to, any Employee Welfare Benefit
Plan or any other Employee Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B or Part 6 of Subtitle B of Title I of ERISA).
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4.24.4 There is no liability in connection with any
Employee Benefit Plan that is not fully disclosed or provided for on the Most
Recent Balance Sheet for which disclosure would be required under generally
accepted accounting principles.
4.24.5 No Employee Benefit Plan or the Company has
any liability to any plan participant, beneficiary or other person by reason of
the payment of benefits or the failure to pay benefits with respect to benefits
under or in connection with any such Employee Benefit Plan, other than claims
in the normal administration of such plans.
4.25 Guaranties. The Company is not a guarantor or
otherwise responsible for any liability or obligation (including indebtedness)
of any other Person.
4.26 Environment, Health, and Safety.
4.26.1 For purposes of this Agreement, the following
terms have the following meanings:
"Environmental, Health, and Safety Laws"
means any and all federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, plans, injunctions, judgments,
decrees, requirements or rulings now or hereafter in effect, imposed by any
governmental authority regulating, relating to, or imposing liability or
standards of conduct relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), public health and safety, or employee health and
safety, concerning any Hazardous Materials or Extremely Hazardous Substances,
as such terms as defined herein, or otherwise regulated, under any
Environmental, Health and Safety Laws. The term "Environmental, Health and
Safety Laws" shall include, without limitation, the Clean Water Act (also known
as the Federal Water Pollution Control Act), 33 U.S.C. Section 1251 et seq.
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136 et seq., the Safe Drinking Water Act,
42 U.S.C. Section 300f et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the Superfund
Amendment and Reauthorization Act of 1986, Public Law 99-4, 99, 100 Stat. 1613,
the Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., and the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., all as amended, together with any amendments thereto, regulations
promulgated thereunder and all substitutions thereof.
"Extremely Hazardous Substance" means a
substance on the list described in Section 302 (42 U.S.C. Section 11002(a)(2))
of the Emergency Planning and Community Right to Know Act, 42 U.S.C.
Section 11001 et seq., as amended.
"Hazardous Material" means any material or
substance that, whether by its nature or use, is now or hereafter defined as a
pollutant, dangerous substance, toxic substance, hazardous waste, hazardous
material, hazardous substance or contaminant under any Environmental,
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Health and Safety Laws, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is now or hereafter regulated under any Environmental, Health and Safety
Laws, or which is or contains petroleum, gasoline, diesel fuel or other
petroleum hydrocarbon product.
4.26.2 Each of the Company and its predecessors and
Affiliates (A) has complied with the Environmental, Health, and Safety Laws in
all respects (and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, directive or notice has been filed or commenced
against any of them alleging any such failure to comply), (B) has obtained and
been in substantial compliance with all of the terms and conditions of all
permits, licenses, certificates and other authorizations which are required
under the Environmental, Health, and Safety Laws, and (C) has complied in all
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in the Environmental, Health, and Safety Laws.
4.26.3 The Company has no liability (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), and none of the Company and its predecessors and
Affiliates has handled or disposed of any Hazardous Materials or extremely
Hazardous Substances, arranged for the disposal of any Hazardous Materials or
Extremely Hazardous Substances, exposed any employee or other individual to any
Hazardous Materials or Extremely Hazardous Substances, or owned or operated any
property or facility in any manner that could give rise to any liability, for
damage to any site, location, surface water, groundwater, land surface or
subsurface strata, for any illness of or personal injury to any employee or
other individual, or for any reason under any Environmental, Health, and Safety
Law.
4.26.4 No Extremely Hazardous Substances are
currently, or have been, located at, on, in, under or about all properties
and equipment used in the business of the Company and its predecessors and
Affiliates.
4.26.5 No Hazardous Materials are currently located
at, on, in, under or about all properties and equipment used in the business of
the Company and its predecessors and Affiliates in a manner which violates any
Environmental, Health and Safety Laws or which requires cleanup or corrective
action of any kind under any Environmental, Health and Safety Laws.
4.27 Certain Business Relationships With the Company.
Neither the Sellers nor any director or officer of the Company, nor any member
of their immediate families, nor any Affiliate of any of the foregoing, owns,
directly or indirectly, or has an ownership interest in (a) any business
(corporate or otherwise) which is a party to, or in any property which is the
subject of, any business arrangement or relationship of any kind with Company,
or (b) any business (corporate or otherwise) which conducts the same business
as, or a business similar to, that conducted by the Company.
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4.28 No Adverse Developments. There is no development
(exclusive of general economic factors affecting business in general) or, to
the Company's knowledge, threatened development affecting the Company (or
affecting customers, suppliers, employees, and other Persons which have
relationships with the Company) that (i) is having or may have a Material
Adverse Effect, or (ii) would prevent the Buyer from conducting the business of
the Company following the Closing in the manner in which it was conducted or
planned to be conducted prior to the Closing.
4.29 Full Disclosure. No representation or warranty in
this Section 4 or in any document delivered by Jack Allweiss, Patricia Allweiss
or the Company pursuant to the transactions contemplated by this Agreement, and
no statement, list, certificate or instrument furnished to the Buyer pursuant
hereto or in connection with this Agreement contains any untrue statement of a
material fact, or omits to state any fact necessary to make any statement
herein or therein not materially misleading. There is no fact, development or
threatened development (excluding general economic factors affecting business
in general) which Jack Allweiss and Patricia Allweiss have not disclosed to the
Buyer in writing and which is having or is likely to have a Material Adverse
Effect. Jack Allweiss, Patricia Allweiss or the Company have delivered to the
Buyer true, correct and complete copies of all documents, including all
amendments, supplements and modifications thereof or waivers currently in
effect thereunder, described in the Company Disclosure Schedule.
5. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use his, her or
its reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 7 below).
5.2 Notices and Consents. The Majority Shareholders will
cause the Company to give any notices to third parties and will cause the
Company to use its reasonable best efforts to obtain any third party consents,
that the Buyer reasonably may request in connection with the matters referred
to in Section 4.3 above. Each of the Parties will (and the Majority
Shareholders will cause the Company to) give any notices to, make any filings
with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3.1.2, Section 3.2.2 and Section 4.3
above. Without limiting the generality of the foregoing, the Buyer as an
"Acquiring Person" and the Company as an "Acquired Person" will file the
Notification and Report Forms and related material required by the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, will use their reasonable best efforts
to obtain clearance either through early termination of the waiting period or
through lapse of the waiting period, and will make any further filings pursuant
thereto that may be necessary, proper, or advisable in connection therewith.
Notwithstanding the foregoing, nothing in this Section 5.2 shall be construed
to require any party to transfer or assign rights or other assets to a Person
who is not a Party.
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5.3 Operation of Business. The Majority Shareholders
will not cause or permit the Company to engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Majority Shareholders
will not cause or permit the Company to (i) issue any capital stock or issue or
grant any options, warrants or rights to acquire any capital stock or (ii)
declare, set aside, or pay any dividend or make any distribution with respect
to its capital stock or redeem, purchase, or otherwise acquire any of its
capital stock, or (iii) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in Section 4.8 above. In
addition, the Majority Shareholders will cause the Company to comply with all
laws, statutes, ordinances, rules, regulations and orders applicable to it or
to the conduct of its business, except for violations that would not subject
the Company to a penalty or loss that would constitute a Material Adverse
Effect.
5.4 Preservation of Business. The Majority Shareholders
will cause the Company to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers,
and employees.
5.5 Access to Information; Due Diligence. Each of the
Majority Shareholders will cause the Company to permit the Buyer and its
representatives to have reasonable access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of the
Company, to information sufficient to enable the Buyer to confirm the value of
the transactions contemplated hereby and to complete such governmental filings
and approvals as may be necessary to effect the transaction. At the Company's
request, the Parties will cooperate to restrict access to Confidential
Information to predesignated representatives of the Buyer. Neither such
access, inspection and furnishing of information to the Buyer and its
representatives, nor any investigation by the Buyer and its representatives,
shall in any way diminish or otherwise effect Buyer's right to rely on any
representation or warranty made by the Majority Shareholders or the other
Sellers hereunder. The Buyer and its representatives shall hold in strict
confidence any Confidential Information it or they receive from any of the
Sellers or the Company in the course of the due diligence investigation
contemplated by this Section 5.5, will not improperly utilize or disclose or
convey to any other Person such Confidential Information, and, if this
Agreement is terminated for any reason whatsoever, will return to the Majority
Shareholders and the Company all tangible embodiments (and all copies) of the
Confidential Information which are in its possession. Except as may be
required by law, the Buyer shall not disclose to any Person and shall not
permit any of the Buyer's representatives to disclose to any Person the
existence of this Agreement or any of the terms or provisions hereof.
5.6 Notice of Developments. The Majority Shareholders
will give prompt written notice to the Buyer of any material adverse
development causing a breach of any of the representations and warranties in
Section 4 above. Each Party will give prompt written notice to the others of
any material adverse development causing a breach of any of her or its own
representations and warranties in Section 3 above. No disclosure by any Party
pursuant to this Section 5.6, however, shall be deemed to amend or supplement
Sellers' Disclosure Schedule, the Company Disclosure Schedule or Buyer's
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Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.7 Exclusivity. None of the Sellers will (and the
Majority Shareholders will not cause or permit the Company to) (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of the Company (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will transfer or offer to transfer any of his,
her or its Company Shares. None of the Sellers will vote their Company Shares
in favor of any such acquisition structured as a merger, consolidation, or
share exchange.
6. Post-Closing Covenants. With respect to the period following
the Closing:
6.1 General. In case at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Sellers acknowledge and agree that from and after
the Closing the Buyer will be entitled to possession of all documents, books,
records (including tax records), agreements, and financial data of any sort
relating to the Company.
6.2 Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Closing Date involving the Company or (B) arising out of the
Buyer's operation of the business of the Company following the Closing in the
manner in which it is presently conducted and planned to be conducted, each of
the other Parties will cooperate with him, her or it and his, her or its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below). Notwithstanding
the foregoing, each of Jack Allweiss and Patricia Allweiss agrees that for a
period of three years following the Closing, such Party shall provide to Buyer
the assistance described in the preceding sentence at the sole expense of such
Party.
6.3 Transition. None of the Sellers nor Jack Allweiss or
Patricia Allweiss will take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Company from maintaining the same business
relationships with the Company after the Closing as it maintained with the
Company prior to the Closing.
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6.4 Confidentiality. Each of the Sellers and Jack
Allweiss and Patricia Allweiss will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in her
or its possession. In the event that any of the Sellers, Jack Allweiss or
Patricia Allweiss is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Person will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6.4. If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers, Jack
Allweiss, Patricia Allweiss and directors and officers of the Company is, on
the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, that Person may disclose the
Confidential Information to the tribunal; provided, however, that such
disclosing Person shall use his, her or its reasonable best efforts to obtain,
at the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
7. Conditions to Obligation to Close.
7.1 Conditions to the Buyer's Obligation to Close. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
7.1.1 the representations and warranties set forth
in Section 3.1 and Section 4 above (supplemented in the case of Section 4 by
the updated Company Disclosure Schedule permitted under Section 4) shall be
true and correct in all respects at and as of the Closing Date;
7.1.2 the Majority Shareholders, Jack Allweiss,
Patricia Allweiss, the other Sellers and the Company shall have performed and
complied with all of their covenants hereunder in all respects through the
Closing, and all of the Sellers shall have tendered all of their Company Shares
to the Buyer at the Closing;
7.1.3 the Company shall have procured all of the
third party consents specified in Section 5.2 above;
7.1.4 no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect materially and adversely the right
of the Buyer to own the Company Shares and to control the Company, or (D)
affect materially and adversely the right of the Company to own its assets
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<PAGE> 30
(including without limitation its intellectual property assets) and to operate
its businesses (and no such injunction, judgment, order, decree, ruling or
charge shall be in effect) and no law, statute, ordinance, rule, regulation or
order shall have been enacted, enforced or entered which has caused or will
likely cause any of the effects under clause (A), (B), (C), or (D) of this
7.1.4 to occur.
7.1.5 Jack Allweiss and Patricia Allweiss shall
have delivered to the Buyer a certificate to the effect that each of the
conditions specified above in Section 7.1.1 to Section 7.1.4 (inclusive) is
satisfied in all respects;
7.1.6 all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.1.2, Section 3.2.2, Section 4.3 above or
disclosed in a corresponding Section in Sellers' Disclosure Schedule, the
Company Disclosure Schedule or Buyer's Disclosure Schedule;
7.1.7 Jack Allweiss shall have executed and
delivered to the Company an Employment and Non-Competition Agreement
substantially identical in form and content to the form of agreement attached
hereto as Exhibit 7.1.7(a) (the "Employment Agreement") and Patricia Allweiss
shall have executed and delivered to the Company a consulting agreement
substantially identical in form and content to the form of agreement attached
hereto as Exhibit 7.1.7(b), and such agreements shall be in full force and
effect;
7.1.8 the Buyer shall have received from counsel to
the Sellers an opinion in form and substance as set forth in Exhibit 7.1.8
attached hereto, addressed to the Buyer, and dated as of the Closing Date;
7.1.9 the Buyer shall have received the
resignations of the directors and officers of the Company, effective as of the
Closing;
7.1.10 A actions to be taken by the Sellers and the
Company in connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyer;
7.1.11 all of the conditions to the Buyer's
obligation to close under the Minority Shareholder Agreement shall have been
satisfied and such transaction shall have closed;
7.1.12 each Seller and each officer and director of
the Company shall have executed and delivered a general release of any claims
against the Company and its successors in the form attached hereto as Exhibit
7.1.12;
7.1.13 all disputes between the Company and third
parties shall have been resolved to the satisfaction of the Buyer.
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7.1.14 the Company shall deliver to Buyer a properly
executed statement conforming to the requirements of Treasury Regulation
Sections 1.897-2(h)(l)(i) and 1.1445-2(c)(3) and the Company further agrees to
provide the notification to the Internal Revenue Service required pursuant to
Treasury Regulation Section 1.897-2(h)(2).
The Buyer may waive any condition (in whole or in part)
specified in this Section 7 if it executes a writing so stating at or prior to
the Closing.
7.2 Conditions to the Sellers' Obligation. The
obligation of the Sellers to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
7.2.1 the representations and warranties set forth
in Section 3.2 above shall be true and correct in all respects at and as of the
Closing Date;
7.2.2 the Buyer shall have performed and complied
with all of its covenants hereunder in all respects through the Closing;
7.2.3 no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect) and no law, statute,
ordinance, rule, regulation or order shall have been enacted, enforced or
entered which has caused or will likely cause any of the effects under clause
(A) or (B) of this 7.2.3 to occur;
7.2.4 the Buyer shall have delivered to Jack
Allweiss and Patricia Allweiss a certificate to the effect that each of the
conditions specified above in Section 7.2.1 to Section 7.2.3 (inclusive) is
satisfied in all respects;
7.2.5 all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3.1.2, 3.2.2, and 4.3 above;
7.2.6 the Sellers shall have received from counsel
to the Buyer an opinion in form and substance as set forth in Exhibit 7.2.6
attached hereto, addressed to the Sellers, and dated as of the Closing Date;
7.2.7 all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other
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documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Jack Allweiss and Patricia
Allweiss;
7.2.8 all of the conditions to the Sellers'
obligation to close under the Minority Shareholder Agreement shall have been
satisfied and such transaction shall have closed;
7.2.9 Jack Allweiss and Patricia Allweiss shall
have been relieved of all obligations in their capacities as guarantors under
the Company's bank lines of credit and the Company's credit cards.
The Majority Shareholders may waive on behalf of all the
Sellers any condition specified in this Section 7.2 if they execute a writing
so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
8.1 Survival of Representations and Warranties. All of
the representations and warranties of the Parties contained in Sections 3
and 4 shall survive the Closing (even if the damaged Party knew or had reason
to know of any misrepresentation or breach of warranty at the time of Closing)
and continue in full force and effect for a period of one year following the
Closing. The covenants and agreements in this Agreement shall survive except
to the extent they are specifically limited by their terms.
8.2 Indemnification Provisions for Benefit of the Buyer.
8.2.1 In the event any of the Company, the Majority
Shareholders, Jack Allweiss and Patricia Allweiss breaches any of his, her or
its representations, warranties, agreements or covenants contained herein,
other than representations and warranties contained in Section 3.1, provided
that the Buyer makes a written claim for indemnification pursuant to Section
10.7 below, then, subject to Sections 8.2.3 and 8.6 below, the Sellers agree,
jointly and severally, to indemnify, defend and hold harmless the Buyer
from and against the entirety of any and all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys'
fees and expenses ("Adverse Consequences") the Buyer may suffer through and
after the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
8.2.2 In the event any of the Sellers breaches any
of his, her or its representations and warranties contained in Section 3.1
hereof, provided that the Buyer makes a written claim for indemnification
against such Seller pursuant to Section 10.7 below, then the Seller
(severally and not jointly) agrees to indemnify, defend and hold harmless the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the breach.
28
<PAGE> 33
8.2.3 The Sellers shall not be required to
indemnify Buyer under this Section 8 except to the extent that the cumulative
amount of the Adverse Consequences actually incurred by the Buyer actually
exceeds $62,500, in which case the Sellers shall be obligated to indemnify
Buyer for the full amount of such Adverse Consequences (including the first
$62,500 in Adverse Consequences).
8.3 Procedure for Asserting Claims. If Buyer wishes to
assert a claim for indemnification pursuant to this Section 8, Buyer shall
prepare and deliver to the Sellers' Agent appointed pursuant to Section 10.16
of this Agreement a certificate signed by an officer of Adaptec (an "Officer's
Certificate") providing notice of such claim and specifying in reasonable
detail the date the Adverse Consequences relating to such claim were paid,
incurred or otherwise arose, and the nature of the misrepresentation or breach
to which such Adverse Consequences are related. Buyer shall act reasonably and
in good faith in preparing any such Officer's Certificate and in specifying any
alleged Adverse Consequences. If the Sellers' Agent disputes the claim,
Sellers' Agent shall notify Buyer of such disagreement within ten (10) days of
the receipt from Buyer of the Officer's Certificate, but in no event later than
the date twelve months after the Closing. Thereupon, Buyer and the Sellers'
Agent will, during the thirty (30) day period following delivery of the
Officer's Certificate, or the period remaining before the date twelve months
after the Closing, whichever is less, negotiate in good faith to resolve their
differences with respect to the claim. Upon the earlier of (1) the expiration
of such 30-day period or (2) the date twelve months after the Closing, Buyer
shall deduct the amount of the original claim or, if Buyer and the Sellers'
Agent have agreed on a different amount, reflected in a written memorandum
signed by both parties, such different amount from the final payment to be made
to the Sellers pursuant to Section 2.1.2 above. If the Sellers' Agent does not
object in the manner set forth above to the claim presented in the Officer's
Certificate, Buyer shall deduct the amount of the claim from the final payment
to be made to the Sellers pursuant to Section 2.1.2 above.
8.4 Matters Involving Third Parties.
8.4.1 If any third party shall notify any Buyer
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any Seller (the
"Indemnifying Party") under this Section 8, the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is prejudiced.
8.4.2 The Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner such Indemnified Party reasonably may deem
appropriate (and such Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), and the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 8. Notwithstanding the foregoing sentence, counsel
for
29
<PAGE> 34
any Indemnifying Party shall be permitted to monitor the Indemnified Party's
defense of a Third Party Claim for the purpose of advising the Indemnifying
Party of the status and progress of the defense. Any such activity shall be at
the sole expense of the Indemnifying Party.
8.5 No Indemnity for Corporate Agents. Each of the
Sellers hereby agrees that such Seller will not make any claim for
indemnification against the Company by reason of the fact that such Seller was
a director, officer, employee, or agent of any such entity or was serving at
the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect to any action, suit,
proceeding, complaint, claim, or demand brought by the Buyer against such
Seller (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
8.6 Exclusivity of Remedy. Except as provided in the
next sentence, the Buyer's sole recourse against the Sellers following the
Closing for any breach by any Seller, Jack Allweiss, Patricia Allweiss or the
Company of any representation, warranty, agreement or covenant contained herein
shall be the indemnification provided for under this Section 8 for a period of
one year following the Closing which shall be satisfied, subject to Section 8.3
above, by setting off the amount of any claims against the final payment to the
Sellers set forth in Section 2.1.2 of this Agreement. Notwithstanding the
preceding sentence, in the event of fraud or Gross Negligence on the part of
either Jack Allweiss, Patricia Allweiss or the Company in connection with the
transactions contemplated by this Agreement, Buyer shall have all available
remedies under the law against such Parties and recourse shall not be limited
as provided in the preceding sentence.
9. Termination.
9.1 Termination of the Agreement. Certain of the Parties
may terminate this Agreement as provided below:
9.1.1 the Buyer and the Majority Shareholders may
terminate this Agreement as to all Parties by mutual written consent at any
time prior to the Closing;
9.1.2 the Buyer may terminate this Agreement by
giving written notice to the Majority Shareholders at any time prior to the
Closing (A) in the event any of the Sellers has breached any representation,
warranty, or covenant contained in this Agreement in any respect, the Buyer has
notified the Majority Shareholders of the breach, and the breach has continued
without cure for a period of thirty (30) days after the notice of breach or (B)
if the Closing shall not have occurred on or before July 14, 1995, by reason of
the failure of any condition precedent under Section 7.1 hereof (unless the
failure results primarily from the Buyer itself breaching any representation,
warranty, or covenants contained in this Agreement); and
30
<PAGE> 35
9.1.3 the Majority Shareholders may terminate this
Agreement by giving written notice to the Buyer at any time prior to the
Closing (A) in the event the Buyer has breached any representation, warranty,
or covenant contained in this Agreement in any respect, any of the Majority
Shareholders has notified the Buyer of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before July 14, 1995, by reason of the
failure of any condition precedent under Section 7.2 hereof (unless the failure
results primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement).
9.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 9.1 above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 5.5 above
shall survive termination.
10. Miscellaneous.
10.1 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior written
approval of the Buyer and the Majority Shareholders; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).
10.2 No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
10.3 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
10.4 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of her or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Majority Shareholders;
provided, however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the performance
of all of its obligations hereunder).
31
<PAGE> 36
10.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
10.6 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims,
and other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid and addressed to the intended
recipient as set forth below:
If to the Sellers:
Jack A. Allweiss and Patricia A. Allweiss
P.O. Box 2000-141
Mission Viejo, CA 92690
Copy to:
Cooley Godward Castro Huddleson & Tatum
4365 Executive Drive, Suite 1200
San Diego, CA 92121
Attention: Frederick T. Muto, Esq.
If to the Buyer:
Adaptec, Inc.
691 S. Milpitas Blvd.
Milpitas, CA 95035
Attention: Christopher G. O'Meara
Alicia Jayne Moore, Esq.
Copy to:
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Henry P. Massey, Jr., Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
32
<PAGE> 37
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
10.9 Forum Selection; Consent to Jurisdiction. All
disputes arising out of or in connection with this Agreement shall be solely
and exclusively resolved by a court of competent jurisdiction in the State of
California. The parties hereby consent to the jurisdiction of the Superior
Court of the State of California and the United States District Courts of
California and waive any objections or rights as to forum nonconveniens, lack
of personal jurisdiction or similar grounds with respect to any dispute
relating to this Agreement.
10.10 Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Majority Shareholders. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior to
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence.
10.11 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
10.12 Expenses. Each of the Sellers and the Buyer will
bear her or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers will bear, pro rata, any and all costs and expenses of the
Company (including any of its legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby. To the extent that
the amounts paid at the Closing under clauses (iii)(A) and (B) of Section 2.3
of this Agreement are insufficient to satisfy the obligations of the Sellers
and the Company to the respective payees, the Sellers shall pay any deficiency.
10.13 Transfer Taxes. Each Seller shall pay all sales,
use, stamp, transfer and like taxes, if any, required to be paid in connection
with the transfer of her or its Company Shares hereunder.
10.14 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises,
33
<PAGE> 38
this Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word "including" shall mean
including without limitation.
10.15 Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
10.16 Sellers' Representative. The Sellers hereby appoint
Patricia Allweiss as their agent and representative (the "Sellers' Agent") for
the purposes of: (i) representing, acting for and binding each of them for all
purposes of this Agreement and the Escrow Agreement, including without
limitation, the settlement of any controversies or disagreements between Buyer
and Sellers hereunder; (ii) receiving or giving any notices to or from Sellers
hereunder; and (iii) communicating with the Buyer or the Company as to any
matters relating to this Agreement. In the event Patricia Allweiss is unable,
unwilling or unavailable to serve as Sellers' Representative, the Sellers
hereby appoint Jack Allweiss to serve in such capacity, if he is able, willing
and available, and if not, someone appointed to serve in such capacity by
holders of 51% of the voting power of the Company immediately prior to Closing.
The Buyer shall be entitled to presumptively rely without further inquiry upon
all acts of, and communications from, the Sellers' Agent as being the
authorized actions and communications of the Sellers' Agent as approved by the
Sellers. The Sellers' Agent shall be entitled to take binding action on behalf
of the Sellers upon obtaining the approval of such Sellers who immediately
prior to the Closing owned at least 51% of the voting power of the Company.
Each Seller hereby further agrees that he will indemnify and hold harmless the
Sellers' Agent for any and all actions taken by the Sellers' Agent under the
provisions of this Section 10.16.
10.17 Attorneys' Fees. If any legal proceeding or other
action for fraud or Gross Negligence relating to this Agreement is brought or
otherwise initiated, the prevailing party shall be entitled to recover
reasonable attorneys fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11. Location of Definitions. The following table sets forth the
Sections of this Agreement in which certain terms are defined:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Adverse Consequences 8.2.1
Affiliate 1
Affiliated Group 4.11.4
Buyer Preamble
Buyer's Disclosure Schedule 3.2
Closing 2.2
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Closing Date 2.2
Code 4.11.3
Company Preamble
Company Disclosure Schedule 4
Company Shares 2.1
Confidential Information 1
Controlled Group of Corporations 4.24.2
Employee Benefit Plan 1
Employee Pension Benefit Plan 1
Employee Welfare Benefit Plan 1
Employment Agreement 7.1.7
Environmental Health and Safety Laws 4.26.1
ERISA 1
Extremely Hazardous Substance 4.26.1
Fiduciary 4.24.2.1
Financial Statements 4.5
Hart-Scott Rodino Act 2.4
Hazardous Material 4.26.1
Indemnified or Indemnifying Party 8.4.1
Intellectual Property 1
Majority Shareholders 1
Minority Shareholder Agreement Recitals
Most Recent Balance Sheet 4.7
Most Recent Financial Statements 4.5
Most Recent Fiscal Year End 4.5
Multiemployer Plan 1
Ordinary Course of Business 1
Party or Parties Preamble
Person 1
</TABLE>
35
<PAGE> 40
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Securities Act 3.2.5
Security Interest 1
Seller Preamble
Sellers' Disclosure Schedule 3.1
Subsidiary 4.6
Taxes 4.11.1
Tax Returns 4.11.2
Third Party Claim 8.4.1
</TABLE>
36
<PAGE> 41
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
SIGNATURE GUARANTEED FUTURE DOMAIN CORPORATION
MEDALLION GUARANTEED
WELLS FARGO BANK, N.A. By: /s/ JACK A. ALLWEISS
------------------------------------------
/s/ ? HARPER Title: CEO
---------------------- ---------------------------------------
SIGNATURE GUARANTEED ADAPTEC, INC.
MEDALLION GUARANTEED
WELLS FARGO BANK, N.A. By:
------------------------------------------
/s/ ? HARPER Title:
---------------------- ---------------------------------------
SIGNATURE GUARANTEED /s/ JACK A. ALLWEISS
MEDALLION GUARANTEED ---------------------------------------------
WELLS FARGO BANK, N.A. Jack A. Allweiss
/s/ ? HARPER /s/ PATRICIA A. ALLWEISS
---------------------- ---------------------------------------------
Patricia A. Allweiss
SIGNATURE GUARANTEED
MEDALLION GUARANTEED /s/ JACK A. ALLWEISS PATRICIA A. ALLWEISS
WELLS FARGO BANK, N.A. ---------------------------------------------
Jack A. Allweiss and Patricia A. Allweiss,
/s/ ? HARPER As Trustees for the Allweiss Family Trust
----------------------
/s/ JACK A. ALLWEISS PATRICIA A. ALLWEISS
SIGNATURE GUARANTEED ---------------------------------------------
MEDALLION GUARANTEED Jack A. Allweiss and Patricia A. Allweiss,
WELLS FARGO BANK, N.A. As Trustees for the Allweiss Charitable
Remainder Trust
/s/ ? HARPER
----------------------
SUMMIT VENTURES, L. P.
By:
-----------------------------------
Title:
--------------------------------
37
<PAGE> 42
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
FUTURE DOMAIN CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
ADAPTEC, INC.
By: /s/ S. SUNDARESH
------------------------------------------
Title: Vice President and General Manager
---------------------------------------
---------------------------------------------
Jack A. Allweiss
---------------------------------------------
Patricia A. Allweiss
---------------------------------------------
Jack A. Allweiss and Patricia A. Allweiss,
As Trustees for the Allweiss Family Trust
---------------------------------------------
Jack A. Allweiss and Patricia A. Allweiss,
As Trustees for the Allweiss Charitable
Remainder Trust
SUMMIT VENTURES, L. P.
By:
-----------------------------------
Title:
--------------------------------
37
<PAGE> 43
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
FUTURE DOMAIN CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
ADAPTEC, INC.
By:
------------------------------------------
Title:
---------------------------------------
---------------------------------------------
Jack A. Allweiss
---------------------------------------------
Patricia A. Allweiss
---------------------------------------------
Jack A. Allweiss and Patricia A. Allweiss,
As Trustees for the Allweiss Family Trust
---------------------------------------------
Jack A. Allweiss and Patricia A. Allweiss,
As Trustees for the Allweiss Charitable
Remainder Trust
SUMMIT VENTURES, L. P.
By: /s/ GREGG M. AVIS
-----------------------------------
Title: Managing Partner
--------------------------------
37
<PAGE> 44
SUMMIT VENTURES II, L.P.
By: /s/ GREGG M. AVIS
---------------------------------------
Title: G.P.
------------------------------------
SV EUROFUND, C. V.
By: /s/ GREGG M. AVIS
---------------------------------------
Title: G.P.
------------------------------------
SUMMIT INVESTORS, L. P.
By: /s/ GREGG M. AVIS
---------------------------------------
Title: G.P.
------------------------------------
38
<PAGE> 45
EXHIBIT 3.2
BUYER'S DISCLOSURE SCHEDULE
No exceptions.
<PAGE> 1
EXHIBIT 2.1(b)
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ADAPTEC, INC. AND
CERTAIN SHAREHOLDERS OF FUTURE DOMAIN CORPORATION
July 13, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties Concerning the Transaction . . . . . . . . . . . . . . . 3
3.1 Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . 3
3.2 Representations and Warranties of The Buyer . . . . . . . . . . . . . . . . . . 4
4. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Conditions to the Buyer's Obligation to Close . . . . . . . . . . . . . . . . . 6
6.2 Conditions to the Sellers' Obligation . . . . . . . . . . . . . . . . . . . . . 6
7. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . 7
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.1 Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.1 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . 7
9.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
- i -
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.9 Forum Selection; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . 9
9.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.13 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.14 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.15 Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . 10
9.16 Sellers' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.17 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
EXHIBITS
Exhibit 3.1 Sellers' Disclosure Schedule
Exhibit 3.2 Buyer's Disclosure Schedule
Exhibit 6.1.4 General Release
Exhibit 6.2.4 Opinion of Counsel for Buyer
</TABLE>
- ii -
<PAGE> 4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of July 13, 1995, by
and among certain holders (the "Sellers") of Common Stock of FUTURE DOMAIN
CORPORATION, a California corporation (the "Company") which are signatories
hereto, and ADAPTEC, INC., a California corporation (the "Buyer"). The
Company, the Sellers and the Buyer are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
RECITALS
The Sellers in the aggregate own 1,146,020 shares of the Company's
common stock, representing approximately 12.505% of the outstanding capital
stock of the Company assuming conversion into common stock of all outstanding
preferred stock.
The shareholders who own the remaining 87.495% of the Company's
capital stock assuming conversion into common stock of all outstanding
preferred stock (the "Majority Shareholders") are simultaneously entering into
a separate stock purchase agreement with the Buyer and the Company (the
"Majority Shareholder Agreement").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company owned by the Sellers in return for
cash.
The consummation of this Agreement and the sale of the shares
hereunder is intended to occur concurrently with the sale of the shares by the
Majority Shareholders under the Majority Shareholder Agreement, such that upon
the closing of both transactions, the Buyer will own all of the outstanding
capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa).
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
"Confidential Information" means any information concerning the
business and affairs of the Company that is designated by the Company as
confidential except for information which (i) was
<PAGE> 5
known to, or had been (or was in the process of being) independently developed
by, Buyer or an Affiliate of Buyer prior to the receipt thereof from the
Company; (ii) was at the time of disclosure by the Company a matter of public
knowledge through no fault of the Buyer or an Affiliate of Buyer; or (iii) was
or hereafter is obtained by the Buyer or an Affiliate of Buyer from a third
party under no duty of confidentiality to the Company.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
2. Purchase and Sale of Company Shares.
2.1 Basic Transaction. Subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of the
Sellers, and each of the Sellers agrees to sell to the Buyer, all of his, her
or its shares of common stock of the Company (the "Company Shares") at the
Closing for the amount of $2.72783416 for each of the Company Shares then held
for a total payment of $3,126,152.50 for all of such shares, in cash, payable
by Buyer's check, subject to the Sellers' delivery instructions as to certain
portions of the payment as set forth in Section 2.3 below. The total purchase
price shall be allocated among the Sellers in proportion to their respective
holdings of Company Shares as set forth in Section 3.1.5 of the Sellers'
Disclosure Schedule.
2.2 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, CA 94304-1050, on July 13, 1995, commencing at 9:00 a.m. local
time. The date on which the Closing occurs is referred to herein as the
"Closing Date".
2.3 Deliveries at the Closing. At the Closing, (i) each
of the Sellers will deliver to the Buyer stock certificates representing all of
such Seller's Company Shares, endorsed in blank or accompanied by duly executed
assignment documents; (ii) each of the Sellers will deliver to the Buyer the
document referred to in Section 6.1.4 below; (iii) the Buyer will deliver to
the Sellers the document referred to in Section 6.2.3 below; and (iv) the
Buyer will deliver the payment for the Company Shares specified in
Section 2.1.1 above as follows: (A) $65,149.02 to L.H. Friend, Weinress,
Frankson and Presson ("L.H. Friend"), (B) $12,504.61 to Cooley Godward Castro
Huddleson & Tatum, plus the Sellers' share of the related costs in the amount
specified by the Company to the Buyer at the Closing and (C) the remainder to
the Sellers, pro rata, based on their respective holdings of Company Shares.
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<PAGE> 6
3. Representations and Warranties Concerning the Transaction
3.1 Representations and Warranties of the Sellers. Each
of the Sellers represents and warrants to the Buyer that the statements
contained in this Section 3.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.1) with respect to such Seller, except as
set forth in the disclosure schedule delivered by the Sellers to the Buyer on
the date hereof (and initialed by the Sellers and the Buyer), a copy of which
is attached hereto as Exhibit 3.1 (referred to herein as the "Sellers'
Disclosure Schedule"). The Sellers' Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered paragraphs contained in this Section
3.1.
3.1.1 Organization of Certain Sellers. If the
Seller is a corporation, the Seller is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.
3.1.2 Authorization of Transaction. The Seller has
full power and authority to execute and deliver this Agreement, to consummate
the transactions contemplated hereunder and to perform such Seller's
obligations hereunder and no other proceedings on the part of such Seller are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions. The
Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
3.1.3 Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the performance of the Seller's obligations hereunder,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject, or
(B) (i) conflict with, (ii) result in a breach of, (iii) constitute a default
under, (iv) result in the acceleration of, (v) create in any party the right to
accelerate, terminate, modify, or cancel, or (vi) require any notice under, any
agreement, contract, lease, license, instrument, franchise, permit or other
arrangement to which the Seller is a party or by which such Seller is bound or
to which any of such Seller's assets is subject.
3.1.4 Fees. Except as provided in (i) the
Engagement Agreement dated September 14, 1994 between the Company and L.H.
Friend and (ii) Section 9.12 of this Agreement, the Seller has no liability or
obligation to pay any fees or commissions to any broker, finder, agent or
attorney with respect to the transactions contemplated by this Agreement.
3.1.5 Company Shares. The Seller holds of record
and owns beneficially the number of Company Shares set forth next to such
Seller's name in Section 3.1.5 of the Sellers' Disclosure Schedule, free and
clear of any restrictions on transfer, taxes, Security Interests, options,
warrants,
-3-
<PAGE> 7
purchase rights, contracts, commitments, equities, claims, and demands and upon
delivery of the stock certificates representing the Company Shares at Closing
and payment therefor as provided in Section 2.1 above, Buyer will acquire valid
title thereto, free and clear of all Security Interests and restrictions on
transfer. The Seller is not a party to any option, warrant, purchase night, or
other contract or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any capital stock of the Company (other than this
Agreement). The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
3.2 Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Sellers that the statements contained in
this Section 3.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3.2), except as set forth in the disclosure schedule
delivered by the Buyer to the Sellers on the date hereof (and initialed by the
Buyer and the Sellers), a copy of which is attached hereto as Exhibit 3.2
(referred to herein as the "Buyer's Disclosure Schedule"). The Buyer's
Disclosure Schedule will be arranged in paragraphs corresponding to the
numbered paragraphs contained in this Section 3.2.
3.2.1 Organization of the Buyer. The Buyer is a
corporation duly organized, validity existing, and in good standing under the
laws of the jurisdiction of its incorporation.
3.2.2 Authorization of Transaction. The Buyer has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
3.2.3 Noncontravention. Neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws, or (B) (i) conflict with, (ii)
result in a breach of, (iii) constitute a default under, (iv) result in the
acceleration of, (v) create in any party the right to accelerate, terminate,
modify, or cancel, or (vi) require any notice under, any agreement, contract,
lease, license, instrument, or other arrangement to which the buyer is a party
or by which it is bound or to which any of its assets is subject.
3.2.4 Brokers' Fees. Except with respect to an
investment banking fee to be paid to Bear, Stearns & Co., Inc., the Buyer has no
liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement for
which any Seller could become liable or obligated.
-4-
<PAGE> 8
3.2.5 Investment. The Buyer is acquiring the
Company Shares for investment and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
4. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the Closing:
4.1 General. Each of the Parties will use his, her or
its reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 6 below).
4.2 Notice of Developments. Each Party will give prompt
written notice to the other of any material adverse development causing a
breach of any of her or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 4.2, however, shall
be deemed to amend or supplement Sellers' Disclosure Schedule or Buyer's
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
4.3 Exclusivity. None of the Sellers will (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of the Company (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers will transfer or offer to transfer any of his,
her or its Company Shares. None of the Sellers will vote their Company Shares
in favor of any such acquisition structured as a merger, consolidation, or
share exchange.
5. Post-Closing Covenants. With respect to the period following
the Closing:
5.1 General. In case at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 7 below).
5.2 Confidentiality. Each of the Sellers will treat and
hold as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in her or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Person will
-5-
<PAGE> 9
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 5.2. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers and directors and officers of the Company
is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Person may
disclose the Confidential Information to the tribunal; provided, however, that
such disclosing Person shall use her or its reasonable best efforts to obtain,
at the reasonable request of the Buyer, an order or other assurance that
confidential treatment way be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
6. Conditions to Obligation to Close.
6.1 Conditions to the Buyer's Obligation to Close. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
6 1.1 all of the conditions to the Buyer's
obligation to close under the Majority Shareholder Agreement shall have been
satisfied and such transaction shall have closed;
6.1.2 the representations and warranties set forth
in Section 3.1 above shall be true and correct in all respects at and as of the
Closing Date;
6.1.3 the Sellers shall have performed and complied
with all of their covenants hereunder in a respects through the Closing, and
all of the Sellers shall have tendered all of their Company Shares to the Buyer
at the Closing, and
6.1.4 each Seller shall have executed and delivered
a general release of any claims against the Company and its successors in the
form attached hereto as Exhibit 6.1.4.
The Buyer may waive any condition (in whole or in part) specified in
this Section 6 if it executes a writing so stating at or prior to the Closing.
6.2 Conditions to the Sellers' Obligation. The
obligation of the Sellers to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
6.2.1 all of the conditions to the Seller's
obligation to close under the Majority Shareholder Agreement shall have been
satisfied and such transaction shall have closed;
6.2.2 the representations and warranties set forth
in Section 3.2 above shall be true and correct in all respects at and as of the
Closing Date;
-6-
<PAGE> 10
6.2.3 the Buyer shall have performed and complied
with all of its covenants hereunder in all respects through the Closing; and
6 2.4 the Sellers shall have received from counsel
to the Buyer an opinion in form and substance as set forth in Exhibit 6.2.4
attached hereto, addressed to the Sellers, and dated as of the Closing Date.
The Sellers may waive any condition specified in this Section 6.2 if
they execute a writing so stating at or prior to the Closing.
7. Survival of Representations, Warranties and Covenants. All of
the representations and warranties of the Parties contained in Section 3 shall
survive the Closing (even if the damaged Party knew or had reason to know of
any misrepresentation or breach of warranty at the time of Closing). The
covenants and agreements in this Agreement shall survive except to the extent
they are officially limited by their terms.
8. Termination.
8.1 Termination of the Agreement. Certain of the Parties
may terminate this Agreement as provided below:
8.1.1 the Buyer and the Sellers may terminate this
Agreement as to all Parties by mutual written consent at any time prior to the
Closing; and
8.1.2 the Buyer may terminate this Agreement by
giving written notice to the Sellers' Agent at any time prior to the Closing
(A) in the event any of the Sellers has breached any representation, warranty,
or covenant contained in this Agreement in any respect, the Buyer has notified
the Sellers' Agent of the breach, and the breach has continued without cure for
a period of thirty (30) days after the notice of breach or (B) if the Closing
shall not have occurred on or before July 14, 1995, by reason of the failure of
any condition precedent under Section 6.1 hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty, or
covenants contained in this Agreement)
8.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 8.1 above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 5.2 above
shall survive termination.
9. Miscellaneous.
9.1 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior written
approval of the Buyer and the Sellers' Agent; provided, however,
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<PAGE> 11
that any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making the
disclosure).
9.2 No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
9.3 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof
9.4 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of her or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Sellers' Agent;
provided, however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the performance
of all of its obligations hereunder).
9.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.6 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid and addressed to the intended
recipient as set forth below:
If to the Sellers: Jack A. and Patricia A. Allweiss
P.O. Box 2000-141
Mission Viejo, CA 92690
Copy to: Cooley Godward Castro Huddleson & Tatum
4365 Executive Drive, Suite 1200
San Diego, CA 92121
Attention: Frederick T. Muto, Esq.
-8-
<PAGE> 12
If to the Buyer: Adaptec, Inc.
691 S. Milpitas Blvd.
Milpitas, CA 95035
Attention: Christopher G. O'Meara
Alicia Jayne Moore, Esq.
Copy to: Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Henry P. Massey, Jr., Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other that would cause the
application of the laws of any jurisdiction other than the State of California.
9.9 Forum Selection; Consent to Jurisdiction. All
disputes arising out of or in connection with this Agreement shall be solely
and exclusively resolved by a court of competent jurisdiction in the State of
California. The parties hereby consent to the jurisdiction of the Superior
Court of the State of California and the United States District Courts of
California and waive any objections or rights as to forum nonconveniens, lack
of personal or similar grounds with respect to any dispute relating to this
Agreement.
9.10 Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Sellers' Agent. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior to
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence.
9.11 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
-9-
<PAGE> 13
9.12 Expenses. Each of the Sellers and the Buyer will
bear her or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers will bear, pro rata with the Majority Shareholders, any
and all costs and expenses of the Company (including any of its legal fees and
expenses) In connection with this Agreement or any of the transactions
contemplated hereby. To the extent that the amounts paid at the Closing under
clauses (iv)(A), (B) and (C) of Section 2.3 of this Agreement are insufficient
to satisfy the obligations of the Sellers and the Company to the respective
payees, the Sellers shall pay any deficiency on a pro rata basis with the
Majority Shareholders.
9.13 Transfer Taxes. Each Seller shall pay all sales,
use, stamp, transfer and like taxes, if any, required to be paid in connection
with the transfer of her or its Company Shares hereunder.
9.14 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Agreement. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
9.15 Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof
9.16 Sellers' Representative. The Sellers hereby appoint
Patricia Allweiss as their agent and representative (the "Sellers' Agent") for
the purposes of (i) representing, acting for and binding each of them for all
purposes of this Agreement, including without limitation, the settlement of any
controversies or disagreements between Buyer and Sellers hereunder; (ii)
receiving or giving any notices to or from Sellers hereunder; and (iii)
communicating with the Buyer or the Company as to any matters relating to this
Agreement. In the event Patricia Allweiss, is unable, unwilling or unavailable
to serve as Sellers' Representative, the Sellers hereby appoint Jack Allweiss
to serve in such capacity, if he is able, willing and available, and if not,
someone appointed to serve in such capacity by holders of 51% of the voting
power of the Company Shares held by the Sellers immediately prior to Closing.
The Buyer shall be entitled to presumptively rely without further inquiry upon
all acts of, and communications from, the Sellers' Agent as being the
authorized actions and communications of the Sellers' Agent as approved by the
Sellers. The Sellers' Agent shall be entitled to take binding action on behalf
of the Sellers upon obtaining the approval of such Sellers who immediately
prior to the Closing owned at least 51% of the Company Shares held by the
Sellers immediately prior to the Closing. The Sellers' Agent shall not be
liable for any act done or omitted hereunder as Sellers' Agent while acting in
good faith, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith. The Sellers shall severally
indemnify the Sellers' Agent and hold such agent harmless against any loss,
liability or expense incurred without gross negligence or bad faith on the part
of the Sellers' Agent and arising out of or in
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<PAGE> 14
connection with any and all actions taken by the Sellers' Agent under the
provisions of this Section 9.16.
9.17 Attorneys' Fees. If any legal proceeding or other
action for fraud or Gross Negligence relating to this Agreement is brought or
otherwise initiated, the prevailing party shall be entitled to recover
reasonable attorneys fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
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<PAGE> 15
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title: Vice President and General Manager
--------------------------------------
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
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<PAGE> 16
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
[SEAL] /s/ ALLAN F. PEASE
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
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<PAGE> 17
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
[SEAL] /s/ HERBERT EVANDER MARIE EVANDER
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
-12-
<PAGE> 18
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
[SEAL] /s/ HERBERT EVANDER MARIE EVANDER
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Modonna Saxton
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<PAGE> 19
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
[SEAL]
By: /s/
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
-12-
<PAGE> 20
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
[SEAL] /s/ MARY D. GIERKE
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
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<PAGE> 21
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
[SEAL] /s/ ROLANDO MONTERROSA
--------------------------------------------
Rolando Monterrosa
--------------------------------------------
Madonna Saxton
-12-
<PAGE> 22
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
ADAPTEC, INC.
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Allan F. Pease
--------------------------------------------
Herbert and Marie Evander, Co-Trustees U/D/T
dtd January 22, 1981
CRUTTENDEN & COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
Mary D. Gierke
--------------------------------------------
Rolando Monterrosa
[SEAL] /s/ MADONNA SAXTON
--------------------------------------------
Madonna Saxton
-12-
<PAGE> 23
EXHIBIT 3.2
BUYER'S DISCLOSURE SCHEDULE
No exceptions.
<PAGE> 24
EXHIBIT 6.1.4
RELEASE AGREEMENT
The undersigned, pursuant to Section 6.1.4 of the Stock Purchase
Agreement dated as of July __, 1995 (the "Stock Purchase Agreement"), by and
between Adaptec, Inc., a California corporation ("Adaptec") and certain holders
of Common Stock of Future Domain Corporation, a California corporation (the
"Company") DOES HEREBY RELEASE, DISCHARGE AND ACQUIT FOREVER the Company and
each of its successors and assigns, from any and all demands, claims or other
liabilities (or potential demands, claims or liabilities) of every kind and
character whatsoever, arising in connection with any matter whatsoever
occurring on or prior to the date of this release, whether known or unknown,
suspected or unsuspected (collectively, the "Subject Claims"). The undersigned
acknowledges that such party has considered the possibility that such party may
not fully know the number or magnitude of all the Subject Claims or other
claims which such party has or may have against the Company or its successors
and assigns, but nevertheless, intends to assume the risk that such party is
releasing such unknown claims and agrees that this Agreement is a full and
final release of any and all Subject Claims and any other claims, and expressly
waives the benefits of Section 1542 of the California Civil Code which provides
that:
"A general release does not extend the release to claims which
the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must
have materially affected his settlement with the debtor."
The undersigned understands and acknowledges the significance and
consequences of such specific waiver of Section 1542, and hereby assumes full
responsibilities for any injuries, damages or losses that each may incur as a
result of such waiver.
This release is given for good and valuable consideration received by
the undersigned and to induce Adaptec to consummate the transactions described
in the Stock Purchase Agreement. This
<PAGE> 25
release shall remain in full force and effect without regard to the expiration
provisions under the Stock Purchase Agreement. Notwithstanding the generality
of the foregoing, the release granted hereby shall have no effect on claims
arising direct out of the Stock Purchase Agreement or upon transactions
subsequent to the date hereof.
EXECUTED this ___ day of ____________, 1995.
_______________________________
(Signature)
_______________________________
(Print Name)
-2-
<PAGE> 26
EXHIBIT 6.2.4
OPINION OF COUNSEL FOR BUYER
To the Persons Listed on Exhibit A Hereto
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement by and among
Adaptec, Inc., a California corporation (the "Company") and certain
shareholders (the "Sellers") of Future Domain Corporation, a California
corporation ("Future Domain") dated ______________, 19__ (the "Agreement"). The
Agreement provides for the sale and transfer by the Sellers of a minority of
the issued and outstanding stock of Future Domain to the Company (the
"Shares"). This opinion is rendered to you pursuant to Section 6.2.4 of the
Agreement, and all capitalized terms used herein have the meanings defined for
them in the Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the effectuation of the stock purchase. As
such counsel, we have made such legal and factual examinations and inquiries as
we have deemed advisable or necessary for the purpose of rendering this
opinion. In addition, we have examined originals or copies of documents,
corporate records, and other writings that we consider relevant for the purpose
of this opinion. In such examination, we have assumed the genuineness of all
signatures on original documents, the conformity to original documents of all
copies submitted to us, the legal capacity of natural persons, and the due
execution and delivery of all documents by any party other than the Company
where due execution and delivery are a prerequisite to the effectiveness
thereof.
As used in this opinion, the expression "to our knowledge" with
reference to matters of fact means that, after an examination of documents made
available to us by the Company, and after inquiries of officers of the Company,
but without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge," with reference to matters of fact, refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact, and no inference as to our knowledge of the existence or absence
of any fact should be drawn from our representation of the Company.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies;
(b) We express no opinion as to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors generally;
<PAGE> 27
To the Persons Listed on Exhibit A hereto
_________________, 19__
Page 2
(c) We are members of the Bar of the State of California and we
are not expressing any opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America and
the laws of the State of California.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of California. The Company has the
requisite corporate power necessary to enter into the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery
of the Agreement by the Company and the consummation of the transactions
contemplated therein have been duly authorized by the Company's Board of
Directors, and no further corporate authorization is necessary on the part of
the Company.
2. The Agreement is a valid and binding obligation of the
Company, enforceable in accordance with its terms.
3. No approval, authorization, consent, order or action of, or
filing or registration with, any court, administrative agency or other
government authority (including, without limitation, under any Federal or State
securities laws) is required in connection with the execution, delivery and
performance of the Agreements by the Company, except the filing required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the expiration of
all applicable waiting periods thereunder, which events have occurred.
4. The execution and delivery of the Agreement by the Company
does not violate any provision of the Company's Articles of Incorporation, as
amended, or Bylaws, and does not constitute a material default under provisions
of any material agreement known to us to which the Company is a party or by
which it is bound.
5. To our knowledge, there is no litigation, proceeding or
controversy (including, without limitation, unsettled claim), pending or
threatened or anticipated by or against the Company relating to the
transactions contemplated by the Agreement nor, to our knowledge, are there any
judgments outstanding against the Company or to or by which the Company is or
may be subject or bound which might prevent the Company from consummating the
terms of the Agreement.
This opinion is solely for your benefit and is not to be made
available to or relied upon by any other person without our express prior
written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE> 28
EXHIBIT A
Allan F. Pease
Herbert and Marie Evander, Co-Trustees
U/D/T dtd January 22, 1981
Cruttenden & Company
Mary D. Gierke
Rolanda Monterrosa
Madonna Saxton
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ADAPTEC, INC.,
INCAT SYSTEMS SOFTWARE USA, INC.
ISS SYSTEMS ACQUISITION CORP.
AND CERTAIN SHAREHOLDERS OF
INCAT SYSTEMS SOFTWARE USA, INC.
JULY 25, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Merger; Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Effect of Merger on the Capital Stock of the Constituent Corporations; Exchange of
Certificates; Earnout Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Exchange of Stock; Rights to Earnout Payments . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Earnout Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Securities Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Securities Act Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Stock Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Representations and Warranties of Incat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Events Subsequent to Most Recent Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.15 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.16 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.17 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.18 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.21 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.23 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.24 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.25 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.26 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.27 Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.28 Certain Business Relationships With Incat . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.29 No Adverse Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.30 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6. Representations and Warranties of Adaptec and Acquisition Sub . . . . . . . . . . . . . . . . . . . 25
6.1 Organization of Adaptec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.11 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.9 Preparation of the Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.10 Solicitation of Written Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.5 Incat Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Conditions to Adaptec's Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Conditions to Incat's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10. Survival of Representations, Warranties and Covenants; Indemnification . . . . . . . . . . . . . . . 35
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Indemnification Provisions for Benefit of Adaptec . . . . . . . . . . . . . . . . . . . . . 35
10.3 Procedure for Indemnification Claims; Matters Involving Third Parties . . . . . . . . . . . 36
10.4 Exclusivity of Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.1 Termination of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.1 Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.2 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.4 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.9 Forum Selection; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
12.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.13 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.14 Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.15 Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.16 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. Location of Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
EXHIBITS
Exhibit 5 Incat Disclosure Schedule
Exhibit 6 Adaptec Disclosure Schedule
Exhibit 4.3 Shareholders Agreement
Exhibit 7.8(a) List of Key Employees
Exhibit 7.8(b) Employment Agreement
Exhibit 9.1(b) Asset Purchase Agreement
Exhibit 9.1(j) Opinion of Counsel for Incat and Shareholders
Exhibit 9.1(o) General Release
Exhibit 9.2(h) Opinion of Counsel for Adaptec
</TABLE>
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<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of July 25, 1995, by and among ADAPTEC, INC., a California corporation
("Adaptec"), INCAT SYSTEMS SOFTWARE USA, INC., a California corporation
("Incat"), ISS Acquisition Corp., a Delaware corporation and a wholly-owned
Acquisition Sub of Adaptec ("Acquisition Sub"), and Fabrizio Caffarelli,
Rossella de Peverelli and Whitney G. Lynn (the "Majority Shareholders").
Adaptec, Incat, Acquisition Sub and the Majority Shareholders are sometimes
referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. Pursuant to the Agreement and Plan of Merger in the form
attached hereto as Exhibit 2.1 providing for the merger of Incat into
Acquisition Sub pursuant to the California General Corporation Law, the shares
of Common Stock of Incat, without par value, issued and outstanding immediately
prior to the effective time of the Merger will be converted into shares of
Common Stock of Adaptec plus the contingent right to receive cash and
additional shares of Common Stock of Adaptec pursuant to Section 3.6 hereof.
B. The Parties desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of this
Agreement, and to serve as conditions precedent to the consummation of the
merger of Incat into Acquisition Sub.
C. The respective Boards of Directors of Adaptec, Incat and
Acquisition Sub have approved and adopted this Agreement, and the agreement is
intended to be a plan of reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
parties hereto do hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa). Certain other
terms are defined in the text of this Agreement, the location of which is set
forth in Section 12 hereof.
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
<PAGE> 7
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of July 25, 1995, by and among ADAPTEC, INC., a California corporation
("Adaptec"), INCAT SYSTEMS SOFTWARE USA, INC., a California corporation
("Incat"), ISS Acquisition Corp., a Delaware corporation and a wholly-owned
Acquisition Sub of Adaptec ("Acquisition Sub"), and Fabrizio Caffarelli,
Rossella de Peverelli and Whitney G. Lynn (the "Majority Shareholders").
Adaptec, Incat, Acquisition Sub and the Majority Shareholders are sometimes
referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. Pursuant to the Agreement and Plan of Merger in the form
attached hereto as Exhibit 2.1 providing for the merger of Incat into
Acquisition Sub pursuant to the California General Corporation Law, the shares
of Common Stock of Incat, without par value, issued and outstanding immediately
prior to the effective time of the Merger will be converted into shares of
Common Stock of Adaptec plus the contingent right to receive cash and
additional shares of Common Stock of Adaptec pursuant to Section 3.6 hereof.
B. The Parties desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of this
Agreement, and to serve as conditions precedent to the consummation of the
merger of Incat into Acquisition Sub.
C. The respective Boards of Directors of Adaptec, Incat and
Acquisition Sub have approved and adopted this Agreement, and the agreement is
intended to be a plan of reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
parties hereto do hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vise versa). Certain other
terms are defined in the text of this Agreement, the location of which is set
forth in Section 12 hereof
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
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"Business Condition" means the current business, financial condition,
results of operations and assets of such corporate entity.
"Confidential Information" means any information concerning the
business and affairs of Incat or its subsidiaries that is designated by Incat
as confidential except for information which (i) was known to, or had been (or
was in the process of being) independently developed by, Adaptec or an
Affiliate of Adaptec prior to the receipt thereof from Incat; (ii) was at the
time of disclosure by Incat a matter of public knowledge through no fault of
Adaptec or an Affiliate of Adaptec; or (iii) was or hereafter is obtained by
Adaptec or an Affiliate of Adaptec from a third party under no duty of
confidentiality to Incat or its subsidiaries.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; (d)
Multiemployer Plan; and (e) any other nonqualified plan providing welfare
benefits, including but not limited to medical, dental, life insurance and
disability benefits.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Gross Negligence" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the consequences of such act or
failure.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, drawings,
specifications, customer and supplier lists, pricing and cost information,
financial information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Material Adverse Effect" shall mean a material adverse effect on the
Business Condition of the parent corporation and its subsidiaries.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37) and
Code Sec. 414(f).
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"Ordinary, Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
2. The Merger.
2.1 Merger; Effective Time of the Merger. Subject to the
terms and conditions of this Agreement, Incat will be merged with and into
Acquisition Sub (the "Merger") in accordance with the Delaware General
Corporation Law (the "DGCL") and the California General Corporation Law (the
"CGCL"). In accordance with the provisions of this Agreement, a certificate of
merger in such form as is required by, and executed in accordance with, the
DGCL, shall be filed with the Delaware Secretary of State and the California
Secretary of State in accordance with the DGCL and the CGCL on the Closing Date
(as defined in Section 2.2) and each issued and outstanding share of Common
Stock, without par value, of Incat ("Incat Common Stock"), shall be converted
into shares of Common Stock, $.001 par value, of Adaptec ("Adaptec Common
Stock") in the manner contemplated by Section 3. The Merger shall become
effective at the time of the filing of such certificate of merger with the
Delaware Secretary of State (the date of such filing being hereinafter referred
to as the "Effective Date of the Merger" and the time of such filing being
hereinafter referred to as the "Effective Time of the Merger").
2.2 Closing. The closing of the Merger (the "Closing")
will take place as soon as practicable on the first business day after
satisfaction or waiver of the latest to occur of the conditions set forth in
Section 9 (the "Closing Date"), at the offices of Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California
94304-1050, unless a different date or place is agreed to by the Parties.
2.3 Effect of the Merger. At the Effective Time of the
Merger, (i) the separate existence of Incat shall cease and Incat shall be
merged with and into Acquisition Sub (Incat and Acquisition Sub are sometimes
referred to herein as the "Constituent Corporations" and Acquisition Sub after
the Merger is sometimes referred to herein as the "Surviving Corporation"),
(ii) the Certificate of Incorporation of Acquisition Sub shall be the
Certificate of Incorporation of the Surviving Corporation (except that the name
of Acquisition Sub will be changed to Incat Systems Software USA, Inc.), (iii)
the Bylaws of Acquisition Sub shall be the Bylaws of the Surviving Corporation.
(iv) the directors of Acquisition Sub shall be the directors of the Surviving
Corporation,
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(v) the officers of Acquisition Sub shall be the officers of the Surviving
Corporation and (vi) the Merger shall, from and after the Effective Time of the
Merger, have all the effects provided by applicable law.
2.4 Tax-Free Reorganization. The Merger is intended to
qualify as a tax free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
3. Effect of Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates; Earnout Payments.
3.1 Exchange of Stock; Rights to Earnout Payments. As of
the Effective Time of the Merger, each share of Incat Common Stock that is
issued and outstanding immediately prior to the Effective Time of the Merger
(other than shares, if any, held by persons exercising dissenters' rights in
accordance with Chapter 13 of the California General Corporation Law
("Dissenting Shares") as provided for in Section 3.2 below), shall, by virtue
of the Merger and without any action on the part of the Incat shareholders, be
converted into (i) that number of shares of Adaptec Common Stock as is
determined by dividing 385,078 by the total number of shares of Incat Common
Stock that are issued and outstanding immediately prior to the Effective Time
of the Merger (the "Exchange Ratio") plus (ii) the right to receive Earnout
Payments as provided in Section 3.6 of this Agreement.
3.2 Dissenters' Rights. If holders of Incat Common Stock
are entitled to dissenters' rights at the Effective Time of the Merger under
Section 1300 et seq. of the California General Corporation Law, the shares as
to which dissenters' rights are available ("Dissenting Shares") shall not be
converted into Adaptec Common Stock on or after the Effective Time of the
Merger, but shall instead be converted into the right to receive from the
Surviving Corporation such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the California General
Corporation Law. Each holder of Dissenting Shares (a "Dissenting Shareholder")
who, pursuant to the provisions of Section 1300 et seq. of the California
General Corporation Law, becomes entitled to payment of the value of shares of
Incat Common Stock held by such Dissenting Shareholder shall receive payment
therefor (but only after the value therefor shall have been agreed upon or
finally determined pursuant to such provisions). In the event of the legal
obligation, after the Effective Time of the Merger, to deliver shares of
Adaptec Common Stock to any Dissenting Shareholder who shall have failed to
make an effective demand for appraisal or shall have lost his status as a
Dissenting Shareholder, the Surviving Corporation shall issue and deliver, upon
surrender by such Dissenting Shareholder of his certificate or certificates
representing shares of Incat Common Stock, the shares of Adaptec Common Stock
to which such Dissenting Shareholder is then entitled under this Section 3.2
and Section 1300 et seq. of the California General Corporation Law. The
Surviving Corporation will pay all sums due to holders of Dissenting Shares on
account of such shares.
3.3 Fractional Shares. No fractional share of Adaptec
Common Stock shall be issued in the Merger, including the Earnout Payments
pursuant to Section 3.6 below. In lieu thereof,
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each holder of shares of Incat Common Stock who would otherwise be entitled to
receive a fraction of a share of Adaptec Common Stock shall receive from
Adaptec an amount of cash (rounded to the nearest whole cent) equal to the
product of the fraction of a share of Adaptec Common Stock to which such holder
would otherwise be entitled, multiplied by $31.1625. For the purpose of
determining fractional shares, all shares of Adaptec Common Stock to be issued
to any Incat shareholder shall be aggregated.
3.4 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date,
Adaptec shall appoint Chemical Trust Company of California to act as the
exchange agent (the "Exchange Agent") in the Merger.
(b) Adaptec to Provide Adaptec Common Stock.
Promptly after the Effective Date of the Merger (but in no event later than ten
business days thereafter), Adaptec shall make available for exchange in
accordance with this Section 3, through such reasonable procedures as Adaptec
may adopt, the shares of Adaptec Common Stock issuable pursuant to Section 3.1
in exchange for outstanding shares of Incat Common Stock.
(c) Exchange Procedures. Within ten days after
the Effective Date of the Merger, the Exchange Agent shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Date of the Merger represented outstanding shares of Incat Common
Stock (the "Certificates") whose shares are being converted into Adaptec Common
Stock pursuant to Section 3.1 hereof, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and which shall be in such form and have such other provisions as Adaptec
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for Adaptec Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Adaptec with the reasonable
concurrence of the former Incat shareholders, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the number of shares of Adaptec Common Stock to
which the holder of Incat Common Stock is entitled pursuant to Section 3.1
hereof. The Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Incat Common Stock which is not registered
on the transfer records of Incat, the appropriate number of shares of Adaptec
Common Stock may be delivered to a transferee if the Certificate representing
such Incat Common Stock is presented to the Exchange Agent and accompanied by
all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. From and after the
Effective Date of the Merger, until surrendered as contemplated by this Section
3.4, each Certificate shall be deemed for all corporate purposes to evidence
the number of shares of Adaptec Common Stock into which the shares of Incat
Common Stock represented by such Certificate have been converted and shall have
the rights with respect thereto as provided by the DCGL.
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(d) No Further Ownership Rights in Capital Stock
of Incat. All Adaptec Common Stock delivered upon the surrender for exchange
of shares of Incat Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Incat Common Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of Incat Common Stock
which were outstanding immediately prior to the Effective Date of the Merger.
If, after the Effective Date of the Merger, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 3.4, provided that the presenting holder is listed on
Incat's shareholder list as a holder of Incat Common Stock.
3.5 Taking of Necessary Action; Further Action. Adaptec,
Incat and Acquisition Sub and the Majority Shareholders shall take all such
action as may be necessary or appropriate in order to effect the Merger as
promptly as possible. If, at any time after the Effective Date of the Merger,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of either Incat or the Acquisition Sub, the officers and directors of such
corporation are fully authorized in the name of the corporation or otherwise to
take, and shall take, all such action.
3.6 Earnout Payments.
(a) Schedule of Earnout Payments. Subject to
Section 3.6(c) below, on or before the forty-fifth day following the end of
each fiscal quarter during the fiscal years ending June 30, 1996, 1997, 1998
and 1999 (each an "Earnout Payment Date"), Adaptec shall pay to the
shareholders of record of Incat immediately prior to the Effective Time of the
Merger whose shares of Incat Common Stock were converted into shares of Adaptec
Common Stock as a result of the Merger an aggregate amount (each, an "Earnout
Payment") calculated as provided below:
(i) 1996 Earnout Payments. The Earnout
Payments for the fiscal year ending June 30, 1996 will be calculated as
follows:
(A) The Earnout Payment for the
fiscal quarter ended September 30, 1995 will equal (1) 25% of the Surviving
Corporation Revenue (as defined below) for such fiscal quarter up to
$11,100,000; plus (2) 20% of such Surviving Corporation Revenue above
$11,100,000, minus (3) $80,000.
(B) The Earnout Payment for the
fiscal quarter ending December 31, 1995 will equal (1) 25% of the Surviving
Corporation Revenue for such fiscal quarter up to $11,100,000 in Year-to-Date
Surviving Corporation Revenue; plus (2) 20% of such Surviving Corporation
Revenue above $11,100,000 in Year-to-Date Surviving Corporation Revenue;
minus (3) $110,000.
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(C) The Earnout Payment for the
fiscal quarter ending March 31, 1996 will equal (1) 25% of the Surviving
Corporation Revenue in such fiscal quarter up to $11,100,000 in Year-to-Date
Surviving Corporation Revenue; plus (2) 20% of such Surviving Corporation
Revenue above $11,100,000 in Year-to-Date Surviving Corporation Revenue, minus
(3) $140,000.
(D) The Earnout Payment for the
fiscal quarter ending June 30, 1996 will equal (1) 25% of the Surviving
Corporation Revenue for such fiscal quarter up to $11,100,000 in Year-to-Date
Surviving Corporation Revenue; plus (2) 20% of such Surviving Corporation
Revenue above $11,100,000 in Year-to-Date Surviving Corporation Revenue; minus
(3) $170,000.
(ii) 1997 Earnout Payments. The Earnout
Payments for each fiscal quarter during the fiscal year ending June 30, 1997
will equal (A) 20% of the Surviving Corporation Revenue for such fiscal quarter
up to $23,250,000 in Year-to-Date Surviving Corporation Revenue, plus (B) 17%
of such Surviving Corporation Revenue above $23,250,000 in Year-to-Date
Surviving Corporation Revenue, minus (C) $200,000.
(iii) 1998 Earnout Payments. The Earnout
Payments for each fiscal quarter during the fiscal year ending June 30, 1998
will equal (A) 17% of the Surviving Corporation Revenue for such fiscal quarter
up to $34,650,000 in Year-to-Date Surviving Corporation Revenue, plus (B)
14.5% of such Surviving Corporation Revenue above $34,650,000 in Year-to-Date
Surviving Corporation Revenue, minus (C) $250,000.
(iv) 1999 Earnout Payment. The Earnout
Payments for each fiscal quarter during the fiscal year ending June 30, 1999
will equal (A) 14.5% of the Surviving Corporation Revenue for such fiscal
quarter, minus (B) $350,000.
Under no circumstances will the total of all Earnout Payments exceed
$45,200,000.
(b) Surviving Corporation Revenue. For purposes
of this Agreement, the term "Surviving Corporation Revenue" shall mean revenue
derived by Adaptec and the Surviving Corporation from sales and licenses of
Incat Products as follows:
(i) Stand Alone Products. All amounts
derived from sales and licenses for Incat Products distributed on a stand alone
basis minus Qualified Offsets. As used herein "Qualified Offsets" shall mean
(i) amounts attributable to support, maintenance, training, consulting and
other services relating thereto, (ii) all taxes or governmental charges
(excluding only income or franchise taxes), (iii) transportation, handling,
insurance, special packaging or other administrative charges separately
invoiced or paid by the customer, (iv) discounts, refunds, rebates, returns or
other credits.
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(ii) Bundled Products - Third Parties.
All amounts derived from licensing Incat Products to third party OEMs minus
Qualified Offsets.
(iii) Bundled Products - Adaptec. For all
Adaptec products which (i) incorporate an Incat Product in its entirety or (ii)
are developed and marketed solely for the CD-R mastering software market, an
amount equal to seventy-five percent (75%) of the most favored pricing offered
to third party OEMs for Incat Products.
(iv) Derivative Products. Surviving
Corporation Revenue shall be deemed to include an amount (the "Base License
Amount") equal to $1,500,000 for the fiscal year ending June 30, 1996,
$1,800,000 for the fiscal year ending June 30, 1997, $2,100,000 for the fiscal
year ending June 30, 1998, and $2,400,000 for the fiscal year ending June 30,
1999, which amounts shall entitle Adaptec to use, modify, incorporate or
distribute (i) those certain Incat Products known as Magic Lantern and EZ
CD-Lite currently licensed by Adaptec and all versions thereof, updates,
revisions and derivatives therefrom, including, without limitation, localized
versions and (ii) any portion (but not all) of an Incat Product in Adaptec
products. The Base License Amount shall be included in Surviving Corporation
Revenue for each such fiscal year, whether or not Adaptec in fact uses any
portion of an Incat Product, and no further amounts will be included in
Surviving Corporation Revenue for any such use, modification, incorporation or
distribution by Adaptec.
As used in this Agreement, the term "Incat
Product" shall mean any software product (i) developed or owned by Incat prior
to the Closing, and (ii) developed and owned by Adaptec after the closing which
is based on a software product developed or owned by Incat prior to the
Closing.
As used in this Agreement, the term
"Year-to-Date Surviving Corporation Revenue" shall mean, as of any date during
any fiscal year, the amount of Surviving Corporation Revenue generated since
the beginning of such fiscal year.
(c) Nature of Earnout Payments. The first
$11,800,000 of the total amount constituting the Earnout Payments shall be paid
in cash by check. All subsequent amounts constituting Earnout Payments shall
be paid in the form of Adaptec Common Stock. Notwithstanding the Earnout
Payment schedule set forth in Section 3.6(a) above, in the event that an Earnout
Payment for any of the first three quarters of any fiscal year is required to
be paid (in whole or in part) in Adaptec Common Stock, Adaptec may, in its sole
discretion, defer payment of such Adaptec Common Stock until the Earnout
Payment Date for the fourth quarter of such fiscal year. For purposes of
calculating the amount of Adaptec Common Stock to be included in an Earnout
Payment, the value of each share of Adaptec Common Stock shall be the average
closing trading price per share on the Nasdaq National Market for the five (5)
trading days preceding the date which is 10 days prior to the applicable
Earnout Payment Date.
(d) Mechanics of Payment Each Earnout Payment
shall be made to the persons who were holders of record of Incat Common Stock
immediately prior to the Effective Time
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of the Merger and whose shares of Incat Common Stock were converted into shares
of Adaptec Common Stock in the Merger as follows: each such holder of Incat
Common Stock shall receive in respect of such Incat Common Stock an amount in
cash or Adaptec Common Stock, as the case may be, equal to the Earnout Payment
multiplied by a fraction, the numerator of which is the number of shares of
Incat Common Stock held by such holder immediately prior to the Effective Time
of the Merger, and the denominator of which is the total number of shares of
Incat Common Stock outstanding immediately prior to the Effective Time of the
Merger. No fractional shares of Adaptec Common Stock will be issued with
Earnout Payments, and the value of such fractional shares will be paid in cash
pursuant to the valuation formula set forth in Section 3.6(c).
(e) Conduct of Adaptec's Business. Nothing in
this Agreement shall affect Adaptec's ability to operate its business and the
business of the Surviving Corporation in a manner that Adaptec deems advisable.
Without limiting the foregoing, nothing in this Agreement shall obligate
Adaptec to operate its business or the businesses of the Surviving Corporation
in such a manner as to generate or maximize Surviving Corporation Revenue.
The shares of Adaptec Common Stock issued in connection with the
Merger and the Earnout Payments are referred to collectively as the "Merger
Consideration."
4. Securities Act Compliance.
4.1 Securities Act Exemption. The issuance of the
Adaptec Common Stock in the Merger shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption
contained in Section 4(2) of the Securities Act.
4.2 Stock Restrictions. The certificates representing
the shares of Adaptec Common Stock issued pursuant to this Agreement shall bear
a restrictive legend (and stop transfer orders shall be placed against the
transfer thereof with Adaptec's transfer agent), which legend shall be removed
in connection with the registration of such shares under the terms of the
Shareholders Agreement (as defined below), stating substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (II) IN COMPLIANCE WITH
RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL
FOR INCAT THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
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4.3 Shareholders Agreement. The Incat shareholders
(other than any shareholders who are eligible to become Dissenting Shareholders
as described in Section 3.2 of this Agreement and who elect not to enter into
such an agreement as described herein) shall duly execute and deliver to
Adaptec on or before the Closing Date, an agreement in the form of Exhibit 4.3
attached hereto (the "Shareholders Agreement"), setting forth, among other
things, certain restrictions upon the transferability of Adaptec Common Stock
in compliance with the Securities Act, representations in connection with the
continuity of interest requirement under the Code and certain registration
rights with respect to the Adaptec Common Stock to be issued in the Merger.
5. Representations and Warranties of Incat. Incat hereby
represents and warrants to Adaptec and Acquisition Sub that the statements
contained in this Section 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 5), except as set forth in the disclosure
schedule delivered by Incat to Adaptec on the date hereof (and initialed by
Adaptec), a copy of which is attached hereto as Exhibit 5 (referred to herein
as the "Incat Disclosure Schedule") and except for events occurring in the
Ordinary Course of Business of Incat between the date of this Agreement and the
Closing Date, which events are not material individually or in the aggregate,
do not violate any of the covenants or agreements of Incat, and are disclosed
to Adaptec by means of an updated Incat Disclosure Schedule not less than two
days prior to the Closing. The Incat Disclosure Schedule will be arranged in
paragraphs, corresponding to the lettered and numbered paragraphs contained in
this Section 5.
5.1 Organization, Qualification, and Corporate Power.
Incat is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. Incat is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Incat has full corporate
power and authority, and has all necessary licenses and permits, to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. Section 5 of the Incat Disclosure Schedule lists the directors
and officers of Incat. The operations now being conducted by Incat have not
been conducted under any other name during the past five (5) years.
5.2 Authorization. Incat has full power and authority to
execute and deliver this Agreement, and, subject to receipt of the requisite
approvals of its shareholders, to consummate the transactions contemplated
hereunder and to perform its obligations hereunder and no other proceedings on
the part of Incat are necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement constitutes the valid and
legally binding obligation of Incat, enforceable against Incat in accordance
with its terms and conditions. Incat need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
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5.3 Capitalization.
(a) Capital Stock. The entire authorized capital
stock of Incat consists of 40,000,000 shares of Common Stock, 8,475,000 of
which are issued and outstanding, and 20,000,000 shares of Preferred Stock,
without par value, none of which are issued and outstanding. All of the issued
and outstanding shares of capital stock have been duly authorized, are validly
issued, fully paid, and non-assessable, and are held of record by the
respective shareholders as set forth in Section 5.3(a) of the Incat Disclosure
Schedule. All of the outstanding shares of capital stock have been offered,
issued and sold by Incat in compliance with applicable Federal and state
securities laws.
(b) No Other Rights or Agreements. Section 5.3(b)
of the Incat Disclosure Schedule lists all of the holders of options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights and
other rights that could require Incat to issue, sell or otherwise cause to
become outstanding any of its capital stock (the "Stock Rights"), and if
determinable, the number of shares of Incat Common Stock subject to such Stock
Rights. Except as set forth in Section 5.3(b) of the Incat Disclosure
Schedule, there are no other outstanding or authorized Stock Rights. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Incat. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Incat.
5.4 Noncontravention. Neither the execution and the
delivery of this Agreement nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Incat or any of its
subsidiaries is subject or any provision of their respective charters or
bylaws, or (B) (i) conflict with, (ii) result in a breach of, (iii) constitute
a default under, (iv) result in the acceleration of, (v) create in any party
the right to accelerate, terminate, modify, or cancel, or (vi) require any
notice under, any agreement, contract, lease, license, instrument, franchise
permit or other arrangement to which Incat or any of its subsidiaries is a
party or by which any of them are bound or to which any of their assets is
subject (or result in the imposition of any Security Interest upon any of their
assets).
5.5 Fees. Neither Incat nor any of its subsidiaries has
any liability or obligation to pay any fees or commissions to any broker,
finder, agent or attorney with respect to the transactions contemplated by this
Agreement.
5.6 Financial Statements. Section 5.6 of the Incat
Disclosure Schedule contains the following financial statements (collectively
the "Financial Statements"): (i) unaudited balance sheets and statements of
income as of and for the fiscal years ended December 31, 1993 and, December 31,
1994 (the "Most Recent Fiscal Year End") for Incat; and (ii) unaudited balance
sheet and statement of income (the "Most Recent Financial Statements") as of
and for the five (5) month period ended May 31, 1995 (the "Most Recent Fiscal
Period End") for Incat. The Financial Statements (including the notes thereto)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby and
present fairly the financial
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<PAGE> 18
condition of Incat as of such dates and the consolidated results of operations
of Incat as for such periods, provided, however, that the Most Recent Financial
Statements lack footnotes and certain other presentation items and are subject
to normal year end adjustments. The books of account of Incat reflect as of
the dates shown thereon substantially all items of income and expenses, and all
assets, liabilities and accruals of Incat required to be reflected therein, in
accordance with generally accepted accounting principles consistently applied.
5.7 Subsidiaries. Incat has no subsidiaries.
5.8 Title to Assets. Incat has good and marketable title
to, or a valid leasehold interest in, the properties and assets (including,
without limitation, all Intellectual Property) used by it, located on its
premises, or shown on the balance sheet contained within the Most Recent
Financial Statements (the "Most Recent Balance Sheet") or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet. No Person other than Incat will own at the time of
the Closing any assets or properties currently utilized in or reasonably
necessary to the operations or business of Incat or situated on any of the
premises of Incat. There are no existing contracts, agreements, commitments or
arrangements with any Person to acquire any of the assets or properties of
Incat (or any interest therein) except for this Agreement and those contracts
entered into during the Ordinary Course of Business for the sale of products
and services to customers of Incat.
5.9 Events Subsequent to Most Recent Fiscal Year End.
Since the Most Recent Fiscal Period End, there has not been any material
adverse change in the Business Condition of Incat. Without limiting the
generality of the foregoing, since that date:
(a) Incat has not sold, leased, transferred, or
assigned any assets or properties, tangible or intangible, outside the Ordinary
Course of Business;
(b) except for those agreements, contracts,
leases and commitments identified in Section 5.17 of the Incat Disclosure
Schedule, Incat has not entered into, assumed or become bound under or
obligated by any agreement, contract, lease or commitment (collectively an
"Incat Agreement") or extended or modified the terms of any Incat Agreement
which (i) involves the payment of greater than $10,000 per annum or which
extends for more than one (1) year, (ii) involves any payment or obligation to
any Affiliate of Incat other than in the Ordinary Course of Business, (iii)
involves the sale of any material assets, (iv) involves any OEM relationship,
or (v) involves any exclusive or extraordinary license of Incat's technology;
(c) no party (including Incat) has accelerated,
terminated, made modifications to, or canceled any agreement, contract, lease,
or license to which Incat is a party or by which it is bound and Incat has not
modified, canceled or waived or settled any debts or claims held by it, outside
the Ordinary Course of Business, or waived or settled any rights or claims of a
substantial value, whether or not in the Ordinary Course of Business;
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<PAGE> 19
(d) none of the assets of Incat, tangible or
intangible, has become subject to any Security Interest;
(e) Incat has not made any capital expenditures
except in the Ordinary Course of Business and not exceeding $10,000 in the
aggregate of all such capital expenditures;
(f) Incat has not made any capital investment in,
or any loan to, any other Person;
(g) Incat has not created, incurred, assumed,
prepaid or guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness;
(h) Incat has not granted any license or
sublicense of any rights under or with respect to any Intellectual Property;
(i) there has been no change made or authorized
in the charter or bylaws of Incat;
(j) Incat has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(k) Incat has not declared, set aside, or paid
any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired any
of its capital stock;
(l) Incat has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property in
excess of $10,000 in the aggregate of all such damage, destruction and losses;
(m) Incat has not suffered any repeated,
recurring or prolonged shortage, cessation or interruption of inventory
shipments, supplies or utility services;
(n) Incat has not made any loan to, or entered
into any other transaction with, or paid any bonuses (except for the bonuses
Incat intends to pay to its option holders to permit them to exercise their
Stock Rights in advance of the Closing) in excess of an aggregate of $10,000
to, any of its Affiliates, directors, officers, or employees or their
Affiliates, and, in any event, any such transaction was on fair and reasonable
terms no less favorable to Incat than would be obtained in a comparable arm's
length transaction with a Person which is not such a director, officer or
employee or Affiliate thereof,
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<PAGE> 20
(o) Incat has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(p) Incat has not granted any increase in the
base compensation of any of its directors or officers, or, except in the
Ordinary Course of Business, any of its employees;
(q) Incat has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, or
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(r) Incat has not made any other change in
employment terms for any of its directors, officers, or employees outside the
Ordinary Course of Business;
(s) Incat has not suffered any adverse change or
any threat of any adverse change in its relations with, or any loss or threat
of loss of, any of its major customers, distributors or dealers;
(t) Incat has not suffered any adverse change or
any threat of any adverse change in its relations with, or any loss or threat
of loss of, any of its major suppliers;
(u) Incat has not received notice or had
knowledge of any actual or threatened labor trouble or strike, or any other
occurrence, event or condition of a similar character;
(v) Incat has not changed any of the accounting
principles followed by it or the method of applying such principles;
(w) Incat has not made a change in any of its
banking or safe deposit arrangements;
(x) Incat has not entered into any transaction
other than in the Ordinary Course of Business; and
(y) Incat has not committed to any of the
foregoing.
5.10 Undisclosed Liabilities. Incat has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes) of a
character which, under GAAP, should be accrued, shown or disclosed on a balance
sheet of Incat, except for (i) liabilities set forth on the Most Recent
Balance Sheet, (ii) liabilities which have arisen after the Most Recent Fiscal
Period End in the Ordinary Course of Business, and (iii) liabilities arising
out of the transactions contemplated by this Agreement.
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<PAGE> 21
5.11 Legal Compliance. Incat has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof). No action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, notice or
inquiry has been filed or commenced against, or received by, any governmental
body alleging any failure to so comply. The licenses, permits, approvals,
registrations, qualifications, certificates and other governmental
authorizations that are listed on Section 5.11 of the Incat Disclosure Schedule
are the only governmental authorizations that are necessary for the operations
of Incat as they are presently conducted.
5.12 Tax Matters.
(a) For purposes of this Agreement, "Taxes" means
all federal, state, municipal, local or foreign income, gross receipts,
windfall profits, severance, property, production sales, use, value added,
license, excise, franchise, employment, withholding, capital stock, levies,
imposts, duties, transfer and registration fees or similar taxes or charges
imposed on the income, payroll, properties or operations of Incat, together
with any interest, additions or penalties, deficiencies or assessments with
respect thereto and any interest in respect of such additions or penalties.
(b) Incat has filed all reports and returns with
respect to any Taxes ("Tax Returns") that it was required to file. All such
Tax Returns were correct and complete in all respects, and no such Tax Returns
are currently the subject of audit. All Taxes owed by Incat (whether or not
shown on any Tax Return) were paid in full when due or are being contested in
good faith and are supported by adequate reserves on the Most Recent Financial
Statements. Incat has provided adequate reserves on its Financial Statements
for the payment of any taxes accrued but not yet due and payable. Incat is not
currently the beneficiary of any extension of time within which to file any Tax
Return, and Incat has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(c) There is no dispute or claim concerning any
Tax liability of Incat either (A) claimed or raised by any authority in writing
or (B) based upon personal contact with any agent of such authority. There are
no tax liens of any kind upon any property or assets of Incat, except for
inchoate liens for taxes not yet due and payable.
(d) Incat has not filed a consent under Sec.
341(f) of the Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. Incat has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under any
circumstances could obligate it to make any payments as a result of the
consummation of the Merger that Will not be deductible under Code Sec. 280G.
Incat has not been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified in Code
Sec. 897(c)(l)(A)(ii). Incat is not a party to any tax allocation or sharing
agreement. Incat (A) has not been a member of any affiliated group within the
meaning of Code Sec. 1504 or any similar group defined under a similar
provision of state, local, or foreign law (in " Affiliated Group") filing a
consolidated federal Income Tax Return (other than a group the common
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parent of which was Incat) and (B) has no any liability for the taxes of any
Person (other than any of Incat and its Subsidiaries) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
(e) The unpaid Taxes of Incat (A) did not, as of
the Most Recent Fiscal Period End, exceed by any amount the reserve for Tax
liability (rather than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) will not
exceed by any material amount that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the past custom and
practice of Incat in filing its Tax Returns.
5.13 Properties.
(a) Incat owns no real property.
(b) Section 5.13 of the Incat Disclosure Schedule
lists and describes briefly all real property leased or subleased to Incat.
Incat has delivered to Adaptec correct and complete copies of the leases and
subleases listed in Section 5.13 of the Incat Disclosure Schedule (as amended
to date), with respect to each lease and sublease listed in Section 5.13 of the
Incat Disclosure Schedule to the knowledge of Incat:
(i) the lease or sublease is legal,
valid, binding, enforceable, and in full force and effect in all respects;
(ii) no party to the lease or sublease is
in breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(iii) no party to the lease or sublease
has repudiated any provision thereof;
(iv) there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease;
(v) Incat has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(vi) all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof, and
have been operated and maintained in accordance with applicable laws, rules,
and regulations in all material respects.
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<PAGE> 23
5.14 Intellectual Property.
(a) Incat has not interfered with, infringed
upon, misappropriated or violated any Intellectual Property rights of third
parties in any respect, and has not received since its inception any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any of
Incat must license or refrain from using any Intellectual Property rights of
any third party). No third party has interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of Incat.
(b) Section 5.14(b) of the Incat Disclosure
Schedule identifies each patent or registration which has been issued to Incat
or any Affiliate of Incat with respect to any of the Intellectual Property used
in Incat's business, identifies each pending patent application or application
for registration which Incat or any Affiliate of Incat has made with respect to
any of the Intellectual Property used in Incat's business, and identifies each
license, agreement, or other permission which Incat or any Affiliate of Incat
has granted to any third party with respect to any of the Intellectual Property
used in Incat's business (together with any exceptions). Incat has delivered
to Adaptec correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date).
Section 5.14(b) of the Incat Disclosure Schedule also identifies (i) each trade
name or unregistered trademark used by Incat or any Affiliate of Incat in
connection with any of its businesses and (ii) each unregistered copyright
owned by Incat or any Affiliate of Incat with respect to Intellectual Property
used in Incat's business. With respect to each item of Intellectual Property
required to be identified in Section 5.14(b) of the Incat Disclosure Schedule:
(i) Incat possesses, or will possess
prior to the Closing, all right, title, and interest in and to the item, free
and clear of any Security Interest, license, or other restriction;
(ii) the item is legal and valid and in
full force and effect and is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending or
threatened in writing which challenges the legality, validity, enforceability,
use or ownership of the item; and
(iv) Incat has never agreed to indemnify
any Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(c) Section 5.14(c) of the Incat Disclosure
Schedule identifies each item of Intellectual Property that any third party
owns and that Incat uses pursuant to license, sublicense, agreement, or
permission. Incat has delivered to Adaptec correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to be identified in
Section 5.14(c) of the Incat Disclosure Schedule:
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<PAGE> 24
(i) the license, sublicense, agreement
or permission covering the item is legal, valid, binding, enforceable, and in
full force and effect in all respects;
(ii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification or acceleration thereunder;
(iii) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof; and
(iv) Incat has not granted any sublicense
or similar right with respect to the license, sublicense, agreement, or
permission.
5.15 Tangible Assets. The buildings, machinery,
equipment, and other tangible assets that Incat owns and leases are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
5.16 Inventory. All of the inventory of Incat, which
consists of raw materials and supplies, manufactured and processed parts, work
in process, and finished goods, is usable, merchantable and fit for the purpose
for which it was procured or manufactured, and none of such inventory is
slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory write down set forth on the face of the Most Recent Balance Sheet as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Incat.
5.17 Contracts. Section 5.17 of the Incat Disclosure
Schedule lists the following contracts, agreements, commitments and other
arrangements to which Incat is a party or by which Incat or any of its assets
is bound:
(a) any agreement (or group of related
agreements) for the lease of personal property to or from any Person providing
for lease payments in excess of $12,000 per annum;
(b) any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one
year or involve consideration in excess of $10,000;
(c) any agreement for the purchase of supplies,
components, products or services from single source suppliers, custom
manufacturers or subcontractors;
(d) any agreement concerning a partnership or
joint venture;
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<PAGE> 25
(e) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or any capitalized lease obligation in excess
of $10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(f) any agreement concerning confidentiality,
noncompetition or restraint of trade;
(g) any agreement with any Incat shareholder or
any of such shareholder's Affiliates (other than Incat) or with any Affiliate
of Incat;
(h) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of its current or former directors, officers,
and employees;
(i) any collective bargaining agreement;
(j) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis;
(k) any agreement under which it has advanced or
joined any amount to any of its directors, officers, and employees;
(l) any agreement under which the consequences of
a default or termination could have a Material Adverse Effect;
(m) any agreement with any original equipment
manufacturer entered into or performed by Incat since its inception;
(n) any agreement pursuant to which Incat is
obligated to provide maintenance, support or training for its products;
(o) any standard form agreement used by Incat,
including, but not limited to, any purchase order, statement of standard terms
and conditions of sale, or employment offer letter;
(p) any agreement pursuant to which any of
Incat's products is manufactured; and
(q) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $5,000
or which is expected to continue for more than six months from the date hereof.
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<PAGE> 26
Incat has delivered to Adaptec a correct and complete copy of each written
agreement listed in Section 5.17 of the Incat Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 5.17 of the Incat Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect in all respects, (B) no
party is in breach or default, and no event has occurred, which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; (C) no party has repudiated
any provision of the agreement; and (D) Incat does not have any reason to
believe that the service called for thereunder cannot be supplied in accordance
with its terms and without resulting in a loss to any of Incat.
5.18 Notes and Accounts Receivable. All notes and
accounts receivable of Incat, all of which are reflected properly on the books
and records of Incat, are valid receivables subject to no setoffs, defenses or
counterclaims, are current and collectible, and will be collected in accordance
with their terms at their recorded amounts, subect only to the reserve for bad
debts set forth on the face of the Most Recent Balance Sheet as adjusted for
operations and transactions through the Closing Date in accordance with the
past custom and practice of Incat.
5.19 Power of Attorney. There are no outstanding powers
of attorney executed on behalf of Incat.
5.20 Insurance. Incat has delivered to Adaptec copies of
each insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
with respect to which Incat is a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and effect in
all respects (and there has been no notice of cancellation or nonrenewal of the
policy received); (B) neither Incat nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (C) no party to the policy has
repudiated any provision thereof; and (D) there has been no failure to give
any notice or present any claim under the policy in due and timely fashion.
Section 5.20 of the Incat Disclosure Schedule describes any self-insurance
arrangements presently maintained by Incat.
5.21 Litigation. Section 5.21 of the Incat Disclosure
Schedule sets forth each instance in which Incat (or any of its assets) (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is or has been since its inception a party, or, to the knowledge
of Incat, is threatened to be made a party, to any action, suit, proceeding,
hearing, arbitration, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. To the knowledge of Incat,
there are no facts or circumstances which would form the basis of any claim
against Incat.
5.22 Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by Incat have conformed in all
respects with all applicable contractual
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<PAGE> 27
commitments and all express and implied warranties, and Incat has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) for replacement or repair thereof or other
damages in connection therewith, other than in the Ordinary Course of Business
in aggregate amount not exceeding $10,000. Substantially all of the products
manufactured, sold, leased, and delivered by Incat are subject to standard
terms and conditions of sale or lease. Section 5.17(o) of the Incat Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for Incat (containing applicable guaranty, warranty, and indemnity provisions).
5.23 Product Liability. Incat has no liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by Incat.
5.24 Employees. No executive, key employee, or
significant group of employees has advised any executive officer of Incat that
he, she or they plan to terminate employment with Incat during the next 12
months. Incat is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strike or grievance, claim of unfair
labor practices, or other collective bargaining dispute within the past three
years. Incat has not committed any unfair labor practice. There is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Incat.
5.25 Employee Benefits.
(a) Section 5.25(a) of the Incat Disclosure
Schedule lists each Employee Benefit Plan that Incat maintains or to which
Incat contributes or is obligated to contribute.
(i) Each such Employee Benefit Plan (and
each related trust, or fund established by Incat) complies in form and in
operation in all respects with their terms, the applicable requirements of
ERISA, the Code, and other applicable laws.
(ii) All required reports and
descriptions (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1's, and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code Sec. 4980B
have been met in all respects with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan. No event has occurred and no
condition exists with respect to any Employee Benefit Plan that would subject
Incat to any tax under Code Sections 4972, 4976 or 4979 or to a fine under
ERISA Sections 502(i) or 502(l).
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<PAGE> 28
(iii) All contributions, premiums or other
payments (including all employer contributions and employee salary reduction
contributions) which are due have been paid to each Employee Benefit Plan and
all contributions, premiums or other payments for any period ending on or
before the Closing Date which are not yet due shall been paid to each such
Employee Benefit Plan or shall be accrued in accordance with the custom and
practice of Incat.
(iv) Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and which is intended to qualify
under Code Sec. 401(a), has received a favorable determination letter from the
Internal Revenue Service with respect to the qualification of the plan under
Code Section 401(a) and the exemption of any corresponding trust under Code
Section 501, unless the Internal Revenue Service is deemed to have approved the
form of such Plan under applicable IRS Revenue Procedures. A copy of such
determination letters have been provided to Adaptec and nothing has occurred
since the date of each such determination letter that would cause such Employee
Pension Benefit Plan to lose its ability to rely on such letter. Each Employee
Pension Benefit Plan has been restated to comply with the 1986 Tax Reform Act
and subsequent applicable tax legislation to the extent required by governing
tax law. A copy of any determination letters applicable to such restatement
which have been received by Incat has been provided to Adaptec.
(v) Neither Incat nor any other Person
or entity under common control with Incat within the meaning of Section 414(b),
(c) or (m) of the Code and the regulations thereunder has now or at any
previous time, maintained, established, sponsored, participated in, or
contributed to, any Employee Pension Benefit Plan that is subject to Part 3 of
Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
No Employee Welfare Benefit Plan or other Employee Benefit Plan providing
welfare benefits is funded with a trust or other funding vehicle, other than
insurance policies or contracts with a health maintenance organization or
similar health care delivery entity.
(vi) Incat has delivered to Adaptec
correct and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the Internal
Revenue Service, if any, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each maintained Employee Benefit Plan. The terms of any such
documentation or other communication do not prohibit Adaptec from amending or
terminating any such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan
that Incat, and/or any controlled group of corporations within the meaning of
Code Sec. 1563 (a "Controlled Group of Corporations") which includes Incat,
maintains or ever has maintained or to which any of them contributes, ever
contributed, or ever has been required to contribute:
(i) There have been no prohibited
transactions within the meaning of ERISA Sec 406 and Code Sec. 4975 with
respect to any such Employee Benefit Plan. No fiduciary within the meaning of
ERISA Sec. 3(21) (a "Fiduciary"), has any liability for breach of
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fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is pending or threatened.
(c) Except as disclosed in Schedule 5.25(c) of
the Incat Disclosure Schedule, Incat does not maintain or contribute to, has
never maintained or contributed to, and has never been required to contribute
to, any Employee Welfare Benefit Plan or any other Employee Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Sec. 4980B or Part 6 of Subtitle
B of Title I of ERISA).
(d) There is no liability in connection with any
Employee Benefit Plan that is not fully disclosed or provided for on the Most
Recent Balance Sheet for which disclosure would be required under generally
accepted accounting principles.
(e) No Employee Benefit Plan or Incat has any
liability to any plan participant, beneficiary or other person by reason of the
payment of benefits or the failure to pay benefits with respect to benefits
under or in connection with any such Employee Benefit Plan, other than claims
in the normal administration of such plans.
5.26 Guaranties. Incat is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
5.27 Environment, Health, and Safety.
(a) For purposes of this Agreement, the following
terms have the following meanings:
"Environmental, Health, and Safety Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, plans, injunctions, judgments, decrees, requirements or
rulings now or hereafter in effect, imposed by any governmental authority
regulating, relating to, or imposing liability or standards of conduct relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
public health and safety, or employee health and safety, concerning any
Hazardous Materials or Extremely Hazardous Substances, as such terms as defined
herein, or otherwise regulated, under any Environmental, Health and Safety
Laws. The term "Environmental, Health and Safety Laws" shall include, without
limitation the Clean Water Act (also known as the Federal Water Pollution
Control Act), 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
Public Law 99-4, 99, 100 Stat.
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1613, the Emergency Planning and Community Right to Know Act, 42 U.S.C. Section
11001 et seq, the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., and the Occupational Safety and Health Act, 29 U.S.C. Section
651 et seq., all as amended, together with any amendments thereto, regulations
promulgated thereunder and all substitutions thereof.
"Extremely Hazardous Substance" means a substance on
the list described in Section 302 (42 U.S.C. Section 11002(a)(2)) of the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001
et seq., as amended.
"Hazardous Material" means any material or substance
that, whether by its nature or use, is now or hereafter defined as a pollutant,
dangerous substance, toxic substance, hazardous waste, hazardous material,
hazardous substance or contaminant under any Environmental, Health and Safety
Laws, or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now or
hereafter regulated under any Environmental, Health and Safety Laws, or which
is or contains petroleum, gasoline, diesel fuel or other petroleum hydrocarbon
product.
(b) Each of Incat and its predecessors and
Affiliates (A) has complied with the Environmental, Health, and Safety Laws in
all respects (and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, directive or notice has been filed or commenced
against any of them alleging any such failure to comply), (B) has obtained and
been in substantial compliance with all of the terms and conditions of all
permits, licenses, certificates and other authorizations which are required
under the Environmental, Health, and Safety Laws, and (C) has complied in all
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in the Environmental, Health, and Safety Laws.
(c) Incat has no liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), and none of Incat and its predecessors and Affiliates
has handled or disposed of any Hazardous Materials or extremely Hazardous
Substances, arranged for the disposal of any Hazardous Materials or Extremely
Hazardous Substances, exposed any employee or other individual to any Hazardous
Materials or Extremely Hazardous Substances, or owned or operated any property
or facility in any manner that could give rise to any liability, for damage to
any site, location, surface water, groundwater, land surface or subsurface
strata, for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health, and Safety Law.
(d) No Extremely Hazardous Substances are
currently, or have been, located at, on, in, under or about all properties and
equipment used in the business of Incat and its predecessors and Affiliates.
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(e) No Hazardous Materials are currently located
at, on, in, under or about all properties and equipment used in the business of
Incat and its predecessors and Affiliates in a manner which violates any
Environmental, Health and Safety Laws or which requires cleanup or corrective
action of any kind under any Environmental, Health and Safety Laws.
5.28 Certain Business Relationships With Incat. Neither
the shareholders of Incat nor any director or officer of Incat, nor any member
of their immediate families, nor any Affiliate of any of the foregoing, owns,
directly or indirectly, or has an ownership interest in (a) any business
(corporate or otherwise) which is a party to, or in any property which is the
subject of, any business arrangement or relationship of any kind with Incat, or
(b) any business (corporate or otherwise) which conducts the same business as,
or a business similar to, that conducted by Incat.
5.29 No Adverse Developments. There is no development
(exclusive of general economic factors affecting business in general) or, to
Incat's knowledge, threatened development affecting Incat (or affecting
customers, suppliers, employees, and other Persons which have relationships
with Incat) that (i) is having or is reasonably likely to have a Material
Adverse Effect on Incat, or (ii) would prevent Adaptec from conducting the
business of the Surviving Corporation following the Closing in the manner in
which it was conducted or planned to be conducted by Incat prior to the
Closing.
5.30 Full Disclosure. No representation or warranty in
this Section 5 or in any document delivered by any Shareholder or Incat
pursuant to the transactions contemplated by this Agreement, and no statement,
list, certificate or instrument furnished to Adaptec pursuant hereto or in
connection with this Agreement contains any untrue statement of a material
fact, or omits to state any fact necessary to make any statement herein or
therein not materially misleading. There is no fact, development or threatened
development (excluding general economic factors affecting business in general)
which Incat has not disclosed to Adaptec in writing and which is having or may
have a Material Adverse Effect on Incat. Incat has delivered to Adaptec true,
correct and complete copies of all documents, including all amendments,
supplements and modifications thereof or waivers currently in effect
thereunder, described in the Incat Disclosure Schedule.
6. Representations and Warranties of Adaptec and Acquisition Sub.
Adaptec and Acquisition Sub jointly and severally represent and warrant to
Incat that the statements contained in this Section 6 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 6), except
as set forth in the disclosure schedule delivered by Adaptec and Acquisition
Sub to Incat on the date hereof (and initialed by Adaptec, Acquisition Sub and
Incat), a copy of which is attached hereto as Exhibit 6 (referred to herein as
the "Adaptec Disclosure Schedule") and except for events occurring in the
Ordinary Course of Business of Adaptec and Acquisition Sub between the date of
this Agreement and the Closing Date, which events are not material individually
or in the aggregate, do not violate any of the covenants or agreements of
Adaptec or Acquisition Sub, and are disclosed to Incat by means of an updated
Adaptec Disclosure
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Schedule not less than two days prior to the Closing. The Adaptec Disclosure
Schedule will be arranged in paragraphs corresponding to the numbered
paragraphs contained in this Section 6.
6.1 Organization of Adaptec. Each of Adaptec and
Acquisition Sub is a corporation duly organized validity existing, and in good
standing under the laws of the State of California.
6.2 Capitalization.
(a) As of March 31, 1995, the authorized capital
stock of Adaptec consisted of (i) 1,000,000 shares of Preferred Stock, $.001
par value, none of which are outstanding and (ii) 200,000,000 shares of Common
Stock, of which 51,677,301 shares were issued and outstanding, 10,427,089
shares were reserved for issuance pursuant to Adaptec's employee and director
stock plans, and 120,000,000 shares were reserved for issuance under Adaptec's
Shareholder Rights Plan. The authorized capital stock of Acquisition Sub
consists of 100 shares of Common Stock, $.001 par value, all of which, as of
the date hereof, are issued and outstanding. All of the outstanding shares of
Adaptec's and Acquisition Sub's respective capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in this Section 6.2, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Adaptec or any of its subsidiaries or obligating
Adaptec or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, Adaptec or any of its subsidiaries.
(b) The shares of Adaptec Common Stock to be
issued pursuant to Section 3.1 of this Agreement are duly authorized and
reserved for issuance, and the shares of Adaptec Common Stock to be issued
pursuant to Section 3.6 of this Agreement will be duly authorized, and in each
case upon issuance thereof will be validly issued, fully paid and nonassessable
and, subject to notice of issuance, shall be approved for listing on the Nasdaq
National Market.
6.3 Authorization. Adaptec and Acquisition Sub each has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement, to consummate the transactions contemplated
hereunder and to perform its obligations hereunder and no other proceedings are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid and legally binding obligation
of Adaptec and Acquisition Sub, enforceable against Adaptec and Acquisition Sub
in accordance with its terms and conditions. Adaptec has full corporate power
and authority to execute and deliver the Shareholders Agreement. The
Shareholders Agreement constitutes the valid and binding obligation of Adaptec,
enforceable against Adaptec in accordance with its terms and conditions.
Neither Adaptec nor Acquisition Sub need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
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6.4 Noncontravention. Neither the execution and the
delivery of this Agreement and, to the extent applicable, the Shareholders
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Adaptec or Acquisition Sub is subject or
any provision of their respective charters or bylaws, or (B) (i) conflict with,
(ii) result in a breach of, (iii) constitute a default under, (iv) result in
the acceleration of, (v) create in any party the right to accelerate,
terminate, modify, or cancel, or (vi) require any notice under, any agreement,
contract, lease, license, instrument, or other arrangement to which Adaptec or
any of its subsidiaries or Acquisition Sub is a party or by which any of them
is bound or to which any of their assets is subject.
6.5 SEC Filings; Financial Statements.
(a) Adaptec has filed all forms, reports and
documents required to be filed with the SEC since March 31, 1994, and has
heretofore delivered to Incat, in the form filed with the SEC, (i) its Annual
Reports on Form 10-K for the fiscal year ended March 31, 1994 and 1995, (ii)
its Quarterly Reports on Form 10-Q for the periods ended June 30, 1994,
September 30, 1994 and December 31, 1994, (iii) all proxy statements relating
to Adaptec's meetings of stockholders (whether annual or special) held since
March 31, 1994, (iv) all other reports filed by Adaptec with the SEC since
March 31, 1994 and (v) all amendments and supplements to all such reports and
registration statements, including Adaptec's Annual Report filed pursuant to
Rule 14a-3 promulgated under the Exchange Act, filed by Adaptec with the SEC
(collectively, the "Adaptec SEC Reports"). The Adaptec SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Adaptec's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Adaptec
SEC Reports has been prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and each fairly presents the consolidated financial position of
Adaptec and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not, or are not
expected to be, material in amount.
(c) Adaptec has heretofore furnished to Incat a
complete and correct copy of any amendments or modifications, which have not
yet been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by Adaptec with
the SEC pursuant to the Securities Act or the Exchange Act.
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6.6 No Undisclosed Liabilities. Neither Adaptec nor any
of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) which are in the aggregate material to the business, operations or
financial condition of Adaptec and its subsidiaries taken as a whole, except
liabilities adequately reserved for in the balance sheet included in Adaptec's
Annual Report on Form 10-K for the year ended March 31, 1995 (the "Adaptec
Balance Sheet") or incurred since March 31, 1995 in the ordinary course of
business and consistent with past practice and liabilities incurred in
connection with this Agreement.
6.7 Absence of Certain Changes or Events. Since December
31, 1994, Adaptec and its subsidiaries have conducted their respective
businesses in the Ordinary Course of Business, and since such date, there has
not occurred any change in the financial condition, results of operations,
business or prospects of Adaptec, or any development that would reasonably be
expected to have a Material Adverse Effect on Adaptec.
6.8 Absence of Litigation. Other than as disclosed in
the Adaptec SEC Reports, there are no claims, actions, suits, proceedings or
investigations pending or, to the best knowledge of Adaptec, threatened against
Adaptec or any of its subsidiaries, or any properties or rights of Adaptec or
any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that,
individually or in the aggregate, could have a Material Adverse Effect on
Adaptec.
6.9 Information Statement. The information supplied by
Adaptec for inclusion in the Information Statement (as defined below) shall
not, on the date the Information Statement is first mailed to the Incat
shareholders, and at the Effective Time of the Merger, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or shall omit
to state any material fact necessary in order to make the statements therein
not false or misleading. If at any time prior to the Effective Time of the
Merger any event relating to Adaptec, Acquisition Sub or any of their
respective affiliates, officers or directors should be discovered by Adaptec or
Acquisition Sub which should be set forth in a supplement to the Information
Statement, Adaptec; or Acquisition Sub will promptly inform Incat.
Notwithstanding the foregoing, Adaptec and Acquisition Sub make no
representation or warranty with respect to any information supplied by Incat
which is contained in any of the foregoing documents.
6.10 Brokers' Fees. Neither Adaptec nor Acquisition Sub
has any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which Incat could become liable or obligated.
6.11 Full Disclosure. No statement contained in any
certificate or schedule furnished or to be furnished by Adaptec or Acquisition
Sub to Incat in, or pursuant to the provisions of, this Agreement contains or
shall contain any untrue statement of a material fact or omits or shall omit to
state any material fact necessary, in the light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading. There is no event, fact or condition
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that materially and adversely affects the business, assets (including
intangible assets), financial condition, results of operations or prospects of
Adaptec and its subsidiaries taken as a whole, or that reasonably could be
expected to do so, that has not been set forth in this Agreement or in the
Adaptec Disclosure Schedule.
7. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the earlier of the termination of this
Agreement and the Effective Time of the Merger:
7.1 General. Each of the Parties will use their
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 9 below).
7.2 Notices and Consents. Incat will give any notices to
third parties and will use its reasonable best efforts to obtain any third
party consents that Adaptec reasonably may request in connection with the
matters identified in Section 5.4 of the Incat Disclosure Schedule. Each of
the Parties will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals
of governments and governmental agencies in connection with the matters
identified in Section 5.4 of the Incat Disclosure Schedule. Notwithstanding
the foregoing, nothing in this Section 7.2 shall be construed to require any
Party to transfer or assign rights or other assets to a Person who is not a
Party.
7.3 Operation of Business. Incat and its subsidiaries
will not engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business or except as disclosed in Section 5.9
of the Incat Disclosure Schedule. Without limiting the generality of the
foregoing, Incat and its subsidiaries will not (i) cause or permit any
amendment to their Articles of Incorporation or Bylaws, (ii) issue any capital
stock or issue or grant any options, warrants or rights to acquire any capital
stock (other than in connection with the exercise of stock options outstanding
on the date of this Agreement) or (iii) declare, set aside, or pay any dividend
or make any distribution with respect to its capital stock or redeem, purchase,
or otherwise acquire any of its capital stock, or (iv) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 5.9 above. In addition, Incat and its subsidiaries will comply with
all laws, statutes, ordinances, rules, regulations and orders applicable to
their or to the conduct of their businesses, except for violations that would
not subject Incat or its subsidiaries to a penalty or loss that would
constitute a Material Adverse Effect on Incat.
7.4 Preservation of Business. Incat and its subsidiaries
will use their best efforts to keep their respective businesses and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees,
7.5 Access to Information. Incat will permit Adaptec
and its representatives to have access at all reasonable times, and in a manner
so as not to interfere with the normal business
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operations of Incat and its subsidiaries, to the business and operations of
Incat and its subsidiaries. Neither such access, inspection and furnishing of
information to Adaptec and its representatives, nor any investigation by
Adaptec and its representatives, shall in any way diminish or otherwise effect
Adaptec's right to rely on any representation or warranty made by Incat
hereunder. All information received or made available to Adaptec and its
representatives pursuant to this Section 7.5 shall be subject to and deemed
covered by the terms of the Non-Disclosure Agreement dated May 10, 1995 between
Adaptec and Incat.
7.6 Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Section 5 or Section
6 above. No disclosure by any Party pursuant to this Section 7.6, however,
shall be deemed to amend or supplement the Incat Disclosure Schedule or the
Adaptec Disclosure Schedule or to prevent or cure any misrepresentation, breach
of warranty, or breach of covenant.
7.7 Best Efforts. Adaptec, Incat and Acquisition Sub
will each use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement.
7.8 Employment Agreements. Prior to the Effective Time
of the Merger, Incat will use its best efforts to obtain an employment
agreement and covenant not to compete (the "Employment Agreement") in the
form attached hereto as Exhibit 7.8(a) with the persons listed on Exhibit
7.8(b) attached hereto and with those other key employees designated by Adaptec
following the date hereof
7.9 Preparation of the Information Statement. As
promptly as practicable after the date hereof, Incat will prepare an
information statement to be delivered to the shareholders and option holders of
Incat for purposes of soliciting their consent to the Merger (the "Information
Statement"). The Information Statement shall be in form reasonably
satisfactory to Adaptec and its counsel. Adaptec will take any action required
to be taken under any applicable state securities or "blue sky" laws in
connection with the issuance of the Adaptec Common Stock in the Merger.
7.10 Solicitation of Written Consents. Incat will solicit
the written consent to the Merger from each of the shareholders and option
holders of Incat as soon as practicable following the execution of this
Agreement, and shall use its best efforts to obtain such consent. The Board of
Directors of Incat will recommend unanimously in the Information Statement the
approval of the Merger by the Incat shareholders.
7.11 Exclusivity. None of the Majority Shareholders nor
Incat will (i) solicit, initiate, or encourage the submission of any proposal
or offer from any Person relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of the assets, of Incat or
its subsidiaries (including any acquisition structured as a merger,
consolidation, or share exchange) or (d) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
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Person to do or seek any of the foregoing. None of the Majority Shareholders
will transfer or offer to transfer any of their Incat Common Stock. None of
the Majority Shareholders will vote their Incat Common Stock in favor of any
such acquisition structured as a merger, consolidation, or share exchange.
8. Post-Closing Covenants. With respect to the period following
the Effective Time of the Merger:
8.1 General. In case at any time after the Effective
Time of the Merger any further action is necessary to carry out the purposes of
this Agreement, each of the Parties will take such further action (including
the execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 10 below).
8.2 Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time of the Merger involving Incat or (B) arising out of
Adaptec's operation of the business of the Surviving Corporation following the
Effective Time of the Merger in the manner in which it is presently conducted
and planned to be conducted, each of the other Parties will cooperate with the
party, its counsel in the contest or defense, make available their personnel,
and provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 10
below). Notwithstanding the foregoing, each of the Majority Shareholders
agrees that for a period of three years following the Effective Time of the
Merger, such Majority Shareholder shall provide to Adaptec the assistance
described in the preceding sentence at the sole expense of such Majority
Shareholder.
8.3 Transition. None of the Majority Shareholders will
take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of Incat from maintaining the same business relationships with the
Surviving Corporation after the Effective Time of the Merger as it maintained
with Incat prior to the Effective Time of the Merger.
8.4 Confidentiality. Each of the Majority Shareholders
will treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to Adaptec or destroy, at the request and
option of Adaptec, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession. In the event that any of
the Majority Shareholders is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information,
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that Person will notify Adaptec promptly of the request or requirement so that
Adaptec may seek an appropriate protective order or waive compliance with the
provisions of this Section 8.4. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Majority Shareholders and directors
and officers of Incat is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
that Person may disclose the Confidential Information to the tribunal;
provided, however, that such disclosing Person shall use its reasonable best
efforts to obtain, at the reasonable request of Adaptec, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Adaptec shall designate.
In the event that anything in this Section 8.4 is inconsistent with any
provision of an Employment Agreement, the terms of such Employment Agreement
shall prevail.
8.5 Incat Employees. Except for the Incat employees who
will be executing Employment Agreements, current employees of Incat and Incat
Italy, the Surviving Corporation or any Adaptec subsidiary following the
Closing will be subject to Adaptec's standard employment terms and practices;
provided, however, that in the event of termination for other than cause, such
employees shall be entitled to salary continuation until March 31, 1996.
Except as otherwise prohibited, these employees will be eligible to participate
in all standard Adaptec benefit plans based upon seniority determined by their
respective dates of hire by Incat except for the Adaptec Sabbatical Program for
which eligibility will be determined based on the Closing Date. Employees of
Incat as of the Effective Time shall be permitted to participate in the
Adaptec Employee Stock Purchase Plan commencing on the first enrollment date
following the Effective Time, subject to compliance with the eligibility
provisions of such plan (with employees receiving credit, for purposes of such
eligibility provisions, for service with Incat).
9. Conditions to Obligation to Close.
9.1 Conditions to Adaptec's Obligation to Close. The
obligation of Adaptec and Acquisition Sub to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of
the following conditions:
(a) the representations and warranties set forth
in 5 above (supplemented in the case of Section 5 by the updated Incat
Disclosure Schedule permitted under Section 5) shall be true and correct in all
respects at and as of the Closing Date.
(b) In-cat Systems Srl ("Incat Italy") and a
subsidiary of Adaptec shall have entered into an Asset Purchase Agreement in
substantially the form attached hereto as Exhibit 9.1(b) (the "Asset Purchase
Agreement").
(c) Incat shall have performed and complied with
all of its covenants hereunder in all respects through the Closing;
(d) all of the Stock Rights listed in Section
5.3(b) of the Incat Disclosure Schedule will have been exercised or terminated;
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(e) Incat shall have procured all of the third
party consents specified in Section 7.2 above;
(f) no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect materially and adversely the right
of Adaptec to control the Surviving Corporation following the Effective Time of
the Merger, or (D) affect adversely the right of Incat or the Surviving
Corporation to own its assets (including without limitation its intellectual
property assets) and to operate its businesses (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect) and no law,
statute, ordinance, rule, regulation or order shall have been enacted, enforced
or entered which has caused or will likely cause any of the effects under
clause (A), (B), (C), or (D) of this Section 9.1(f) to occur.
(g) the Chief Financial Officer of Incat shall
have delivered to Adaptec a certificate to the effect that each of the
conditions specified above in Sections 9.1(a) to 9.1(f) (inclusive) is
satisfied in all respects;
(h) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 5.4 above or disclosed in a corresponding
Section in the Incat Disclosure Schedule;
(i) each of the employees of Incat listed on
Exhibit 7.8(b) attached hereto shall have executed and delivered an Employment
Agreement and such agreement shall be in full force and effect;
(j) Adaptec shall have received from counsel to
Incat and the Incat shareholders an opinion in form and substance as set forth
in Exhibit 9.1(j) attached hereto, addressed to Adaptec, and dated as of the
Closing Date;
(k) this Agreement and the Merger will have been
approved by the vote of the holders of 100% of the outstanding Common Stock of
Incat, and no such shareholder shall have exercised or be eligible to exercise
any dissenters' rights with respect to the Merger;
(l) all actions to be taken by the Majority
Shareholders and Incat in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Adaptec; and its counsel;
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<PAGE> 40
(m) each officer and director of Incat shall have
executed and delivered a general release of any claims against Incat and its
successors in the form attached hereto as Exhibit 9.1(m);
(n) the Incat shareholders and Adaptec shall have
entered into the Shareholders Agreement.
(o) Fabrizio Caffarelli and Incat Italy shall
have executed assignments to Incat of certain Intellectual Property owned by
them and used in Incat's business, which assignments shall be in a form
satisfactory to Adaptec.
Adaptec may waive any condition (in whole or in part)
specified in this Section 9.1 if it executes a writing so stating at or prior
to the Closing.
9.2 Conditions to Incat's Obligation. The obligation of
Incat to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of Adaptec
and Acquisition Sub set forth in Section 6 above shall be true and correct in
all respects at and as of the Closing Date;
(b) Adaptec shall have performed and complied
with all of its covenants hereunder in all respects through the Closing;
(c) no action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect) and no law, statute, ordinance,
rule, regulation or order shall have been enacted, enforced or entered which
has caused or will likely cause any of the effects under clause (A) or (B) of
this Section 9.2(c) to occur;
(d) the Chief Financial Officer or other duly
authorized officer of Adaptec shall have delivered to Incat a certificate to
the effect that each of the conditions specified above in Sections 9.2(a)
to 9.2(c) (inclusive) is satisfied in all respects;
(e) the Incat shareholders and Adaptec shall have
entered into the Shareholders Agreement, as defined in Section 4.3 above;
(f) the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 5.4 above;
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<PAGE> 41
(g) Adaptec and the employees of Incat listed on
Exhibit 7.8.(b) hereto shall each have executed and delivered an Employment
Agreement and such agreement shall be in full force and effect;
(h) Incat shall have received from counsel to
Adaptec an opinion in form and substance as set forth in Exhibit 9.2(h)
attached hereto, addressed to Incat, and dated as of the Closing Date;
(i) the shares of Common Stock to be issued
pursuant to Section 3.1 shall have been approved for quotation on the Nasdaq
National Market, upon official notice of issuance thereof.
(j) Adaptec shall have paid deferred salaries to,
and certain pre-existing indebtedness evidenced by promissory notes in favor
of, Fabrizio Caffarelli and Whitney Lynn in the aggregate amounts of $80,000
and $30,000, respectively.
(k) all actions to be taken by Adaptec in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Incat and its counsel.
Incat may waive any condition (in whole or in part) specified
in this Section 9.2 if it executes a writing so stating at or prior to the
Closing.
10. Survival of Representations, Warranties and Covenants;
Indemnification.
10.1 Survival. All of the representations and warranties
of the Parties contained in Sections 5 and 6 shall survive the Closing
(even if the damaged Party knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect for a period of one year following the Closing (the "Survival
Termination Date"). The covenants and agreements in this Agreement shall
survive except to the extent they are specifically limited by their terms.
10.2 Indemnification Provisions for Benefit of Adaptec.
In the event Incat breaches any of its representations, warranties, agreements
or covenants contained herein or Incat Italy breaches any of its
representations, warranties, agreements or covenants contained in the Asset
Purchase Agreement, provided that Adaptec makes a written claim for
indemnification in the manner provided for in this Section 10 on or prior to
the Survival Termination Date, then, subject to Section 10.4 below, the
Majority Shareholders agree, jointly and severally, to indemnify, defend and
hold harmless Adaptec from and against the entirety of any and all actions,
suits, proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, reasonable amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses, and fees, including court costs
and reasonable attorneys' fees and
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<PAGE> 42
expenses ("Adverse Consequences") Adaptec may suffer through and after the date
of the claim for indemnification resulting from, arising out of, relating to,
in the nature of, or caused by the breach.
10.3 Procedure for Indemnification Claims; Matters
Involving Third Parties.
(a) In the event that Adaptec (the "Indemnified
Party") makes a claim against any Majority Shareholder (the "Indemnifying
Party") for indemnification under Section 10.2(a) (a "Claim"), it shall notify
the Shareholders' Representative in writing as to the existence and amount of
the Claim (the "Claim Notice"). If the Indemnifying Person with respect to
such Claim disputes the existence or the amount of such Claim, the Indemnifying
Person shall notify the Indemnified Person in writing (with reasonable
specificity) within thirty (30) days following the Indemnifying Person's
receipt of the Claim Notice (the "Response Notice"). Upon such an exchange of
written notification, the parties will negotiate in good faith for up to thirty
(30) days or such other period of time as the parties mutually agree in an
effort to resolve their differences with respect to such Claim. If no Response
Notice is received by the Indemnified Person within thirty (30) days of the
Indemnifying Person's receipt of the Claim Notice or if the parties have not
resolved their differences with the aforementioned thirty (30) day negotiation
period, then the Indemnified Party shall be entitled to reduce the portions of
the Earnout Payments otherwise payable to the Majority Shareholders pursuant to
Section 3.6 by the amount of the Claim.
(b) If any third party shall notify the
Indemnified Party with respect to any matter (a "Third Party Claim") which may
give rise to a Claim against any Indemnifying Party under this Section 10, the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(c) The Indemnified Party may defend against, and
consent to tile entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner such Indemnified Party reasonably may
deem appropriate (and such Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith), and the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 10. Notwithstanding the foregoing sentence, counsel
for any Indemnifying Party shall be permitted to monitor the Indemnified
Party's defense of a Third Party Claim for the purpose of advising the
Indemnifying Party of the status and progress of the defense. Any such
activity shall be at the sole expense of the Indemnifying Party.
10.4 Exclusivity of Remedy. Adaptec's sole recourse
following the Closing for any breach by Incat of any representation, warranty,
agreement or covenant contained herein, or any breach by Incat Italy of any
representation, warranty, agreement or covenant contained in the Asset Purchase
Agreement, shall be the recovery of indemnification payments under this Section
10 by set-off to the portions of the Earnout Payments payable to the Majority
Shareholders, which payments shall not
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exceed $1,200,000 in the aggregate and which shall be pro rata to the Majority
Shareholders based on their respective holdings of Incat Common Stock
immediately prior to the Merger.
11. Termination.
11.1 Termination of the Agreement. Certain of the Parties
may terminate this Agreement as provided below:
(a) Adaptec and Incat may terminate this
Agreement as to all Parties by mutual written consent at any time prior to the
Closing;
(b) Adaptec may terminate this Agreement by
giving written notice to Incat and the Majority Shareholders at any time prior
to the Closing (A) in the event either of Incat or the Majority Shareholders
has breached any representation, warranty, or covenant contained in this
Agreement in any respect, Adaptec has notified Incat and the Majority
Shareholders of the breach, and the breach has continued without cure for a
period of thirty (30) days after the notice of breach or (B) if the Closing
shall not have occurred on or before September 1, 1995, by reason of the
failure of any condition precedent under Section 9.1 hereof (unless the
failure results primarily from Adaptec: itself breaching any representation,
warranty, or covenants contained in this Agreement); and
(c) Incat may terminate this Agreement by giving
written notice to Adaptec and the Majority Shareholders at any time prior to
the Closing (A) in the event Adaptec has breached any representation, warranty,
or covenant contained in this Agreement in any respect, Incat has notified
Adaptec of the breach, and the breach has continued without cure for a period
of thirty (30) days after the notice of breach or (B) if the Closing shall not
have occurred on or before September 1, 1995, by reason of the failure of any
condition precedent under Section 9.2 hereof (unless the failure results
primarily from Incat itself breaching any representation, warranty, or
covenants contained in this Agreement).
11.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 12 above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 8.4 above
shall survive termination.
12. Miscellaneous.
12.1 Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the prior written
approval of Adaptec and Incat; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise
the other Parties prior to making the disclosure).
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<PAGE> 44
12.2 No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the Parties, the
shareholders and option holders of Incat and their respective successors and
permitted assigns.
12.3 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
12.4 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties; provided, however, that Adaptec
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Adaptec nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
12.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
12.6 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid and addressed to the intended
recipient as set forth below:
If to Adaptec:
Adaptec, Inc.
691 S. Milpitas Blvd.
Milpitas, California 95035
Attention: Christopher G. O'Meara
Alicia Jayne Moore, Esq.
Copy to:
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Henry P. Massey, Jr., Esq.
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<PAGE> 45
If to Incat:
Incat Systems Software
1684 Dell Avenue
Campbell, California 95008
Attention: Whitney Lynn
Executive Vice President
Copy to:
Brobeck, Phleger & Harrison
Spear Street Tower
One Market Plaza
San Francisco, California 94105
Attention: Steven Tonsfeldt, Esq.
If to the Majority Shareholders:
Fabrizio Caffarelli
Incat Systems Software
1684 Dell Avenue
Campbell, California 95008
Copy to:
Brobeck, Phleger & Harrison
Spear Street Tower
One Market Plaza
San Francisco, California 94105
Attention: Steven Tonsfeldt, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
12.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
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<PAGE> 46
12.9 Forum Selection; Consent to Jurisdiction. All
disputes arising out of or in connection with this Agreement shall be solely
and exclusively resolved by a court of competent jurisdiction in the State of
California. The Parties hereby consent to the jurisdiction of the Superior
Court of the State of California and the United States District Courts of
California and waive any objections or rights as to forum nonconveniens, lack
of personal jurisdiction or similar grounds with respect to any dispute
relating to this Agreement.
12.10 Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by Adaptec, Incat and the Majority Shareholders. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
to subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence.
12.11 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
12.12 Expenses. Each of Adaptec and Incat will bear their
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that the Majority Shareholders win be responsible for (i)
any brokers', finders' or advisory fees payable on behalf of Incat in
connection with the Agreement and the transactions contemplated hereby, and
(ii) any legal or accounting fees in excess of $25,000 undertaken on behalf of
Incat or its principals in connection with the Agreement and the transactions
contemplated hereby.
12.13 Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all miles and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
12.14 Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
12.15 Shareholders Representative. The Majority
Shareholders hereby appoint Fabrizio Caffarelli as their agent and
representative (the "Shareholders' Agent") for the purposes of (i)
representing, acting for and binding each of them for all purposes of this
Agreement, including without limitation, the settlement of any controversies or
disagreements between Adaptec; and the Majority Shareholders of Incat
hereunder; (ii) receiving or giving any notices to or from the Majority
Shareholders hereunder; and (iii) communicating with Adaptec or Incat as to any
matters relating to this Agreement. In the event Fabrizio Caffarelli is
unable, unwilling or unavailable to serve as the
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<PAGE> 47
Shareholders' Representative, the Majority Shareholders hereby appoint Whitney
Lynn to serve in such capacity, if he is able, willing and available, and if
not, someone appointed to serve in such capacity by holders of 51% of the
voting power of Incat immediately prior to Closing. Adaptec shall be entitled
to presumptively rely without further inquiry upon all acts of, and
communications from, the Shareholders' Agent as being the authorized actions
and communications of the Shareholders' Agent as approved by the Majority
Shareholders. The Shareholders' Agent shall be entitled to take binding action
on behalf of the Majority Shareholders upon obtaining the approval of such
Majority Shareholders who immediately prior to the Closing owned at least 51%
of the voting power of Incat. Each Majority Shareholder hereby further agrees
that he will indemnify and hold harmless the Shareholders' Agent for any and
all actions taken by the Shareholders' Agent under the provisions of this
Section 12.15.
12.16 Attorneys' Fees. If any legal proceeding or other
action for fraud or Gross Negligence relating to this Agreement is brought or
otherwise initiated, the prevailing party shall be entitled to recover
reasonable attorneys fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
13. Location of Definitions. The following table sets forth the
Sections of this Agreement in which certain terms are defined:
<TABLE>
<CAPTION>
Term Section
-------------------------------------------- ------------
<S> <C>
Acquisition Sub Introduction
Adverse Consequences 10.2(a)
Affiliate 1
Affiliated Group 5.12(d)
Adaptec 2.1
Adaptec Common Stock Introduction
Adaptec Disclosure Schedule 6
Adaptec SEC Reports 6.5(a)
Certificates 3.4(c)
Closing 2.2
Closing Date 2.2
Code 2.4
Confidential Information 1
Controlled Group of Corporations 5.2(b)
Dissenting Shareholder 3.2
Dissenting Shares 3.2
Earnout Payment 3.6
Earnout Payment Date 3.6
Exchange Agent 3.4(a)
Exchange Ratio 3.1
Incat Introduction
</TABLE>
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<PAGE> 48
<TABLE>
<CAPTION>
Term Section
---------------------------------------------- -----------
<S> <C>
Incat Disclosure Schedule 5
Incat Shareholders' Meeting 7.10
Effective Date of the Merger 2.1
Effective Time of the Merger 2.1
Employee Benefit Plan 1
Employee Pension Benefit Plan 1
Employee Welfare Benefit Plan 1
Employment Agreement 7.8
Environmental, Health and Safety Laws 5.27(a)
ERISA 1
Fiduciary 5.25
Financial Statements 5.6
Incat Common Stock 2.1
Incat Disclosure Schedule 5
Indemnified Party 10.3
Information Statement 7.9
Intellectual Property 1
Majority Stockholders Introduction
Merger 2.1
Merger Agreement 2.1
Merger Consolidation 3.6
Most Recent Balance Sheet 5.8
Most Recent Financial Statements 5.6
Most Recent Fiscal Period End 5.6
Most Recent Fiscal Year End 5.6
Ordinary Course of Business 1
Party Introduction
Person 1
Securities Act 4.1
Security Interest 1
Shareholders Agreement 4.3
Shareholders' Meeting Date 7.10
Acquisition Sub Introduction
Surviving Corporation 2.3
Surviving Corporation Revenue 3.6(b)
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
Term Section
-------------------------------------------- -----------
<S> <C>
Taxes 5.12(a)
Tax Returns 5.12(b)
Third Party Claim 10.3
</TABLE>
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<PAGE> 50
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
INCAT SYSTEMS SOFTWARE USA, INC.
Company: By:
------------------------------------
Title:
---------------------------------
Adaptec: ADAPTEC, INC.
By: /s/ S. SUNDARESH
------------------------------------
Title: Vice President & General Manager
---------------------------------
Acquisition Sub: ISS ACQUISITION CORP.
By: /s/ CHRISTOPHER G. O'MERA
------------------------------------
Title: Vice President
---------------------------------
Majority Shareholders:
---------------------------------------
Fabrizio Caffarelli
---------------------------------------
Rossella de Peverelli
---------------------------------------
Whitney G. Lynn
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<PAGE> 51
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
INCAT SYSTEMS SOFTWARE USA, INC.
Company: By: /s/ FABRIZIO CAFFARELLI
------------------------------------
Title:
---------------------------------
Adaptec: ADAPTEC, INC.
By:
------------------------------------
Title:
---------------------------------
Acquisition Sub: ISS ACQUISITION CORP.
By:
------------------------------------
Title:
---------------------------------
Majority Shareholders: /s/ FABRIZIO CAFFARELLI
---------------------------------------
Fabrizio Caffarelli
/s/ ROSSELLA DE PEVERELLI
---------------------------------------
Rossella de Peverelli
/s/ WHITNEY G. LYNN
---------------------------------------
Whitney G. Lynn
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<PAGE> 52
EXHIBIT 4.3
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made and entered into as of __________, 1995, between
Adaptec, Inc., a California corporation ("Adaptec"), and each of the
undersigned shareholders (the "Shareholders") of Incat Systems Software USA,
Inc., a California corporation ("Incat").
RECITALS
Adaptec, Incat, ISS Acquisition Corp., a wholly-owned Acquisition Sub
of Adaptec ("Acquisition Sub"), and the Shareholders have entered into an
Agreement and Plan of Reorganization dated as of __________, 1995 (the
"Reorganization Agreement") which provides for the merger (the "Merger") of
Incat into Acquisition Sub. Upon the Merger, outstanding shares of Incat
Common Stock will be converted into shares of the Common Stock of Adaptec (the
"Merger Shares") and rights to receive certain future earnout payments as set
forth in the Reorganization Agreement, a portion of which will consist of
Common Stock of Adaptec (the "Earnout Shares"). The Earnout Shares, if any, to
be issued as part of the 1996 Earnout Payment are referred to herein as the
"1996 Earnout Shares." The Merger Shares and the 1996 Earnout Shares are
sometimes collectively referred to herein as the "Adaptec Shares." The Adaptec
Shares to be so issued have not been registered under the Securities Act of
1933, as amended ("Securities Act") in reliance upon the exemption therefrom
contained in Section 4(2) of the Securities Act. Capitalized terms used in
this Agreement shall have the same meaning as in the Reorganization Agreement
unless the context requires otherwise.
In consideration of the premises and the mutual representations,
warranties and covenants herein contained, the parties hereto have agreed and
do hereby agree as follows:
1. Restricted Stock; Legend.
1.1 Each certificate for Adaptec Shares shall be stamped
or otherwise imprinted with a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
ASSIGNED, OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) IN
COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
Such legend shall be removed upon the earlier of (i) the
registration of the Adaptec Shares under the Securities Act or (ii)
_________, 1998.
<PAGE> 53
1.2 In connection with the limitations on disposition
with respect to the Adaptec Shares contained in this Agreement, Adaptec will
issue stop transfer instructions to its transfer agent with respect to such
Shares.
1.3 The undersigned Shareholders understand that Adaptec
is under no obligation to register the sale, transfer or other disposition of
the Adaptec Shares, except as specifically provided in this Agreement.
2. Shareholder's Representations. The undersigned Shareholder
represents, warrants and covenants to Adaptec that:
2.1 The undersigned Shareholder will not make any sale,
transfer, or other disposition of the Adaptec Shares unless (1) such sale,
transfer, or other disposition is within the limitations of and in compliance
with Rule 144 promulgated by the Securities and Exchange Commission under the
Securities Act; or (ii) some other exemption from registration under the
Securities Act is available with respect to any such proposed sale, transfer or
other disposition of the Adaptec Shares; or (iii) such distribution of the
Adaptec Shares has been registered under the Securities Act.
2.2 The undersigned Shareholder is aware of Adaptec's
business affairs and financial condition and has sufficient information about
Adaptec to reach an informed and knowledgeable decision to acquire the Adaptec
Shares pursuant to the Reorganization Agreement. The undersigned Shareholder
acknowledges he or she has (i) previously received Adaptec's Annual Report for
the fiscal years ended March 31, 1993, March 31, 1994, and March 31, 1995; and
(ii) had the opportunity to ask questions and receive answers concerning the
Merger. The undersigned Shareholder is acquiring such Adaptec Shares for
investment for such Shareholder's own account and not with a view to resale or
distribution.
2.3 The undersigned Shareholder has no present plan,
intention, or arrangement to dispose of any of the Adaptec Shares in a manner
that would cause the Merger to violate the continuity of shareholder interest
requirement set forth in Reg. Section 1.368-1 under the Internal Revenue Code
of 1986, as amended.
2.4 The undersigned Shareholder acknowledges the
advisability of consulting his or her own tax advisor regarding the
consequences of the Merger. The undersigned Shareholder acknowledges that The
Portola Group will serve as "purchaser representative" (with the meaning of
Regulation D promulgated under the Securities Act) with respect to the Merger.
3. Transfers of Stock. With respect to any disposition or
attempted disposition of any Adaptec Shares, the undersigned Shareholder will
comply with the following procedure:
3.1 With respect to any sale of the Adaptec Shares within
the limitations of Rule 144, Adaptec will notify its transfer agent promptly
after consummation of the Merger to transfer such Adaptec Shares upon receipt
of appropriate documentation.
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<PAGE> 54
3.2 With respect to a disposition of the Adaptec Shares
not registered under the Securities Act other than pursuant to the limitations
of Rule 144, the undersigned Shareholder will give prior written notice to
Adaptec describing the manner and circumstances of the proposed disposition in
sufficient detail to enable Adaptec to evaluate fully whether the proposed
disposition of such Shares satisfies the requirements of the Securities Act and
this Agreement. Upon receipt of such written notice, Adaptec shall promptly
notify the undersigned Shareholder either (i) that the Adaptec Shares may be
disposed of in the manner and under the circumstances described, or (ii) that
on the basis of the information in the notice Rule 144 does not appear to be
available and the Adaptec Shares may not be disposed of prior to the receipt
by Adaptec of an opinion of counsel reasonably satisfactory to Adaptec and its
counsel to the effect that the proposed deposition of the Adaptec Shares may be
effected without registration under the Securities Act, or in lieu thereof, a
"no action" letter or other communication from the Commission reasonably
satisfactory to Adaptec and its counsel to that effect.
3.3 With respect to a disposition of the Adaptec Shares
registered under the Securities Act, the undersigned will dispose of such
Shares as provided in the applicable registration statement.
4. Registration Rights.
4.1 Certain Definitions. As used in this Section 4, the
following terms shall have the following respective meanings:
(i) The term "Commission" means the Securities
and Exchange commission;
(ii) The term "Form S-3" will refer to the
registration statement of the same name (including successors thereto) prepared
for filing with the Commission,
(iii) The term "Holder" means any holder or
transferee of outstanding Registrable Securities who acquired such Registrable
Securities in a transaction or series of transactions not involving any public
offering;
(iv) The terms "register", "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration;
(v) The term "Registrable Securities" means
(i) the Merger Shares, (ii) the 1996 Earnout Shares, and (iii) any other shares
of Common Stock of Adaptec issued in respect to such shares; provided, however,
that such shares of Common Stock of Adaptec referred to in (i), (ii) and (iii)
above shall only be treated as Registrable Securities if and so long as they
have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery
-3-
<PAGE> 55
requirements of the Securities Act under Section 4(l) thereof so that all
transfer restrictions and restrictive legends with respect thereto are removed
upon the consummation of such sale;
(vi) The term "Restricted Securities" means the
Adaptec Shares required to bear the legend set forth in Section 1. I hereof;
and
(vii) The term "Securities Act" means the
Securities Act of 1933, as amended.
4.2 Registration on Form S-3. Adaptec will use its best
efforts to prepare and file a registration statement covering the Merger Shares
under the Securities Act (whether or not required by law to do so) and to have
such registration statement declared effective by October 31, 1995 on Form
S-3. Adaptec will further use its best efforts to prepare and file a
registration statement covering the 1996 Earnout Shares under the Securities
Act (whether or not required by law to do so) and to have such registration
statement declared effective by August 15, 1996. Adaptec's obligation to
register the Merger Shares and the 1996 Earnout Shares pursuant to this Section
4.2 shall be subject only to the following:
(i) Adaptec will not be required to effect a
registration pursuant to this Section (x) within 120 days immediately following
the effective date of any registration statement pertaining to securities of
Adaptec (other than a registration of securities in a Commission Rule 145
transaction or with respect to an employee benefit plan); or (y) if Adaptec
shall furnish to the Holders of Registrable Securities a certificate signed by
the Chief Executive Officer of Adaptec stating that in the good faith judgment
of the Board of Directors of Adaptec, upon the advice of counsel, it would be
seriously detrimental to Adaptec and its shareholders for such registration to
be effected at such time, in which event Adaptec shall have the right to defer
the filing and/or effectiveness of such registration statement for a period of
not more than 120 days (but any further delays by Adaptec after such 120 days
will not be permitted).
(ii) Adaptec will give notice to all Holders of
Registrable Securities of each registration pursuant to this Section and will
provide a reasonable opportunity for such Holders to participate in each
registration.
(iii) Subject to the foregoing, Adaptec hereby
represents that it is presently eligible to utilize Form S-3 for the purpose of
registering the resale of Restricted Securities.
4.3 Registration and Selling Expenses. All expenses
incurred in connection with any registration proceeding pursuant to Section 4.2
will be borne by Adaptec.
4.4 Registration Procedures. In the case of each
registration or qualification effected by Adaptec pursuant to this Section 4,
Adaptec will keep each Holder participating therein advised in writing as to
the initiation of such registration or qualification and as to the completion
thereof. Adaptec will, as expeditiously as possible:
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<PAGE> 56
(i) Prepare and file with the Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective, and,
upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for the
lesser of two years or until the Holders have informed Adaptec in writing that
the distribution of their securities has been completed.
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement, and use its best efforts
to cause each such amendment to become effective, as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
(iii) Furnish to the Holders participating in
such registration such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such Holders may reasonably request in order to facilitate the public offering
of such securities.
(iv) Notify each seller of Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchaser of such shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in the light of the circumstances then existing.
(v) Use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(vi) Apply for listing and use its best efforts
to list the Registrable Securities being registered on any national securities
exchange on which a class of Adaptec's equity securities are listed or, if
Adaptec does not have a class of equity securities listed on a national
securities exchange, apply for qualification and use its best efforts to
qualify the Registrable Securities being registered for inclusion on the
automated quotation system of the National Association of Securities Dealers,
Inc.
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<PAGE> 57
4.5 Information by Holder. The Holder or Holders of
Registrable Securities included in any registration will furnish to Adaptec
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as Adaptec may reasonably request in writing, in
connection with any registration, qualification or compliance referred to in
this Section 4. In connection with the preparation and filing of each
registration statement under the Securities Act pursuant to this Agreement,
Adaptec will give each participating Holder and its counsel and accountants,
the opportunity to discuss the business of Adaptec with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
Adaptec shall not file any registration statement under the Securities Act
(whether a Holder is disposing of registrable Securities or not) which contains
any reference to any Holder without the prior written consent of Holder, which
consent shall not be unreasonably withheld.
4.6 No-Action Letter; Letter or Opinion of Counsel in
Lieu of Registration. Notwithstanding anything else herein, if Adaptec shall
have obtained from the Commission a "no-action" letter in which the Commission
has indicated that it will take no action if, without registration under the
Securities Act, particular Holders dispose of Registrable Securities covered by
any request made under Section 4.2 in the manner in which they propose to
dispose of the Registrable Securities included in such request, or if in the
opinion of counsel for Adaptec reasonably concurred in by counsel for such
Holders, no registration under the Act is required in connection with such
disposition, Adaptec need not comply with such request as to such Holders.
5. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, Adaptec agrees for a period of three years from the date of this
Agreement to use its best efforts to:
5.1 Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
5.2 Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of Adaptec under the
Securities Act and the Securities Exchange Act of 1934, as amended; and
5.3 So long as a Shareholder owns any Restricted
Securities to furnish to the Shareholder forthwith upon request a written
statement by Adaptec as to its compliance with the reporting requirements of
said Rule 144 and of the Securities Act and the Securities Exchange Act of
1934, a copy of the most recent annual or quarterly report of Adaptec, and such
other reports and documents of Adaptec and other information in the possession
of or reasonably obtainable by Adaptec as a Shareholder may reasonably request
in availing itself of any rule or regulation of the Commission allowing a
Shareholder to sell any such securities without registration.
-6-
<PAGE> 58
6. Notices. Except as otherwise provided in this Agreement, all
notices or other communications hereunder shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid. Until
otherwise specified by notice in writing to the other party, such notices, if
given to Adaptec, shall be addressed to it at 691 South Milpitas Blvd.,
Milpitas, CA 95035, Attention: General Counsel; and if given to the undersigned
Shareholders, shall be addressed to them at their addresses set forth on the
stock records of Adaptec or Adaptec's transfer agent.
7. Miscellaneous.
7.1 This Agreement shall be binding upon and shall inure
to the benefit of Adaptec and the undersigned Shareholders and their respective
assigns, transferees and successors in interest.
7.2 This Agreement shall be governed by and construed in
accordance with the laws of the State of California, excluding its conflicts of
law rules, as applied to agreements entered into in California between
California residents. The parties expressly stipulate that all litigation
under this Agreement shall be brought in the state courts of Santa Clara
County, California, or, in matters involving federal jurisdiction, the United
States District Court for the Northern District of California. The parties
consent to the County of Santa Clara, California, as the appropriate
jurisdiction and venue for any such proceedings.
7.3 This Agreement may be executed in counterparts. All
of such counterparts, taken together, shall constitute a single instrument.
7.4 This Agreement and the contents hereof shall not be
disclosed in any form by Shareholder to any other person or entity.
Shareholder further agrees not to disclose to any other person and to maintain
the confidentiality of all non-public information known to him or her
concerning the Merger and the transactions in connection therewith.
-7-
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ADAPTEC, INC. SHAREHOLDERS
By: _____________________________ _____________________________________
(Signature)
Title: __________________________
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
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<PAGE> 60
SHAREHOLDERS
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
-9-
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SHAREHOLDERS
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
-10-
<PAGE> 62
SHAREHOLDERS
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Printed Name)
_____________________________________
_____________________________________
(Address)
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<PAGE> 63
EXHIBIT 5
INCAT SYSTEMS SOFTWARE USA, INC.
CONFIDENTIAL DISCLOSURE SCHEDULE
The following confidential disclosures constitute the Incat Disclosure
Schedule as referenced in the Agreement and Plan of Reorganization dated as of
July 25, 1995 (the "Merger Agreement") by and among ADAPTEC, INC, a California
corporation ("Adaptec"), ISS ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Adaptec ("Acquisition Sub"), and INCAT SYSTEMS
SOFTWARE USA, INC., a California corporation ("Incat").
Each of the disclosures set forth in this Disclosure Schedule shall
apply to the Section of the Merger Agreement to which such disclosure pertains.
All capitalized terms used herein shall, unless the context indicates otherwise,
have the definition given to them in the Merger Agreement. The disclosures
herein should be read together and are qualified by the other pertinent
information contained herein. Copies of agreements, plans, policies, and other
documents referred to herein have been made available to Adaptec. Descriptions
contained herein of said documents are intended to be summaries and are
qualified by the actual terms of said documents.
SECTION 5.1
Incat was incorporated as a California corporation on September 29,
1993. Incat is qualified to do business only in the State of California.
The directors and officers of Incat are as follows:
Directors: Fabrizio Caffarelli, Rossella de Peverelli, and
Whitney G. Lynn.
Officers: Fabrizio Caffarelli, President
Whitney G. Lynn, Executive Vice President,
Chief Financial Officer and Secretary
Umberto Bassignani, Vice President,
Research & Development
Jeff Stenehjem, Vice President, Sales
<PAGE> 64
SECTION 5.3(a)
Shareholders of Incat as of July 25, 1995 are as follows:
<TABLE>
<S> <C>
Fabrizio Caffarelli 4,000,000 shares Common
Rosella de Peverelli 4,000,000 shares Common
Whitney G. Lynn 300,000 shares Common
Umberto Bassignani 150,000 shares Common
Becky J. White 25,000 shares Common
---------
8,475,000
</TABLE>
SECTION 5.3(b)
Schedule 5.3(b), included herewith, provides a list of the current
holders of stock options relating to the Common Stock of Incat. It is
anticipated that each holder of outstanding stock options will exercise each of
such options prior to the consummation of the Merger.
SECTION 5.4
See Schedule 5.4 attached.
SECTION 5.5
On February 17, 1995, Incat entered into an agreement with Corum Group
Ltd. of Bellevue, Washington for assistance in identifying a potential buyer of
the company and structuring and valuing transaction alternatives. Under the
terms of that agreement, Incat paid a monthly retainer of $7,500 to Corum from
inception of the relationship until the signing of the letter with Adaptec in
May 1995. Additionally, the terms of the agreement require Incat to pay a
transaction fee based on the following formula: 8% of the first $2 million of
transaction consideration; 6% on the next $2 million of transaction
consideration; and 4% on any additional transaction consideration. The
transaction fee is payable upon the successful consummation of a transaction.
The transaction fee was orally amended to a flat rate of 4% of the transaction
consideration. Incat intends to satisfy its obligations with respect to this
fee by issuing to Corum a sufficient number of shares of Incat's Common Stock
such that at the time of closing, Corum will hold 4% of Incat's equity on a
fully diluted basis. The issuance of these shares will be contingent upon the
consummation of the Merger. Corum will participate pro-rata in the Merger with
the holders of Common Stock of Incat.
2.
<PAGE> 65
SECTION 5.6
Schedule 5.6, included herewith, contains Incat's unaudited balance
sheet and statement of income for the fiscal years ended December 31, 1993 and
December 31, 1994. Schedule 5.6 also contains unaudited balance sheets and
statements of income as of and for the five (5) month period ended May 31,
1995. Incat believes that the Financial Statements have been prepared applying
GAAP principles, methods and assumptions, and, while Incat does not strictly
comply with GAAP requirements with respect to the presentation of certain of
the required financial statements, the Financial Statements present fairly
Incat's financial condition and results of operation for the periods indicated.
In 1994, Incat took a very conservative approach to recognizing
royalty revenue as it was not known whether royalties would be a significant
part of revenue for the year. Royalties were recognized as revenue after the
payment was actually received by Incat. Royalty revenue was spread forward
depending upon the royalty period (month, quarter. year).
For example, a quarterly royalty would be received the month following
each quarter end and spread ratably over the following quarter. Thus, royalty
revenue was recorded on a one-quarter lag. Similarly, a monthly royalty would
be received in the month following each month end and was recognized in the
month received. Thus, royalty revenue was recorded on a one-month lag.
In 1995, Incat realized that royalties were becoming a significant
part of monthly revenue and elected to change the method of royalty revenue
recognition. Incat accrues royalty revenue actually earned each mouth based an
estimate received from the licensee or based on recent trend. An adjustment is
made if necessary upon receipt of the payment. Any adjustment is reflected in
the month in which the payment is actually received.
In the first quarter of 1995, there was an overlap of royalty revenues
due to the changes in recognition policy.
SECTION 5.8
All representations set forth in Section 5.8 regarding Incat's
ownership of Intellectual Property are qualified in their entirety by the
disclosures made in Section 5.14 of this Disclosure Schedule.
3.
<PAGE> 66
SECTION 5.9(c)
Incat intends to amend each of its outstanding stock option agreements
to provide for full acceleration of all vesting schedules, termination of all
rights of first refusal and elimination of all escrow arrangements thereunder.
The effectiveness of such amendment shall, however, be contingent upon the
consummation of the Merger.
SECTION 5.9(f)
Incat is presently operating under a non-binding letter of intent with
Juke Box Information Systems pursuant to which Incat has offered to license
certain rights to the use of the source code for Easy-CD Toolkit to Juke Box
Information Systems, in consideration for which, Juke Box Information Systems
will issue to Incat shares of capital stock representing 10% of Juke Box
Information System's equity. This license is subject to negotiation and
execution of a final agreement on terms mutually agreeable to the parties.
SECTION 5.9(g)
As of the date of this Agreement, Incat is indebted to Fabrizio
Caffarelli in the aggregate amount of $80,000 (aggregate principal amount of
promissory note and $16,000 in accrued salary) and is indebted to Whitney Lynn
in the aggregate amount of $30,000 (accrued salary). These amounts shall be
repaid in full, together with all accrued interest through July 31, 1995 of
$5,771.41 ($1,900.19 owing to Mr. Lynn; $3,870.42 owing to Mr. Caffarelli), in
connection with the consummation of the Merger.
SECTION 5.9(i)
It is anticipated than all Incat option holders will exercise their
outstanding options prior to the consummation of the Merger.
See Section 5.5 of this Disclosure Schedule.
SECTION 5.9(n)
On January 23, 1995, Incat made a payment of $125,000 on a performance
bonus of $150,000 to Fabrizio Caffarelli relating to 1994 operations. On May
5, 1995, Incat made an additional payment of $20,000 to Mr. Caffarelli and, on
June 30, 1995, made the final payment of $5,000 to him.
4.
<PAGE> 67
See Section 5.9(c) of this Disclosure Schedule.
SECTION 5.9(n)
Acceleration of the options in connection with the Merger will give
rise to non-deductible "express parachute payments" as such term is used in
Section 280G of the Code. However, Incat anticipates seeking Shareholders'
approval of any such parachute payments in order to comply with the Small
Business Corporation exemption to Section 280G of the Code.
SECTION 5.11
See Section 5.1 of this Disclosure Schedule.
SECTION 5.12(b)
Incat's federal and California income tax returns for the year ended
December 31, 1994 are currently on extension and are being prepared by Arthur
Andersen.
SECTION 5.12(d)
Acceleration of the options in connection with the merger will give
rise to non-deductible "excess parachute payments" as such terms is used in
Section 280G of the Code. However, Incat anticipates seeking shareholder
approval of any such parachute payments in order to comply with the Small
Business Corporation exemption to Section 280G of the Code.
SECTION 5.13(b)
Incat presently leases approximately 5,600 square feet of office space
at 1684 Dell Avenue, Campbell, CA 95008. The lease expires January 15, 1997,
and the monthly rent is $7,854. The lessor is South Bay Construction
Development III and VII Company.
SECTION 5.14(b)
Schedule 5.14, included herewith, includes a list of all patents,
copyrights and trademarks (whether registered or unregistered) known to Incat,
relating to Incat's business and owned or held by Incat, Incat Italy or
Fabrizio Caffarelli. All such
5.
<PAGE> 68
intellectual property owned or held by Fabrizio Caffarelli or Incat Italy will
be assigned to Incat prior to the consummation of the Merger. Schedule
5.14(b), included herewith, lists any and all licenses or permissions granted
by Incat to any third parties with respect to this intellectual property.
SECTION 5.14(c)
Schedule 5.14(c), included herewith, includes a list of Intellectual
property that any third party owns and that Incat uses pursuant to license,
sublicense, agreement, or permission.
SECTION 5.16
Incat's policy is to provide goods on a "just in time" basis and thus,
generally does not hold inventory. As customer orders are received, such
orders are filled by Incat's local duplicating and assembly vendors and then
picked up by Incat and shipped to the customer typically within 1 or 2
business days.
SECTION 5.17(a)
(1) A 36-month closed end lease with Nissan Motor Acceptance
Corporation dated January 7, 1994 for the lease of a 1994 Nissan Pathfinder 4X4
(VIN#JN8HD1740RW204837). The monthly payment is $358.25.
(2) A 36-month closed end lease with Autocorp dated January 20,
1994 for entered into for the lease of a 1994 Honda Civic
(VIN#2HGEH3397RH504145). The monthly payment is $298.17.
(3) A 36-month closed end lease with BMW Financial Services dated
June 24, 1994 for the lease of a 1994 BMW 325 ICA (VIN#WBABJ5323RJC78270). The
monthly payment is $693.76.
(4) A 36-month closed end lease with Nissan Motors Acceptance
Corporation dated July 25, 1994 for the lease of a 1994 Nissan Altima
(VIN#1N4BU31LXRC202653). The monthly payment is $256.91.
SECTION 5.17(b)
Incat operates under oral agreement with suppliers. The terms of these
oral agreements typically include payments on net 30-day terms. The key
suppliers of
6.
<PAGE> 69
Incat who operate under such oral agreements include the following: Craftsman
Packaging, Inc. (product boxes, inserts and license envelopes); Danex
Corporation (assembly and duplication); and, Western Press (labels and
stickers).
SECTION 5.17(d)
The letter if intent between Incat and Jukebox Information Systems,
Inc. contemplates Incat receiving a ten percent (10%) equity interest in
Jukebox. See Section 5.9(f) of the Disclosure Schedule.
SECTION 5.17(e)
Business Loan Agreements, Commercial Pledge Agreement, and Promissory
Note, each executed on August 10, 1994 by Incat, whereby Citibank provides to
Incat a revolving line of credit in the amount of $54,545 at prime plus 2%.
This facility is secured by a standby letter of credit in the amount of $60,000
issued by Creditor Commerciale of Milan, Italy. An aggregate principal amount
of $50,000 is presently outstanding under this facility. This facility is
subject to annual review and has a present expiration date of August 10, 1995.
Promissory Note dated March 13, 1995 between Incat and Fabrizio
Caffarelli in an aggregate principal amount of $64,000. The Promissory Note is
payable on demand, and is accruing interest at an applicable federal rate of
7.19% per annum. No repayments of principal have been made to date.
Deferred royalty income payable to Incat Italy but paid to Incat
resulted in long-term indebtedness owing to Incat Italy of an aggregate
principal amount of $50,000.
SECTION 5.17(f)
The following is a list of Confidential and Non-Disclosure Agreements
entered into by Incat:
CD ROM Galleries, Inc. dated February 16 1994
Colorado Memory Systems (a division of Hewlett Packard) dated
February 8, 1995
Dyna Tek Automation Systems, Inc. dated June 23, 1995
E-Mu Systems, Inc. dated February 16, 1995
Keystar Systems dated June 24, 1994
Lion Optics Corporation dated February 13, 1995
Objects Management Inc. dated August 22, 1994
7.
<PAGE> 70
Apple Computer, Inc. dated February 10, 1994
In addition, each employee of Incat has signed the standard Incat
Confidentiality and Non-Disclosure Agreement and the Proprietary Information
Agreement.
SECTION 5.17(g)
Promissory Notes referred to in Section 5.17(e) of these Disclosure
Schedules.
Stock option agreements with those option holders listed on Section
5.3(b) of this Disclosure Schedule.
Intellectual property assignment documentation to be executed by Incat
Italy and Fabrizio Caffarelli in favor of Incat to be executed in connection
with the consummation of the Merger.
Long-term indebtedness owing to Incat Italy referred to in Section
5.17(e) of this Disclosure Schedule.
SECTION 5.17(h)
1994 Stock Option Plan and related agreements. Each of the employees
and consultants listed in Section 5.3(b), and the Schedule relating thereto,
has entered into an agreement under which incentive stock options or
nonstatutory stock options, respectively, have been granted to the holder.
SECTION 5.17(j)
On November 30, 1993, Incat entered into a consulting agreement with
David Powell, Inc. whereby financial consulting services have been provided by
Douglas S. Barry. Incat also entered into an oral employment agreement with
Whitney G. Lynn whereby Whitney became Executive Vice President of Incat.
In addition, employees typically sign a letter agreement which details
the nature of employment, job description, salary and benefits. All employees
are "at will" employees.
8.
<PAGE> 71
SECTION 5.17(m)
1. License Agreement with Adaptec dated May 5, 1993 and related
assignments and amendments.
2. Letter of Intent dated November 10, 1994 between Incat and Creative
Labs, Inc.
3. Licensing Agreement dated December 15, 1993 between Incat and
Fujitsu Limited.
4. Software License Agreement dated April 21, 1995 between Incat and
Hewlett-Packard Company.
5. Licensing Agreement dated October, 1993 between Incat and Pinnacle
Micro, Inc.
SECTION 5.17(n)
Schedule 5.17(n), included herewith, includes a list of those contracts
under which Incat is required to provide technical or other support for its
products.
SECTION 5.17(o)
Incat Check Request Form
Incat Purchase Order
Incat Employment Application
Incat Payroll Action Notice
Incat Employee Information Sheet
Incat Termination Certification
Incat Proprietary Information Agreement
Incat Licensing Agreement
Incat Mutual Non-Disclosure Agreement
Incat Confidentiality and Non-Disclosure Agreement
Incat Product Purchase Evaluation Agreement
Form or Distribution Agreement
Form of Employment Letter
9.
<PAGE> 72
SECTION 5.17(p)
1. Adaptec License Agreement dated May 5, 1993.
2. Amendment No. 1 to Adaptec License Agreement (dated May 5,
1993) dated June 4, 1993.
3. Assignment to Adaptec License Agreement (dated May 5, 1993) to
Incat dated February 9, 1994.
4. Amendment No. 2 to Adaptec License Agreement (dated May 5, 1993)
dated July 25, 1995.
5. Amendment No. 3 to Adaptec License Agreement (dated May 5, 1993)
dated January 18, 1995.
6. Amendment No. 4 to Adaptec License Agreement (dated May 5, 1993)
dated May 15, 1995.
7. Letter of Intent dated November 10, 1994 between Incat and
Creative Labs, Inc.
8. Licensing Agreement dated December 15, 1993 between Incat and
Fujitsu Limited.
9. Software License Agreement dated April 21, 1995 between Incat
and Hewlett-Packard Company.
10. Licensing Agreement dated October, 1993 between Incat and
Pinnacle Micro, Inc.
11. Memorandum of Understanding and Agreement dated April 24, 1995
between Incat and CD Cambridge.
12. Memorandum of Understanding and Agreement dated March 13, 1995
between Incat and Information Management Research, Inc.
13. Distribution Amendment to the Easy-CD Toolkit License Agreement
dated May 15, 1995 between Incat and Macro Computer Products, Inc.
14. Memorandum of Understanding and Agreement dated February 28,
1995 between Incat and Mindworks Corporation.
15. Distribution Amendment to the Easy-CD Toolkit License Agreement
dated May 8, 1995 between Incat and MVE Limited.
16. Memorandum of Understanding and Agreement dated May 30, 1995 and
Distribution Amendment to the Easy-CD Toolkit dated May 30, 1995 between Incat
and Base Ten Systems, Inc.
17. Memorandum of Understanding and Agreement dated February 28,
1995 between Incat and Metafile Information System, Inc.
SECTION 5.18
Under its present accounting practices, Incat recognizes bad debt
expense only at the time an account is actually written off as uncollectible.
No allowance for doubtful accounts is maintained on the books of Incat. Incat's
management believes that if an allowance for doubtful accounts were to be
established at this time it would be
10
<PAGE> 73
approximately $40,000, which amount shall be deemed accrued for purposes of
interpreting the representation set forth in Section 5.18.
SECTION 5.20
Incat maintains no self-insurance arrangement.
SECTION 5.21
On May 31, 1995, a civil antitrust complaint filed in U.S. District
Court, Northern District of Texas, by Optic Solutions naming Incat as
defendant. The complaint was served on Incat on June 6, 1995 and claims
discrimination in price and discounts or promotional allowances. On July 25,
1995, Optic Solutions agreed to dismiss this lawsuit with prejudice and to
fully and completely release and waive any and all claims against Incat
relating to the subject matter of the lawsuit.
By letter dated June 28, 1995 from Kaman Aerospace Corporation, Incat
has been informed of a potential dispute with regard to the use of the
trademark "Magic Lantern" by Adaptec, Inc. The letter alleges that "Magic
Lantern" is the pre-existing mark of Kaman. First use of the mark "Magic
Lantern" by Kaman occurred in 1987.
SECTION 5.22
Incat operates under several sales terms: Payment on 2/10 or net 30-day
terms, COD, credit card sales, and bank wires. Sales to end-users typically
involve shrink-wrap license agreements in the form previously provided to
Adaptec.
SECTION 5.25
Incat provides the following benefits to its employees:
1. Group Medical Insurance.
a. Steve Fertitta
Fertitta & Associates
1999 So. Bascom Avenue, Suite 515
Campbell, CA 95008
(408) 377-6852
b. Insurer: John Alden Life Insurance Company
<PAGE> 74
c. Policy Number: #836209
Period of Coverage: September 1, 1994 - August 31, 1995
d. Scope: See attached summary of benefits.
2. Group Dental Insurance.
a. Steve Fertitta
Fertitta & Associates
1999 So. Bascom Avenue, Suite 515
Campbell, CA 95008
(408) 377-6852
b. Insurer: Standard Insurance Company
Policyholder: Incat
Covered Insured: See attached list of each covered insured
c. Policy Number: #517059
Period of Coverage: September 1, 1994 - August 31, 1995
d. Scope: See attached summary of benefits.
3. Group Life Insurance.
a. Steve Fertitta
Fertitta & Associates
1999 So. Bascom Avenue, Suite 515
Campbell, CA 95008
(408) 377-6852
b. Insurer: Standard Insurance Company
Policyholder: Incat
Covered Insured: See attached list of each covered insured
c. Policy Number: #618108
Period of Coverage: September 1, 1994 - August 31, 1995
d. Scope: See attached summary of benefits.
In addition, Incat employees are generally eligible to receive stock
options during the term of their employment. Stock Options are granted to
employer pursuant to the 1994 Stock Option Plan referred to in Section 5.17(h)
of this Disclosure Schedule,
SECTION 5.28
Mr. Caffarelli owns a 20% interest in Incat France.
12.
<PAGE> 75
EXHIBIT 6
ADAPTEC DISCLOSURE SCHEDULE
No exceptions.
<PAGE> 76
EXHIBIT 7.8(a)
LIST OF KEY EMPLOYEES
Paolo Barettoni
Umberto Bassignani
Fabrizio Caffarelli
Andrea D'Amato
Phat Ho
Teofil Genchev Kolev
Whitney Lynn
Gianluca Macciocca
Guido Maffezzoni
Dierdre Straugham (consultant)
<PAGE> 77
EXHIBIT 7.8(b)
ADAPTEC, INC.
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (the "Agreement") is made
as of August __, 1995 by and between Adaptec, Inc., a California corporation
(the "Company"), and ________________ ("Employee").
BACKGROUND
A. The Company, Incat Systems Software USA, Inc., a California
corporation ("Incat"), ISS Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of the Company ("ISS") and certain shareholders of
Incat have entered into an Agreement and Plan of Reorganization dated as of
even date (the "Reorganization Agreement"), which provides for the merger of
Incat with and into ISS (the "Merger").
B. Employee is presently an employee of Incat.
C. As a condition to the Merger, the Reorganization Agreement
contemplates, among other things, that Employee enter into this Agreement
effective upon the Closing of the Merger.
NOW THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as the "Parties") hereby agree
as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT.
a. Position. The Company shall employ the Employee in the
position described in Exhibit A attached hereto. The
Employee shall devote his full business efforts and time to the
Company and its subsidiaries. The Employee shall comply with
and be bound by the Company's operating policies, procedures
and practices from time to time in effect during his
employment. During the term of the Employee's employment with
the Company, the Employee shall devote his full time, skill and
attention to his duties and responsibilities, and shall perform
them faithfully, diligently and competently, and the Employee
shall use his best efforts to further the business of the
Company and its affiliated entities.
b. Compensation. The Company shall pay the Employee as
compensation for his services a base salary at the
annualized rate specified in Exhibit A. Such salary shall be
paid periodically in accordance with normal Company payroll
practices. During the first year of Employee's Initial
Employment Term (as such term is defined below) Employee will
receive a bonus of ________ percent (_____%) of Employee's base
salary, payable in accordance with standard Company policies
and procedures, provided that Employee
<PAGE> 78
remains in good standing with the Company. During the
second year of Employee's Initial Employment Term, Employee
shall be eligible to participate in a discretionary bonus plan
pursuant to which annual bonuses may be granted based on
individual and Company performance. Additionally, Employee
shall be granted incentive stock options exercisable for that
number of shares of the Company's Common stock specified on
Exhibit A.
c. Employee Benefits. The Employee shall be eligible to
participate in certain employee benefit plans
maintained by the Company, including the Company's 401(k) plan,
medical, dental, life, short-term and long-term disability,
accident and other insurance programs, paid vacations, stock
purchase plan and similar plans or programs, subject in each
case to the generally applicable terms and conditions of the
applicable plan or program in question and to the determination
of any committee administering such plan or program.
Currently, during each year of this Agreement, Employee shall
be eligible for (i) 12 days of paid vacation, (ii) 5 days of
Christmas holiday shutdown and (iii) 5 days of personal
business time.
d. Term of Employment. The term of Employee's employment shall
commence on the date hereof and shall terminate under
this Agreement on the second anniversary hereof (the "Initial
Employment Term"). This Agreement may be terminated by the
Company at any time for good cause. As used herein "cause"
shall mean (i) theft, embezzlement or fraud by the Employee or
the Employee's involvement in any other scheme or conspiracy
pursuant to which the Company has lost assets to the Employee
or to others calculated by the Employee to receive such assets,
(ii) incapacity on the job by reason of the use of alcohol or
drugs, (iii) commission of a felony or a crime involving moral
turpitude, (iv) gross insubordination, (v) unexplained and
continuous absences from work, (vi) substantial breach by the
Employee of any of the provisions of this Agreement which is
not cured within 30 business days after the Company sends
written notice thereof to the Employee specifying the nature of
such breach, or (vii) material violation by the Employee of any
of the Company's substantive policies and procedures which is
not cured within a reasonable period of time given the
circumstance of the violation. From and after the Initial
Employment Term, Employee's employment with the Company shall
constitute "at-will" employment and, as such, shall be
terminable at any time, with or without good cause or for any
or no cause, at the option of either the Employee or the
Company. At such time, nothing in this Agreement shall confer
any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with the Employee's
right or the Company's right to terminate Employee's employment
at any time, with or without case.
e. Confidentiality. Employee acknowledges and agrees that, as a
result of his performance of his duties hereunder, he
shall develop, make use of, acquire and have access to
confidential and proprietary information of a special and
unique nature and value relating to the Company (the
"Confidential Information"). Such Confidential Information
shall include, without limitation, manuals, reports, computer
programs, sales formats, client
-2-
<PAGE> 79
data bases, compilation of client preferences, client
and supplier lists and pricing of the Company's services,
whether such materials were developed by the Employee or
provided by the Company. Such Confidential Information is the
exclusive property of, and is exclusively owned by, the
Company. As a material inducement to the Company entering into
this Agreement, the Employee covenants and agrees that he shall
not, at any time during or for a period of five (5) years
after the term of this Agreement, except in the course of
performing his duties hereunder or in response to a court order
or demand from a governmental agency, directly or indirectly,
use, divulge or disclose for any purpose whatsoever any
Confidential Information. The Employee agrees to use his best
efforts and take all measures necessary to prevent any person
from directly or indirectly using, divulging or disclosing any
Confidential Information to any other person except to the
extent that such Confidential Information may be used, but not
further disclosed or divulged, to assist such other persons in
advising Employee in the furtherance of Employee's duties
hereunder. Confidential Information shall not include (i)
information which is in the public domain at the time of the
communication thereof by the Company to Employee, (ii)
information which enters the public domain through no fault of
Employee subsequent to the time of communication thereof by the
Company to Employee, or (iii) information which is communicated
by the Company to a third party free of any obligation of
confidence. Upon termination of employment, Employee shall
execute a Termination Statement acceptable to the Company and
in form and content substantially similar to that set forth in
Exhibit C.
f. Third Party Information. As an Employee of the Company, its
subsidiary or its affiliate, Employee recognizes that
such entity has received and in the future shall receive from
third parties their confidential or proprietary information
subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for
certain limited purposes. Employee agrees, during the term of
his employment and thereafter, to hold all such confidential or
proprietary information in the strictest confidence and not to
disclose it to any person, firm, or corporation (except as
necessary in carrying out work for the Company or such third
party (consistent with the Company's agreement with such third
party) without the express written authorization of the
Company.
g. Return of Documents and Property. Upon termination of
employment for any reason, whether as the result of a
material breach of a material term hereof, or in accordance
with its terms, the Employee shall deliver to the Company any
property then in its possession belonging to the Company (or
third parties pursuant to confidentiality agreements
therewith). For purposes of this Agreement, the Parties hereto
do hereby agree that any original or copies of any books,
papers, customers lists, files, books of accounts, summaries,
notes and other documents and data or the writings, tapes or
records, relating to the Company or prepared in connection with
the Employee's performance of his duties hereunder, are owned
by and are the property of the Company. Any property situated
on the Company's premises and owned by the Company, including
desks, filing cabinets, or
-3-
<PAGE> 80
other storage or work area is subject to inspection by
Company personnel at any time, with or without notice. In the
event of termination of Employee's employment, Employee agrees
to sign and deliver the "Termination Statement" attached hereto
as Exhibit C.
2. RETAINING AND ASSIGNING INVENTIONS AND ORIGINAL WORKS.
a. Inventions and Original Works Retained by Employee. Employee
has listed, on Exhibit B, descriptions of any and all
inventions, original works of authorship, developments,
improvements, and trade secrets which were made by Employee
prior to employment with the Company, which belong to Employee,
which relate to the Company's proposed business and products,
and which are not assigned to the Company.
b. Inventions and Original Works Assigned to the Company.
Employee agrees promptly to make full written
disclosure to the Company, to hold in trust for the sole right
and benefit of the Company, and to assign to the Company all
right, title, and interest in and to any and all inventions,
original works of authorship, developments, improvements, or
trade secrets which Employee may solely or jointly conceive or
develop or reduce to practice, or cause to be conceived or
developed or reduced to practice, during the period of time
Employee is in the employ of the Company. Employee recognizes,
however, that assignment to the Company under this provision of
any invention is subject to Section 2870 of the California
Labor Code which reads as follows:
"(a) Any provision in an employment agreement
which provides that an employee shall assign, or
offer to assign, any of his or her rights to an
invention to his or her employer shall not apply to an
invention that the employee developed entirely on his
or her own time without using the employer's equipment,
supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or
reduction to practice of the invention to the
employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the
employee for the employer.
"(b) to the extent a provision in an employment
agreement purports to require an employee to
assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the
provision is against the public policy of this state
and unenforceable."
-4-
<PAGE> 81
Employee acknowledges that all original works of
authorship which are made by Employee (solely or jointly with
others) within the scope of his employment and which are
protectable by copyright are "works made for hire," as the term
is defined in the United States Copyright Act (17 USCA, Section
101). The provisions of this Agreement requiring assignment to
the Company do not apply to any invention which qualifies fully
under the provisions of Section 2870 of the California Labor
Code. Employee shall advise the Company promptly in writing of
any inventions, original works of authorship, developments,
improvements, or trade secrets that he believes are exempt from
assignment to the Company based upon the application of Section
2870 of the California Labor Code, and shall at that time
provide to the Company in writing all evidence necessary to
substantiate that belief. The Company shall keep in
confidence and shall not disclose to third parties without
Employee's consent any confidential information disclosed in
writing to the Company relating to inventions that qualify
fully under the provisions of Section 2870 of the California
Labor Code.
c. Maintenance of Records. Employee agrees to keep and maintain
adequate and current written records of all inventions
and original works of authorship made by Employee (solely or
jointly with others) during the term of employment with the
Company. The records shall be in the forms of notes, sketches,
drawings, and any other format that may be specified by the
Company. The records shall be available to and remain the sole
property of the Company at all times.
d. Inventions Assigned to the United States. Employee agrees to
assign to the United States government, all of
Employee's right, title, and interest in and to any and all
inventions, original works of authorship, developments,
improvements, or trade secrets whenever such full title is
required to be in the United States by a contract between the
Company and the United States or any of its agencies.
e. Obtaining Letters Patent, Copyrights, and Mask Work Rights.
Employee agrees that the obligation to assist the
Company to obtain United States or foreign letters patent,
copyrights, or mask work rights covering inventions, works of
authorship, and mask works, respectively, assigned hereunder to
the Company shall continue beyond the termination of
employment, but after such termination the Company shall
compensate Employee at a reasonable rate for the time actually
spent at the Company's request on such assistance. If the
Company is unable because of Employee's mental or physical
incapacity or for any other reason to secure Employee's
signature to apply for or to pursue any application for any
United States or foreign letters patent, copyrights, or mask
work rights covering inventions or other rights assigned to the
Company, as above, then Employee hereby irrevocably designates
and appoints the Company and its duly authorized officers and
agents as Employee's agent and attorney in fact, to act for and
on Employee's behalf and stead and to execute and file any such
applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent,
copyrights, and mask work rights with the same legal force and
effect as if executed by
-5-
<PAGE> 82
Employee. Employee hereby waives and quitclaims to the
Company any and all claims of any nature whatsoever, which
Employee now or may hereafter have for infringement of any
patents, copyrights, or mask work rights resulting from any
such application assigned hereunder to the Company.
3. COVENANT NOT TO COMPETE OR SOLICIT.
a. Non-Competition. Until one year after Employee ceases to be
employed by the Company for any or no reason (including
a voluntary or involuntary termination), Employee shall not
directly or indirectly, without the prior written consent of the
Company engage anywhere in the world in (whether as an
employee, consultant, proprietor, partner, director or
otherwise), or have any ownership interest in (except for
ownership of five percent (5%) or less of any outstanding entity
whose securities are listed on a national securities exchange),
or participate in the financing, operation, management or
control of, any firm, corporation or business that engages in
the development, marketing or sale of CD-ROM mastering
technology and products, CD-R mastering technology and products,
imaging technology and products or network CD technology and
products.
b. No Solicitation. Until three years after Employee ceases to be
employed by the Company for any or no reason (including
a voluntary or involuntary termination), Employee shall not,
directly or indirectly, without the prior written consent of the
Company (i) solicit, encourage, hire or take any other action
which is intended to induce any employee of the Company to
terminate his or her employment with the Company, or (ii)
disrupt, damage, impair or interfere in any manner with the
contractual or employment relationship between the Company and
any employee, customer or supplier of the Company.
c. Separate Covenants. The covenants contained in Sections 3(a)
and 3(b) above shall be construed as a series of
separate covenants, one for each county, city and state of any
geographic area where any business is presently carried on by
the Company. Except for geographic coverage, each such separate
covenant shall be identical in terms to the covenant contained
in Sections 3(a) and 3(b). If, in any judicial proceeding, a
court refuses to enforce any of such separate covenants (or any
part thereof), then such unenforceable covenant (or such part)
shall be eliminated from this Agreement to the extent necessary
to permit the remaining separate covenant (or portions thereof)
to be enforced. In the event that the provisions of this
Section 3 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions
shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.
d. Acknowledgment. Employment acknowledges that his services are
needed by virtue of the Acquisition, and that Employee's
covenant not to compete or solicit contained in this Section 3
is given in the conjunction with such Acquisition and is
intended to protect the value of the business acquired by the
Company in the Acquisition.
-6-
<PAGE> 83
e. Injunctive Relief. Employee acknowledges that breach of this
Section 3 would cause irreparable injury to the Company
and agrees that in the event of such breach, the Company shall
be entitled to seek injunction relief without the necessity of
proving actual damages.
4. ARBITRATION.
a. Consent. Except as provided in Section 3(e) above, all
disputes or controversies (whether of law or fact) of
any nature whatsoever arising from or relating to this
Agreement and the transactions contemplated hereby shall be
decided by arbitration by the American Arbitration Association
(the "Association") in accordance with the rules and
regulations of the Association.
b. Timing and Expense. The Parties shall, within 30 days of the
date of demand by either party for arbitration,
mutually select one independent, qualified arbitrator. Each
party reserves the right to object to any individual arbitrator
who shall be employed by or affiliated with a competing
organization. In the event objection is made, the American
Arbitration Association shall resolve any dispute regarding the
proprietary of an individual arbitrator acting in that
capacity. The Parties shall each bear one-half of the expenses
of the arbitrator. Hearings in the proceeding shall commence
within 120 days of the selection of the arbitrator.
c. Procedure. Arbitration shall take place in the County of Santa
Clara, California. At the request of either party,
arbitration proceedings shall be conducted confidentially; in
such case all documents, testimony and records shall be
received, heard and maintained by the arbitrators in confidence
under seal, available for the inspection only by the
Association, the Parties and their respective attorneys and
their respective experts who shall agree in advance and in
writing to receive all such information confidentially and to
maintain such information in confidence. The arbitrator shall
be able to decree any and all relief of an equitable and legal
nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction,
and shall also be able to award damages, with or without an
accounting and costs. The decree or award rendered by the
arbitrator may be entered as a final and binding judgment in
any court having jurisdiction thereof.
d. Notice. Reasonable notice of the time and place of arbitration
shall be given to all persons, other than the Parties,
as shall be required by law, in which case such persons or
those authorized representatives shall have the right to attend
and/or participate in all the arbitration hearings in such
manner as the law shall require.
-7-
<PAGE> 84
5. MISCELLANEOUS.
a. Severability. If any portion of this Agreement is held by a
court of competent jurisdiction to conflict with any
federal, state or local law, such portion of this Agreement
shall be of no force or effect and this Agreement shall
otherwise remain in full force and effect and be construed as
if such portion had not been included in this Agreement.
b. No Assignment. Employee shall not assign this Agreement or any
rights or obligations under this Agreement without the
prior written consent of the Company. This Agreement shall be
binding upon Employee's heirs, executors, administrators, and
other legal representatives and shall be for the benefit of the
Company, its successors and its assigns.
c. Notice. Any notice or communication required or permitted
under this Agreement shall be made in writing and
delivered personally to the other party or sent by certified or
registered mail, return receipt requested and postage prepaid.
d. Entire Agreement. This Agreement contains the entire agreement
and understanding of the Parties and supersedes all
prior discussions, agreements and understandings relating to
the subject matter of this Agreement. Any subsequent change or
changes in Employee's duties, salary, or compensation shall not
affect the validity or scope of this Agreement. This Agreement
may not be changed or modified, except by an agreement in
writing executed by the Company and by Employee.
e. Waiver of Breach. The waiver of a breach of any term or
provision of this Agreement shall not operate as or be
construed to be a waiver of any other previous or subsequent
breach of this Agreement.
f. Governing Law. This Agreement shall be governed by the laws of
the State of California.
g. Headings. All captions and section headings used in this
Agreement are for convenient reference only and do not form a
part of this Agreement.
h. Survival. Sections 1(e), 1(f), 1(g), 2, 3, 4 and the relevant
subsections of this Section 5 shall survive the
termination of Employee's employment, and all Sections of this
Agreement shall survive the assignment of this Agreement by the
Company to any successor in interest or other assignee.
i. Representations. Employee agrees to execute any proper oath or
verify any proper document required to carry out the
terms of this Agreement. Employee represents that performance
of all of the terms of this Agreement shall not breach any
agreement to keep in confidence proprietary information
acquired by Employee in confidence or in trust prior to
employment by the Company. Employee has not entered into, and
agrees not to enter into, any oral or written agreement in
conflict herewith.
-8-
<PAGE> 85
j. Counterparts. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and
effect as an original and shall constitute an effective,
binding agreement on the part of each of the undersigned.
-9-
<PAGE> 86
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
ADAPTEC, INC. EMPLOYEE
- ------------------------------- -------------------------------
-----------------
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<PAGE> 87
EXHIBIT A
Title of Position: ____________________
Duties: ____________________
Salary (annualized): $____________________
Starting Grade: __________
Proposed Incentive Stock Option Grant: ____________________
<PAGE> 88
EXHIBIT B
LIST OF INVENTIONS
Pursuant to Section 2(a) of this Agreement, below is a list of Employee's prior
inventions and original works of authorship.
<TABLE>
<CAPTION>
TITLE DATE BRIEF DESCRIPTION
- --------------------- -------- ------------------------------------
<S> <C> <C>
</TABLE>
In the event, as a result of my work for the Company, the Company would
infringe any intellectual property right of mine listed, the Company shall
automatically have a royalty free, nonexclusive license throughout the work
including the right to grant and sublicense to the extent necessary to permit
the Company to use and to enjoy all the resulting product of such work of mine
to the fullest extent, unless, prior to initiating any such work, I obtain the
waiver, in writing, of the Company, by an officer of the Company waiving the
Company's license in such instance.
IF NO PRIOR INVENTIONS OR WORKS OR AUTHORSHIP ARE LISTED IN THIS EXHIBIT B, I
HEREBY AFFIRM THAT THERE ARE NO SUCH INVENTIONS OR ORIGINAL WORKS OF
AUTHORSHIP.
- ----------------------------------- -----------------------------------
Signature of Employee Name of Employee (typed or printed)
Dated:
-----------------------------
ACCEPTED AND AGREED:
By: Title:
-------------------------------- -----------------------------
Dated:
-----------------------------
<PAGE> 89
EXHIBIT C
TERMINATION STATEMENT
Technical and Management Personnel
Employee: __________________________ Termination Date: _____________________
During the course of my employment by ADAPTEC, INC., I acknowledge that I have
acquired knowledge or had access to trade secrets and proprietary information
of ADAPTEC, INC. and the trade secrets and proprietary information of other
third parties pursuant to agreements by and between ADAPTEC, INC. and said
third parties, including but not limited to, the information checked below.
1. Financial and pricing information.
2. ADAPTEC, INC. business, research, and new product plans and
strategies.
3. Patent applications and patent disclosures.
4. Yields designs, efficiencies, and capacities of production
methods, facilities, and systems.
5. Customer and vender lists, contacts, habits, and plans.
6. Marketing information.
7. Process and manufacturing information.
8. Agreements with customers, vendors, and other companies.
9. Plastic overlays of circuits, circuit boards, and test chips.
10. Product and process specifications, procedures and test
reports.
11. Personnel lists and information regarding skills of various
personnel.
12. Other: ________________________________________________________
For the items marked above, the reverse side details any additional specific
trade secrets and proprietary information to which I may have had access during
my employment.
I further acknowledge that I have been advised, during the termination
interview, as to my obligations to ADAPTEC, INC. concerning trade secrets and
proprietary information to which I may have had access during by employment,
and of my continuing obligation to ADAPTEC, INC. to keep confidential all trade
secrets and proprietary information to which I may have had access during by
employment. I further acknowledge that I have returned all copies of technical
papers, specifications, customer lists, and other ADAPTEC, INC. proprietary
information, including controlled design notebooks.
I have also been advised that I am free to use information in the public domain
and my own skill, knowledge, know-how, and experience to whatever extent and in
whatever way I wish so long as such uses does not involve any such trade
secrets and proprietary information. In addition, I acknowledge that I have no
reports, drawings, documents, process specifications, masks, or other written
material or copies thereof or physical property of ADAPTEC, INC. in my
possession or custody in any location whatsoever.
Date: _________________________ Employee: ________________________________
The foregoing Termination Statement has been reviewed and discussed with the
terminating employee.
Date: _________________________ Manager: _________________________________
Date: _________________________ Human Resources: _________________________
<PAGE> 90
EXHIBIT 9.1(b)
Draft
July 11, 1995
INCAT COMMENTS
Translation
AGREEMENT FOR THE SALE OF PART OF BUSINESS
Between
- - _____________________, with registered office at ___________________,
______________, registered at the Register of Companies at the Court
of Milan at No. ______________, C.F. and VAT ________________________
(the "Company"), represented by its Sole Director and legal
representative Mrs. ________________________; having all necessary
powers pursuant to its By-Laws (hereinafter the "Seller")
- on one side -
and
- - _____________________, with registered office at _____________________
______________, registered at the Register of Companies at the Court
of Milan at No. ______________, C.F. and VAT _________________________
represented by its Managing Director and legal representative
Mr. ________________________; having all necessary powers pursuant to
the resolutions of the Board of Directors held on ____________________
(hereinafter the "Purchaser")
- on the other side -
WHEREAS
- - Seller owns a part of a business which reproduces and sells computer
programs; and
- - Purchaser desires to acquire the Sellers' business above mentioned,
Now, therefore, it is agreed as follows:
- 1 -
<PAGE> 91
Draft
July 21, 1995
1. DEFINITIONS
In this Agreement and its Exhibits, the words and expressions which
follow will have the following meanings:
A. Business: that part of the business of the Company consisting
of assets, agreements, receivables, payables recorded in its
assets, know-how, employees, inventory and licenses as more
fully described in the exhibits hereto on a going concern
basis; provided, however, that the Business shall not be
deemed to include any intellectual property rights held by the
Seller;
B. Assets: those assets listed in Exhibit "A";
C. Agreements: the on-going contracts of Seller which relate to
the Business, listed in Exhibit "B";
D. Receivables: those receivables due to Seller which relate to
the Business as of ___________, 1995, listed in exhibit "C";
E. Recorded Payables ["Liabilities"? See Sections 4.4 & 4.5]:
those obligations of the Seller which relate to the Business
as of ____________, 1995 which are duly recorded in the
accounts of the Seller, listed in Exhibit "D";
F. Employees: the employees of the Seller listed in Exhibit "E";
G. Inventory: the finished products (magnetic supports containing
computer programs), packaging, components, advertising and
marketing materials as at ______________, 1995, listed in
Exhibit "F";
H. Know-How: the know-how used in the Business relating to the
reproduction of computer programs sold by it;
- 2 -
<PAGE> 92
Draft
July 21, 1995
I. Accounting Principles: the accounting principles
prepared by the Commission of the National Board
of Accountants and Bookkeepers ("Commercialisti e
Ragionieri") or, in absence thereof, the principles
adopted by the International Accounting Standards
Committee;
J. Financial Statement: the Financial Statement of the
Seller as at June 30, 1995, enclosed as Exhibit "G".
2. SALE OF PART OF BUSINESS
The Seller hereby sells the Business to the Purchaser on the terms and
conditions herein set forth.
3. PRICE AND PAYMENT
The price for the purchase and sale has been agreed to be Lit.
____________, paid simultaneously with the execution hereof.
[Text deleted]
4. REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Purchaser as follows:
4.1 ASSETS
The Assets are in good condition and operate satisfactorily for the
purpose to which they are used in the Business.
4.2 AGREEMENTS
- 3 -
<PAGE> 93
Draft
July 21, 1995
The Agreements are in full force and effect and have been duly
performed by the Seller to and including ___________, 1995.
4.3 RECEIVABLES
Receivables (less a reasonable allowance for doubtful accounts based
upon the past history and practices of the Seller) will be paid within
sixty (60) days of their respective due dates.
4.4 EMPLOYEES
There are no Employees of the Business except for those listed in
Exhibit "E".
The level of employment and retribution for each employee is in
accordance with the duties actually performed and are in accordance
with the provisions of the applicable national collective labor
agreement. The Seller has duly performed all its obligations to the
Employees for salary, social contributions, withholdings and other
obligations relating to their employment. The reserve for their
severance pay ("TER") and accruals are covered in the Recorded
Liabilities.
4.5 RECORDED LIABILITIES
As at ____________, 1995 there are no liabilities of the Business of
any nature except for the Recorded Liabilities.
4.6 INVENTORY
The items contained in the Inventory are in good condition, saleable or
useable for the use intended in the Business.
4.7 AGENTS AND EXECUTIVE EMPLOYEES ("Dirigenti")
The Seller is and shall remain solely responsible for any liability
which may arise for indemnities which may be due to agents and
dirigenti who may terminate their relationships in accordance with Art.
2558 Civil Code and the provisions of the applicable collective labor
- 4 -
<PAGE> 94
Draft
July 21, 1995
agreements.
4.8 TAX AND SOCIAL SECURITY COMPLIANCE
The company has duly performed all its obligations of a tax and
Social Security nature.
The company has not received assessments for taxes due nor are
there pending before any judicial or administrative authority actions
or proceedings relating to its tax or social security obligations.
4.9 FINANCIAL STATEMENT
The Financial Statement correctly reflects the status of the
company as at June 30, 1995 and was prepared in accordance with the
Accounting Principles.
All assets and liabilities are correctly listed and there are
no other liabilities.
The reserves and accruals listed in the Financial Statement are
adequate, based on criteria of diligent prudence.
4.10 From June 30, 1995 to and including _________________, 1995:
(i) the Business has been conducted in the ordinary course with the
diligence of a good administrator;
(ii) as regards the Business, there have not been:
- any significant change in its financial condition;
- any events which could substantially modify the basic
conditions for the acquisition by the Purchaser or
which would render the representations and warranties
incorrect or no longer reflecting the truth
except for the transfer of ______________________________________.
- 5 -
<PAGE> 95
Draft
July 21, 1995
6. COLLABORATION
6.1 The parties undertake to actively cooperate with each other and to take
all action which may be required in order to assure the full entry
of the Purchaser in all the rights and relationships which form
part of the Business sold. The Purchaser and the Seller shall jointly
and promptly bring to the attention of customers, suppliers and all
others having conducted business with the Seller for products of the
nature sold hereunder, of the transfer and purchase of the Business.
The form, content and timing of the communications will be agreed to in
advance by the parties.
6.2 In particular, as regards relationships with third parties,
- 6 -
<PAGE> 96
the Seller and Purchaser undertake to give timely notice to ___________
but not after _____________, 1995 of the termination and grant,
respectively of _____________. All costs and obligations from and after
_____________ shall be for the account of _________________.
6.3 No press releases shall be issued without the prior written consent of
the other party. It is the intent of the parties that all details of
the agreements contemplated hereby, including the purchase price, shall
remain confidential.
7. GENERAL PROVISIONS
7.1 No modification of this agreement shall be valid unless it shall be in
writing, signed by the party to be charged.
7.2 All notices provided for or permitted by this agreement shall be in
writing and shall be considered duly given upon receipt when sent by
registered mail, telegram or fax addressed as follows:
To Seller:
------------
------------
------------
To Purchaser:
------------
------------
------------
or to such other address or fax number as each party may, by notice in
accordance with the above provisions, hereafter send to the other.
-7-
<PAGE> 97
7.3 All costs and expenses (including tax stamps, registration tax
(principal and supplemental and notarial fees) relating to the
execution of this agreement shall be for the account of the Purchaser.
7.4 The civil and tax effects of this sale shall be from and after
_____________, 1995.
__________________________ ___________________________
-8-
<PAGE> 98
EXHIBIT 9.1(j)
OPINION OF COUNSEL FOR INCAT AND SHAREHOLDERS
___________ __, 1995
Adaptec, Inc.
691 S. Milpitas Blvd.
Milpitas, California 95035
Gentlemen:
We have acted as special counsel to Incat Systems Software USA, Inc., a
California corporation ("Incat"), and, for the exclusive limited purpose of
rendering the opinions set forth herein, the shareholders of Incat in
connection with the negotiation, preparation and execution of the Agreement and
Plan of Reorganization dated ___________, 1995 (the "Reorganization
Agreement") by and among Adaptec, Inc., a California corporation ("Adaptec"),
ISS Acquisition Corp., a California corporation, Incat and those shareholders
of Incat listed on the signature pages thereto. This opinion is being
delivered to you pursuant to Section 9.1(j) of the Reorganization Agreement.
Capitalized terms used herein and not otherwise defined shall have the meanings
given to them in the Reorganization Agreement.
. . .
Based upon the foregoing, and except as otherwise disclosed in the
Incat Disclosure Schedule, as the same may have been amended or supplemented
prior to Closing, we are of the opinion that:
1. Incat 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 to carry on its business as presently conducted
and to carry out the transactions contemplated by the Reorganization Agreement.
Incat is duly qualified and authorized to do business only in the State of
California, which, to our knowledge, is the only state in which the present
business operations of Incat would require it to be so qualified and
authorized.
2. To our knowledge, Incat has no subsidiaries or affiliated
entities (as such term is defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended) and does not directly or
indirectly own or control any entity interest in any corporation, partnership,
limited liability company or other entity, nor is Incat a member of or
participant in any joint venture or similar entity or arrangement.
<PAGE> 99
Adaptec, Inc. , 1995
Page 2
3. Incat has full corporate power and authority to execute and
deliver the Reorganization Agreement and to consummate the transactions
contemplated thereunder and to perform its obligations thereunder, and no other
proceedings on the part of Incat are necessary to authorize the execution,
delivery and performance of the Reorganization Agreement. The Reorganization
Agreement has been duly executed and delivered by Incat and the Majority
Shareholders and constitutes the valid and binding obligation of Incat and the
Majority Shareholders, enforceable against Incat and the Majority Shareholders
in accordance with its terms. The affirmative vote of a majority of the shares
of Incat Common Stock outstanding on the record date set for the vote or
written consent of the shareholders of Incat, which vote has been obtained, is
the only vote of the holders of any Incat capital stock necessary under the
California General Corporation Law to approve the Reorganization Agreement and
the transactions contemplated thereby.
4. The Shareholders Agreement has been duly and validly executed
and delivered by the shareholders of Incat and constitutes a valid and legally
binding obligation of such shareholders, enforceable against such shareholders
in accordance with its terms.
5. The execution, delivery and performance by Incat of the
Reorganization Agreement and compliance with the provisions therein and the
consummation of the transactions contemplated thereby will not conflict with,
result in a breach of the terms of, constitute a default under or violation of,
give rise to or accelerate an obligation or a loss of benefit under, give rise
to any right of termination or result in the creation of any lien, charge or
encumbrance pursuant to (i) any provision of the Articles of Incorporation or
Bylaws of Incat, (ii) to our knowledge, any order, judgment or decree to which
Incat is a party or by which Incat or any of its properties or assets is bound
or to which any of its assets is subject, (iii) to our knowledge, any law or
regulation of any governmental authority, foreign or domestic, (iv) any
provision of any written executed agreement, contract, license, lease, permit
or mortgage described in the Incat Disclosure Schedule to which Incat is a
party or by which Incat or any of its properties or assets is bound or to which
any of its assets is subject. No consent, authorization or approval of any
person not a party to the Reorganization Agreement, and no consent,
authorization, approval or declaration of any governmental authority, is
required to be obtained on the part of Incat other than the filing of the
Certificate of Merger with the Offices of the Secretary of State of the States
of Delaware and California to permit the consummation of the Merger.
6. Upon the filing of the Certificate of Merger, in appropriate
form, with the Offices of the Secretary of State of the States of Delaware and
California, the Merger will have become effective.
<PAGE> 100
Adaptec, Inc. , 1995
Page 3
7. The authorized capital stock of Incat consists of 40,000,000
shares of Common Stock, without par value (10,000,000) of which are issued and
outstanding, and 20,000,000 shares of Preferred Stock, without par value, none
of which are outstanding. All issued and outstanding shares of Common Stock
have been duly authorized and validly issued, and are fully paid and
nonassessable. To our knowledge, there are no preemptive rights, options or
warrants or other conversion privileges or rights presently outstanding to
purchase any of the authorized but unissued capital stock of Incat. The holders
of record of the presently issued and outstanding shares of Incat Common Stock
are as set forth under Section 5.3(a) of the Incat Disclosure Schedule, as the
same shall have been amended and supplemented prior to Closing. To our
knowledge, Incat has no commitment or obligation, either firm or conditional,
to issue, deliver or sell, or cause to be issued, delivered or sold, under
offers, stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, calls, conversion rights or otherwise,
any shares of the capital stock or other securities of Incat. To our knowledge,
there are no voting trusts or other agreements or understanding with respect to
the shares of capital stock of Incat.
8. To our knowledge, there is no action, suit, proceeding,
investigation, order or judgment pending or threatened against Incat or its
assets or business, which questions the validity of the Reorganization
Agreement or the enforceability of any action taken or to be taken pursuant to
or in connection with the provisions of the Reorganization Agreement.
Very truly yours,
Brobeck, Phleger & Harrison
<PAGE> 101
EXHIBIT 9.1(o)
RELEASE AGREEMENT
The undersigned, pursuant to Section 9.1(o) of the Agreement and Plan
of Reorganization dated as of _______________, 1995 (the "Reorganization
Agreement"), by and among Adaptec, Inc., a California corporation ("Adaptec"),
Incat Systems Software USA, Inc., a California corporation ("Incat"), ISS
Acquisition Corp., a California corporation ("Subsidiary") and certain
Shareholders of Incat ("Shareholders"), which Reorganization Agreement provides
for the merger of Incat with and into Subsidiary (Subsidiary after the merger
is sometimes referred to herein as the "Surviving Corporation") DOES HEREBY
RELEASE, DISCHARGE AND ACQUIT FOREVER Incat, Subsidiary and the Surviving
Corporation, and each of their successors and assigns, from any and all
demands, claims or other liabilities (or potential demands, claims or
liabilities) of every kind and character whatsoever, arising in connection with
any matter whatsoever occurring on or prior to the date of this release,
whether known or unknown, suspected or unsuspected (collectively, the "Subject
Claims"). The undersigned acknowledges that such party has considered the
possibility that such party may not fully know the number of magnitude of all
the Subject Claims or other claims which such party has or may have against
Incat, Subsidiary and/or the Surviving Corporation or their successors and
assigns, but nevertheless, intends to assume the risk that such party is
releasing such unknown claims and agrees that this Agreement is a full and
final release of any and all Subject Claims and any other claims, and expressly
waives the benefits of Section 1542 of the California Civil Code which provides
that:
"A general release does not extend the release to claims which
the creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially
affected his settlement with the debtor."
<PAGE> 102
The undersigned understands and acknowledges the significance and
consequences of such specific waiver of Section 1542, and hereby assumes full
responsibilities for any injuries, damages or losses that each may incur as a
result of such waiver.
This release is given for good and valuable consideration received by
the undersigned and to induce Incat, Subsidiary to consummate the transactions
described in the Reorganization Agreement. This release shall remain in full
force and effect without regard to the expiration provisions under the
Reorganization Agreement. Notwithstanding the generality of the foregoing, the
release granted hereby shall have no effect on claims arising direct out of the
Reorganization Agreement or upon transactions subsequent to the date hereof.
EXECUTED this ___ day of _____________, 1995.
---------------------------------
(Signature)
---------------------------------
(Print Name)
<PAGE> 103
EXHIBIT 9.2(h)
OPINION OF COUNSEL FOR ADAPTEC AND SUBSIDIARY
____________________, 1995
Incat Systems Software USA, Inc.
1684 Dell Avenue
Campbell, CA 95008
Gentlemen:
We have acted as legal counsel to Adaptec, Inc., a California
corporation ("Adaptec") and ISS Acquisition Corp., a Delaware corporation, and
wholly-owned subsidiary of Adaptec ("Subsidiary"), in connection with the
negotiation, preparation and execution of the Agreement and Plan of
Reorganization dated ____________, 1995 by and among Adaptec, Subsidiary, Incat
Systems Software, USA Inc., a California Corporation ("Incat"), and certain
Shareholders of Incat (the "Shareholders") (the "Reorganization Agreement").
This opinion is delivered to you pursuant to Section 9.1(h) of the
Reorganization Agreement. Capitalized terms used herein shall have the meanings
defined either in the Reorganization Agreement or elsewhere in this opinion.
In connection with this opinion, we have examined:
i) executed copies of the Reorganization Agreement;
ii) the Articles of Incorporation, as certified by the Secretary of
State of the State of California, and Bylaws of Adaptec;
iii) the Certificate of Incorporation, as certified by the Secretary
of State of the State of Delaware, and Bylaws of Subsidiary;
iv) records of proceedings and written consents of the Board of
Directors and shareholders of Adaptec and Subsidiary;
v) certificates of officers of Adaptec and Subsidiary as to
certain factual matters; and
vi) certificates of public officials as to the good standing of
Adaptec and Subsidiary in the States of California and Delaware.
<PAGE> 104
, 1995
Page 2
In connection with our examination of the documents set forth above, we
have assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all
documents (except as to due execution and delivery of Adaptec and Subsidiary)
where due execution and delivery are a prerequisite to the effectiveness
thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by Adaptec and Subsidiary, and
after inquiries of officers of Adaptec and Subsidiary, but without any further
independent factual investigation, we find no reason to believe that the
opinions expressed herein are factually incorrect. Further, the expression "to
our knowledge," "known to us" or similar language with reference to matters of
fact refers to the current actual knowledge solely of the present attorneys of
this firm who have worked on matters for Adaptec and Subsidiary in connection
with the agreements and the merger. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have
relied only upon our examination of the documents set forth above, and we have
not undertaken any independent investigation to determine the existence or
absence of any fact, and no inference as to our knowledge of the existence or
absence of any fact should be drawn from our representation of Adaptec and
Subsidiary or the rendering of the opinions set forth below. In rendering the
opinion set forth in paragraph 11 below, we have not made any independent
investigation of court records to determine whether any actions have been
filed.
The opinions hereinafter expressed are subject to the following, as to
which we express no opinion:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affection the rights of creditors;
(b) The effect of rules of law governing specific performance,
injunctive relief and other equitable remedies;
(c) The effect of applicable antifraud statutes, rules and regulations
under state federal laws concerning the issuance of securities;
(d) The application of the laws of any state or jurisdiction other
than the laws California and the United States of America and the Delaware
General Corporation Law; and
(e) The unavailability of certain remedies upon non-material
violations or breaches of the Reorganization Agreement.
<PAGE> 105
____________ __, 1995
Page 3
Based upon and subject to the foregoing we are of the opinion that:
1. Adaptec and Subsidiary are duly organized, validly existing and
in good standing under the laws of jurisdiction of their incorporation.
Adaptec and Subsidiary have all requisite corporate power and authority to own
their properties and assets and carry on their businesses as now conducted and
are duly qualified and authorized to do business in the State of California.
2. The authorized capital stock of Adaptec and Subsidiary are as
set forth in Section 6.2(a) of the Reorganization Agreement.
3. All of the outstanding shares of Common Stock of Adaptec and
Subsidiary have been duly authorized and validly issued.
4. All of the shares of Adaptec Common Stock to be issued pursuant
to the Reorganization Agreement, when issued in accordance with the terms of
the Reorganization Agreement, will be validly issued, fully paid and
non-assessable, and, to our knowledge, free and clear of all liens and
encumbrances, except for restrictions on transfer under state and federal
securities laws, the restrictions imposed by Section 4 of the Reorganization
Agreement, the Shareholders Agreement and liens or encumbrances which may be
created by or imposed upon the holders of the shares.
5. Adaptec and Subsidiary have the requisite corporate power and
authority to execute and deliver the Reorganization Agreement and to consummate
the transactions contemplated thereby. The execution and delivery of the
Reorganization Agreement and consummation of the transactions contemplated
thereby have been duly authorized by the Board of Directors of Adaptec and
Subsidiary and by the holders holding a majority of the shares of outstanding
Common Stock of Subsidiary, and no other corporate proceedings on the part of
Adaptec or Subsidiary are necessary to authorize and approve the
Reorganization Agreement and the transactions contemplated thereby.
6. The Reorganization Agreement has been duly and validly executed
and delivered by Adaptec and Subsidiary and constitutes valid and legally
binding obligation of Adaptec and Subsidiary against them in accordance with
its terms.
7. The Shareholders Agreement has been duly and validly executed
and delivered by Adaptec and constitutes a valid and legally binding obligation
of Adaptec enforceable against Adaptec in accordance with its terms.
8. To our knowledge, the execution, delivery and performance by
Adaptec and Subsidiary of their respective obligations set forth in the
Reorganization Agreement and by Subsidiary of its obligations set forth in
Agreement of Merger does not (a) conflict with, or result
<PAGE> 106
____________ __, 1995
Page 4
in any violation by Adaptec or Subsidiary of their respective Articles of
Incorporation or Bylaws or (b) violate any statute, law, ordinance, regulation
or other requirement applicable to Adaptec or Subsidiary where such violation
would have a material adverse effect on the business of Adaptec and its
subsidiaries, taken as a whole, or (c) result in any breach of, or default
under, any agreement or other instrument to which Adaptec or Subsidiary is a
party where such breach or default would have a material adverse effect on the
business of Adaptec and its subsidiaries, taken as a whole. To our knowledge,
no consent, authorization or approval of any person not a party to the
Reorganization Agreement and no consent, authorization, approval or declaration
or any governmental authority, is required to be obtained on the part of
Adaptec or Subsidiary, other than the filing of the Certificate of Merger with
the Offices of the Secretary of State of the States of Delaware and California,
to permit the consummation of the Merger.
9. To our knowledge, there is no action, suit, proceeding or
governmental investigation pending or threatened against Adaptec or Subsidiary
which would have a material adverse effect on the business of Adaptec and its
subsidiaries, taken as a whole, except as disclosed on the Adaptec Disclosure
Schedule to the Reorganization Agreement, as updated at the Closing.
This opinion is intended solely for your use in connection with the
Reorganization Agreement and is not to be made available to or relied upon by
other persons or entities without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
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