As filed with the Securities and Exchange Commission on August 1, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
EXAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 3674 94-1741481
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
2222 Qume Drive
San Jose, California 95131
(408) 434-6400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Thomas R. Melendrez, Esq.
EXAR CORPORATION
2222 Qume Drive
San Jose, California 95131
(408) 434-6400
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Peter F. Stone, Esq.
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
Five Palo Alto Square
Palo Alto, California 94306
(415) 843-5000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. "
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. "
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. "
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. "
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum
Title of Maximum Aggregate Amount
Securities to be Amount to be Offering Offering Price ofRegist
Registered Registeres Price per (1) ration
Share (1) Fee
Common Stock,
$.0001 par 43,334 $31.50 $1,365,021 $470.70
value.....
(1)Estimated solely for the purpose of calculating the amount of the
registration fee based on the average of the high and low sales prices on the
Nasdaq National Market on July 25, 1995.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TABLE OF CONTENTS
Page
Available Information 2
Additional Information 2
Incorporation of Certain
Documents by Reference 2
Risk Factors 3
Use of Proceeds 5
Selling Stockholders 6
Plan of Distribution 7
Legal Matters 7
Experts 7
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such State.
Subject to Completion, dated August 1, 1995
PROSPECTUS
43,334 Shares
EXAR CORPORATION
Common Stock
This Prospectus relates to 43,334 shares of Common Stock, par value $.0001
(the "Common Stock") which are being offered and sold by certain stockholders
(the "Selling Stockholders") of Exar Corporation (the "Company"). The
Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market or in privately negotiated transactions. The Selling
Stockholders and any agents, broker-dealers or underwriters that participate
in the distribution of the Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Act"),
and any commission received by them and any profit on the resale of the Common
Stock purchased by them may be deemed to be underwriting discounts or
commissions under the Act. The Company will not receive any proceeds from the
sale of shares by the Selling Stockholders. See "Selling Stockholders" and
"Plan of Distribution."
The Common Stock of the Company is quoted on the Nasdaq National Market under
the symbol "EXAR." The last reported sales price of the Company's Common Stock
on the Nasdaq National Market on July 28, 1995 was $38.00 per share.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company
in connection with this offering are $15,000. The aggregate proceeds to the
Selling Stockholders from the Common Stock will be the purchase price of the
Common Stock sold less the aggregate agents' commissions and underwriters'
discounts, if any. See "Plan of Distribution."
The Company has agreed to indemnify the Selling Stockholders, and
the Selling Stockholders have agreed to indemnify the Company against
certain liabilities, including liabilities under the Act.
August 1995
----
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the Commission's Public Reference Section, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, as well as at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of suchmaterial can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on
the Nasdaq National Market. Reports and otherinformation concerning
the Company may be inspected at the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W. Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock offered
hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information
contained in such Registration Statement and the exhibits and schedules
thereto, certain portions of which have been omitted pursuant to the rules
and regulations of the Commission. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus regarding the contents of any contract or any
other documents are not necessarily complete and, in each instance,
reference is hereby made to the copy of such contract or document filed as an
exhibit to the Registration Statement. The Registration Statement,
including exhibits thereto, may be inspected without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof
may be obtained from the Public Reference Section, Securities and Exchange
Commission, Washington, D.C., 20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission
under the Exchange Act are hereby incorporated by reference into this
Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995;
(ii) The Company's quarterly report on form 10Q for the quarter ended June
30, 1995;
(iii) The Company's Proxy Statement for its annual meeting of
stockholders to be held on August 31, 1995 (other than the portions thereof
identified as not deemed filed with the Commission; and
(iv) The Description of Capital Stock contained in the Company's Form S-3
Registration Statement filed with the Commission on May 18, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or
oral request of such person, a copy of any and all of the documents that
have been incorporated by reference herein (not including exhibits to such
documents unless such exhibits are specifically incorporated by reference
herein or into such documents). Such request may be directed to Exar
Corporation, Attention: Thomas R. Melendrez, Esq., 2222 Qume Drive, San
Jose, California 95131, telephone (408) 434-6400.
THE COMPANY
The Company was incorporated in California in 1971 and reincorporated in
Delaware in October 1991. Unless the context otherwise requires, references
in this Prospectus to the "Company" or "Exar" refer to Exar
Corporation and its subsidiaries. The Company's executive offices are
located at 2222 Qume Drive, San Jose, California 95131, and its telephone
number is (408) 434-6400.
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following factors in evaluating the Company
and its business before purchasing any shares of the Common Stock hereby
offered.
Integration of Operations. Since May 1994, Exar has acquired four companies
in separate transactions. Most recently, Exar acquired Silicon
Microstructures, Inc. ("SMI") through the purchase of all of the
outstanding capital stock of SMI (the "Transaction") pursuant to that
certain Agreement and Plan of Reorganization among Exar, SMI, Rohm
Corporation and James W. Knutti, Henry V. Allen and Rohm U.S.A. Inc.
(the "Plan of Reorganization"). If Exar is to realize the anticipated
benefits of these acquisitions, the operations of these companies must be
integrated and combined efficiently. The process of rationalizing
supply and distribution channels, computer and accounting systems and
other aspects of operations, while managing a larger entity, will present a
significant challenge to the management of Exar. There can be no assurance
that the integration process will be successful or that the anticipated
benefits of these business combinations will be fully realized. The
dedication of management resources to such integrations may detract attention
from the day-to-day business of Exar. The difficulties of these
integrations may be increased by the necessity of integrating personnel
with disparate business backgrounds and combining different corporate
cultures. There can be no assurance that there will not be substantial
costs associated with such activities or that there will not be other material
adverse effects of these integration efforts. Such effects could materially
reduce the short-term earnings of Exar. Exar expects to incur a charge in its
first quarter ended June 30, 1995, currently estimated to be $2.0 million to
$2.5 million, to reflect the write-off of purchased SMI in-process research and
development. This amount is a preliminary estimate only and is therefore
subject to change. In addition, there can be no assurance that Exar
will not incur additional charges in subsequent quarters to reflect
costs associated with these acquisitions. The integration and efficient
combination of the operations of these companies will present increased
challenges to Exar's management due to Exar's obligations to operate some of
these companies in a number of fundamental respects as separate business
entities. Such restrictions on Exar's ability to completely integrate
the operations of these companies may present unforseen business
difficulties, for example, by further complicating the rationalization of
supply and distribution channels, accounting systems and other aspects of the
companies' operations. Moreover, such restrictions may further tax
management's resources and detract attention from the day-to-day business of
Exar. There can be no assurance that there will not be additional costs
associated with such efforts or that other material adverse effects will not
result. Such effects could further reduce the short-term earnings of Exar.
Factors Affecting Operating Results. Exar believes its future operating
results will be subject to quarterly and annual variations based on a
wide variety of factors, including customer demand for Exar's products,
changes in product mix, competitive pressures on prices and prices charged by
Exar's suppliers. The semiconductor industry has historically been
characterized by business cycles, with economic downturns resulting in
diminished
product demand and erosion of average selling prices. Exar's future
operating results could be adversely affected by a downturn in this
market or by the failure of one or more of its customers to compete
successfully in such market. The markets for components used in personal
computer and consumer electronics products are extremely price competitive.
Dependence On New Products. Exar's operating results will depend to a
significant extent on its ability to continue to introduce new products. In
particular, the consumer markets being addressed by Exar are characterized by
shorter product life cycles and more rapid technological change than the
markets traditionally addressed by Exar. The success of Exar's new
products will depend on several factors, including the ability to anticipate
customer requirements, timely introduction of new products to the market
and market acceptance. There can be no assurance that Exar's new
products will be successfully developed, or will receive or maintain
substantial market acceptance.
Discontinuation of Product Line. In May 1995, Exar announced the
discontinuance of its mass storage product line, a historically low
margin business. In the year ended March 31, 1995, sales of mass storage
products were approximately $20 million and the product line generated a
small operating loss. The Company is currently evaluating the assets
associated with this product line and other costs associated with
the cancellation of these products. There can be no assurance that Exar will
be able to efficiently utilize these assets in existing or new product lines.
Exar has made a claim against its foundry supplier for recovery of write-offs it
may incur related to the termination of this product line.
Dependence On Outside Fabrication Facilities. All of the semiconductor
wafers used in the manufacture of Exar's products are processed to Exar's
specifications by outside suppliers. In particular, Rohm Corporation ("Rohm")
is Exar's primary source of CMOS wafers and BiCMOS wafers and Exar's sole
source of bipolar wafers. Exar has generally received adequate deliveries
of wafers and adequate yield and quality of product. Rohm is
contractually obligated to supply Exar with bipolar wafers pursuant to a
long-term agreement and has committed to provide Exar with wafers at a price
that is commercially favorable. The parties are finalizing an agreement for
the supply of CMOS and BiCMOS wafers. However, if for any reason wafer
shipments were delayed or its suppliers encountered yield or quality problems
in the future, Exar's operating results would be adversely affected. In
addition, because Exar has not qualified second sources for many of its
products, Exar would encounter lengthy delays if for any reason it was forced
to establish alternative manufacturing arrangements.
Pursuant to the same agreement, Rohm is contractually obligated to provide
foundry services for the SMI business. The SMI business is dependent upon
Rohm for certain processing steps so if for any reason Rohm was delayed or
unable to perform these services, the SMI business would be adversely affected.
While Exar believes that it has an adequate wafer supply to meet its currently
anticipated needs, there can be no assurance that in the future Exar will
receive sufficient quantities of wafers at favorable prices on a timely
basis. If the wafer manufacturers which Exar currently uses to
manufacture its products suffer a material curtailment of their
manufacturing operations, Exar could incur manufacturing delays of between
three and six months. Although Exar believes that there is an adequate
level of high quality wafer manufacturing capacity available world-wide
which could perform manufacturing for Exar in those circumstances, there is
no assurance that Exar would be able to arrange sufficient alternative
manufacturing capacity on comparable terms or within that time period if
its current suppliers curtailed or halted manufacturing. Should wafer
capacity limitations occur because of increased demand for Exar's products or
otherwise, Exar may be unable to meet demand for its products in a timely
fashion, which could result in customer dissatisfaction and decreased
revenues.
Litigation and Patents. As is typical in the semiconductor industry,
Exar has from time to time received, and may in the future receive,
communications from third parties asserting patent rights, copyrights or
other intellectual property rights covering Exar's products or processes.
There can be no assurance that other intellectual property claims will not be
made against Exar, or that any such claims or litigation proceedings will not
be decided against Exar. In order to continue using the technologies
subject to such claims, Exar may be required to obtain licenses and make
royalty payments. There can be no assurance that Exar will be able to
obtain such licenses on commercially reasonable terms.
Key Personnel. Exar's future success depends in large part on the continued
service of certain of Exar's key technical and management personnel and on
Exar's ability to continue to attract and retain qualified employees,
particularly those highly skilled design, process and test engineers involved in
the manufacture of existing products and the development of new products
and processes. The competition for such personnel is intense, and the loss of
key employees, most of whom are not subject to an employment agreement
for a specified term or a post-employment non-competition agreement, could
have a material and adverse effect on Exar. Exar has employment
agreements with James W. Knutti and Henry V. Allen, the founders of SMI, for
three years.
Environmental Regulations. Exar is subject to a variety of federal, state
and local governmental regulations relating to the purchase, storage, use,
release and disposal of toxic, volatile or otherwise hazardous chemicals.
Although Exar believes that it has all permits necessary to conduct its
business, the failure to comply with present or future regulations could
result in the imposition of fines on Exar. Exar and certain other parties
are currently involved in a dispute with Siemens Components, Inc. arising
out of alleged groundwater releases of environmental contaminants by Exar
at a site formerly occupied by Exar in Sunnyvale, California. Exar is also
involved in a groundwater contamination and clean-up matter relating to a
Santa Clara site that is presently occupied by Exar. Although Exar does
not believe that these matters will have a material adverse effect on Exar's
business, there can be no assurance that there will not be such an adverse
effect.
Dependence on Assembly Subcontractors. Exar's products are currently
assembled to Exar's specifications by independent subcontractors. Exar's
reliance on subcontractors to assemble its products involves significant
risks, including reduced control over delivery schedules, the potential lack
of adequate capacity and potential misappropriation of proprietary
intellectual property. Failure to obtain products on a timely basis could
delay product delivery to Exar's customers, thereby materially adversely
affecting Exar's businesses. In addition, Exar presently utilizes
semiconductor assembly contractors located throughout Asia. Offshore
assembly operations entail certain political and economic risks,
including political instability and expropriation, currency controls and
changes in tax laws, tariffs and freight rates. Exar's operations could be
materially adversely affected if the operations of any major supplier are
interrupted, or if air transportation from Asia is disrupted, for a
substantial period of time.
Variation in Production Yields. The manufacture and assembly of semiconductor
products is highly complex and sensitive to a wide variety of factors,
including the level of contaminants in the manufacturing environment,
impurities in the materials used and the performance of manufacturing
personnel and production equipment. No assurance can be given that Exar or
its suppliers will not experience yield problems in the future, which could
result in a material adverse effect on Exar's results of operations.
See " Dependence on Outside Fabrication Facilities."
Intense Competition. The semiconductor industry is intensely competitive
and is characterized by price erosion, rapid technological change and
heightened international competition in many markets. Exar competes
with major domestic and international semiconductor companies, many of
which have substantially greater financial and other resources than Exar
with which to pursue engineering, manufacturing, marketing and distribution
of their products. New entrants may also increase competition in the
semiconductor market. The ability of Exar to compete successfully in the
rapidly evolving area of integrated circuit technology depends on factors both
within and outside of its control, including success in designing and
subcontracting the manufacture of new products that implement new technologies,
adequate sources of raw materials such as wafers and plastics, protection of
Company products by effective utilization of intellectual property laws
and other security measures, product quality, reliability, price, efficiency
of production, the pace at which customers incorporate Exar's integrated
circuits into their products, success of competitors' products and general
economic conditions. There is no assurance that Exar will be able to
compete successfully in the future.
Foreign Trade and Currency Exchange. Approximately 74% of Exar's
revenues in fiscal 1994 and approximately 61% in fiscal 1995, were derived
from sales to foreign customers. In addition, although a majority of Exar's
manufacturing is done domestically, Exar purchases its assembly services from
foreign subcontractors. Both the manufacture and sale of Exar's products may be
adversely affected by political or economic conditions abroad.
Protectionist trade legislation in either the United States or foreign
countries could adversely affect Exar's ability to manufacture or to
sell in foreign markets. Even though Exar primarily transacts business
internationally in United States currency (except for Japan, where Exar
transacts business in Japanese Yen), currency exchange fluctuations in
countries in which Exar does business (other than Japan) could materially
adversely affect Exar by resulting in pricing that is not competitive
with prices denominated in local currencies. The Company generally enteres into
foreign currency contracts to hedge currency exposure in Japan.
Possible Volatility of Stock Price. Since the initial public offering of
Exar Common Stock in 1985, the market value of Exar Common Stock has been
subject to significant fluctuation. The market price of Exar Common Stock may
continue to be subject to significant fluctuations in response to operating
results and other factors. In addition, the stock market in recent years has
experienced price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price of Exar Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders in the offering.
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders,
the number of shares of Common Stock owned beneficially by each of them
as of June 30, 1995 and the number of shares which may be offered pursuant to
this Prospectus. This information is based upon information provided by the
Selling Stockholders. The Selling Stockholders may offer all, some or none
of their Common Stock.
Number Shares
Shares Beneficially of Shares Beneficially Owned
Owned Prior to Offering(1) being After Offering(1)(3)
Name Number Percent(2) Offered Number Percent (2)
James W. Knutti (4) 22,667 * 22,667 0 *
Henry V. Allen (5) 15,111 * 15,111 0 *
Rohm U.S.A. Inc.(6) 5,556 * 5,556 0 *
* Less than one percent.
(1) Unless otherwise indicated below, the persons named in the table have
sole voting and investment power with respect to all shares beneficially owned
by them, subject to community property laws where applicable.
(2) Applicable percentage of ownership is based on 9,605,106 shares of
Common Stock outstanding on June 30, 1995.
(3) Assumes the sale of all shares offered hereby.
(4) Dr. Knutti is a director, President and Chief Executive Officer of
SMI.
(5) Dr. Allen is Vice President of SMI and was formerly a director of
SMI.
(6) The President and Chairman of the Board of Rohm U.S.A. Inc. was formerly
the Chairman of the Board of Exar. Rohm Corporation, a wholly-owned
subsidiary of Rohm U.S.A. Inc., provides manufacturing and foundry services for
Exar. Until March 31, 1995, Exar provided certain MIS and accounting
services for Rohm Corporation and until March 31, 1994, Exar provided certain
security, legal and environmental services for Rohm Corporation.
PLAN OF DISTRIBUTION
The shares of Common Stock offered by the Selling Stockholders may be
sold from time to time to purchasers directly by any of the Selling
Stockholders acting as principal for its own account in one or more
transactions at a fixed price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Alternatively, any of
the Selling Stockholders may from time to time offer the Common Stock through
underwriters, dealers or agents who may receive compensation in the form of
underwriting discounts, commissions or concessions from the Selling Stockholders
and/or the purchasers of shares for whom they may act as agent. Sales may be
made on the Nasdaq National Market or in private transactions. In addition to
sales of Common Stock pursuant to the Registration Statement of which this
Prospectus is a part, the Selling Stockholders may sell such Common Stock in
compliance with Rule 144 promulgated under the Act.
The Selling Stockholders and any agents, broker-dealers or underwriters that
participate in the distribution of the Common Stock offered hereby may be
deemed to be underwriters within the meaning of the Act, and any discounts,
commissions or concessions received by them and any profit on the resale of the
Common Stock purchased by them might be deemed to be underwriting discounts
and commissions under the Act.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Common Stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
Pursuant to the Plan of Reorganization, the Company has agreed to register
the Selling Stockholders' Common Stock under applicable Federal and state
securities laws under certain circumstances and at certain times. The
Company will pay substantially all of the expenses incident to the offering
and sale of the Common Stock to the public, other than commissions,
concessions and discounts of underwriters, dealers or agents. Such expenses
(excluding such commissions and discounts) are estimated to be $15,000. The
above-referenced agreement provides for cross-indemnification of the Selling
Stockholders and the Company to the extent permitted by law, for losses,
claims, damages, liabilities and expenses arising, under certain
circumstances, out of any registration of the Common Stock.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward Castro Huddleson & Tatum, Palo
Alto, California.
EXPERTS
The financial statements and schedules of Exar Corporation as of March 31,
1995 and 1994 and for each of the years in the three-year period ended March
31, 1995 have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, Independent
Certified Public Accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person
to whom it is unlawful to make such offer or solicitation. The delivery of
this Prospectus at any time does not imply that the information herein is
correct as of any time subsequent to the date hereof.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee.
Registration fee $ 500
Printing and engraving expenses 2,000
Legal fees and expenses 8,000
Accounting Fees and Expenses 2,500
Nasdaq fee 2,000
Total $ 15,000
Item 15. Indemnification of Officers and Directors.
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and
officers to the fullest extent permitted by Section 145 of the Delaware Law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the Delaware Law, a corporation generally has the
power to indemnify its present and former directors, officers, employees
and agents against expenses incurred by them in connection with any suit to
which they are, or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of
a corporation, and, with respect to any criminal action, they had no
reasonable cause to believe their conduct was unlawful. The Registrant
believes that these provisions are necessary to attract and retain qualified
persons as directors and officers. These provisions do not eliminate
liability for breach of the director's duty of loyalty to the Registrant or
its stockholders, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for any transaction from
which the director derived an improper personal benefit or for any
willful or negligent payment of any unlawful dividend or any unlawful stock
purchase agreement or redemption.
The Registrant has entered into agreements with its directors and
executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any
such person may be made a party by reason of the fact that such person is or
was a director or officer of the Registrant or any of its listed enterprises,
subject to certain limitations set forth in such agreements. The
indemnification agreements also set forth certain procedures that will apply
in the event of a claim for indemnification thereunder.
The Registrant has purchased an insurance policy covering the officers and
directors of the Registrant with respect to certain liabilities arising
under the Securities Act or otherwise.
Item 16. Exhibits
(a) Exhibits.
Exhibit
Number Description of Document
2.1 Agreement and Plan of Reorganization dated June 8,
1995 among Exar Corporation, Silicon Microstructures,
Inc., Rohm Corporation and James W. Knutti, Henry V.
Allen and Rohm U.S.A. Inc.
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
23.1 Consent of KPMG Peat Marwick LLP.
Reference is made to page II-6.
23.2 Consent of Cooley Godward Castro
Huddleson & Tatum. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to
page II-4.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post- effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnifica tion by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report to security holders that is
incorporated by reference in the Prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act;
and, where interim financial information required to be presented by Article 3
or Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference
in the Prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, County of Santa Clara, State of California, on July 31, 1995.
EXAR CORPORATION
By: /S/ RONALD W. GUIRE
Ronald W. Guire
Senior Vice President, Chief
Financial Officer
and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George D. Wells and Ronald W. Guire and each or
any one of them, as his true and lawful attorney-in-fact and agents with
full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys- in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them,
or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/S/ GEORGE D. WELLS President, Chief July 31, 1995
George D. Wells Executive Officer
and Director
(Principal Executive
Officer)
/S/ RONALD W. GUIRE Senior Vice July 31, 1995
Ronald W. Guire President, Cheif Financial
Officer
Secretary and Director
(Principal Financial and
Accounting Officer)
/S/ RAIMON L. CONLISK Chairman of the July 31, 1995
Raimon L. Conlisk Board and Director
/S/ JAMES E. DYKES Director July 31, 1995
James E. Dykes
/S/ GEORGE E. GREGA Director July 31, 1995
George E. Grega
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Palo Alto, California
July 31, 1995
INDEX TO EXHIBITS
Exhibit
Number Description of Document
2.1 Agreement and Plan of Reorganization dated
June 8, 1995 among Exar Corporation,
Silicon Microstructures, Inc., Rohm Corporation
and James W. Knutti, Henry V. Allen and Rohm
U.S.A. Inc
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
23.1 Consent of KPMG Peat Marwick LLP. Reference is made
to page II-6
23.2 Consent of Cooley Godward Castro Huddleson &
Tatum. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
among:
EXAR CORPORATION,
a Delaware corporation;
SILICON MICROSTRUCTURES, INC.,
a California corporation;
ROHM CORPORATION,
a California corporation;
and
JAMES W. KNUTTI, HENRY V. ALLEN AND ROHM U.S.A. INC.
Dated as of June 8, 1995
TABLE OF CONTENTS Page
Page
SECTION 1.SALE AND PURCHASE OF SHARES; RELATED
TRANSACTIONS 1
1.1 Sale and Purchase of Shares. 1
1.2 Purchase Price. 2
1.3 Closing. 2
1.4 Tax Treatment. 2
1.5 Agreements with Selling Shareholders 3
SECTION 2.REPRESENTATIONS AND WARRANTIES OF
THE FOUNDERS 3
2.1 Subsidiaries. 3
2.2 Corporate Existence. 3
2.3 Capitalization. 4
2.4 Financial Statements of SMI. 4
2.5 Changes. 4
2.6 No Undisclosed Liabilities. 4
2.7 Taxes. 4
2.8 Real Property. 5
2.9 Tangible Personal Property. 5
2.10 Intellectual Property. 5
2.11 Compliance with Laws. 6
2.12 Contracts. 6
2.13 Employees, Salaries and Fringe
Benefits. 6
2.14 Insurance. 7
2.15 Receivables. 7
2.16 Inventory. 7
2.17 Sale of Products; Performance of
Services. 8
2.18 Litigation. 8
2.19 Non-Contravention. 8
2.20 Corporate Authority; Authorization. 8
2.21 Governmental Approvals. 8
2.22 Brokers. 9
2.23 Full Disclosure. 9
2.24 Title To Shares. 9
2.25 No Claim Against SMI. 9
2.26 Investment Representations. 9
SECTION 3.REPRESENTATIONS AND WARRANTIES OF EXAR 10
3.1 Acquisition of Shares. 10
3.2 Due Organization 10
3.3 Corporate Authority; Authorization. 11
3.4 Governmental Approvals; No Conflicts. 11
3.5 Changes. 11
3.6 SEC Filings; Financial Statements. 11
3.7 Offering Valid 12
3.8 Disclosure. 12
3.9 Finders. 12
SECTION 4.PRE-CLOSING COVENANTS OF SMI AND THE SELLING
SHAREHOLDERS 12
4.1 Access and Investigation. 12
4.2 Operation of Business. 12
4.3 Filings and Consents. 15
4.4 Notification; Updates to Disclosure
Schedule. 15
4.5 Best Efforts. 16
SECTION 5.COVENANTS OF EXAR 16
5.1 Negative Covenants 16
5.2 Affirmative Covenants 16
5.3 Post-Closing Covenants. 17
SECTION 6.CONDITIONS PRECEDENT TO OBLIGATIONS OF EXAR 17
6.1 Due Diligence 17
6.2 Compliance with Covenants and
Conditions; Representations and
Warranties Correct 17
6.3 No Material Adverse Effect 17
6.4 Officer's Certificate 17
6.5 Consents of Others 17
6.6 Continuity of Interest Certificates 18
6.7 Legal Opinion 18
6.8 Employment Agreements. 18
6.9 Resignations 18
6.10 Securities Law Compliance 18
6.11 Absence of Restraint 18
6.12 No Proceedings 18
6.13 Required Approvals 18
6.14 Legal Requirements 18
6.15 FIRPTA 19
SECTION 7.CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SELLING SHAREHOLDERS 19
7.1 Compliance with Covenants and
Conditions; Representations and
Warranties Correct 19
7.2 Officers' Certificate 19
7.3 Absence of Restraint 19
7.4 No Material Adverse Effect 19
7.5 Securities Law Compliance 19
7.6 No Proceedings 19
7.7 Required Approvals 19
7.8 Legal Requirements 19
Section 8.INDEMNITY BY FOUNDERS 20
8.1 Indemnity 20
8.2 Satisfaction of Indemnification 20
8.3 Third-Party Claims. 21
8.4 Fraud 21
8.5 Survival of Representations
and Warranties 21
SECTION 9.EARN-OUT PAYMENTS FOR FOUNDERS 21
9.1 Calculation of Earn-Out Payments 21
9.2 Distributions of Earn-Out Payments. 23
9.3 Post-Closing Covenants of Exar. 23
Section 10.REGISTRATION RIGHTS. 24
10.1 Registration Rights. 24
10.2 Piggyback Registration. 26
10.3 Indemnification. 27
10.4 Current Public Information. 28
10.5 Termination of Registration Rights. 28
10.6 Transferability of Registration
Rights. 28
SECTION 11.TERMINATION OF AGREEMENT 28
11.1 Termination 28
11.2 Effect of Termination 29
11.3 Fees and Expenses 29
11.4 Extension of Time; Waivers 29
SECTION 12.MISCELLANEOUS 30
12.1 Amendment 30
12.2 Entire Agreement; Counterparts;
Applicable Law 30
12.3 Attorneys' Fees 30
12.4 Assignability 30
12.5 Notices 30
12.6 Severability 31
12.7 Shareholder Consent. 32
12.8 Waiver of Right of First Refusal 32
12.9 Waiver of Liquidation Rights 32
12.10 Titles 32
12.11 Cooperation 32
12.12 Third Party Beneficiary Rights 32
12.13 Publicity 32
EXHIBITS
Exhibit A: Certain Definitions
THIS AGREEMENT AND PLAN OF REORGANIZATION is entered into as of June 8, 1995, by
and among EXAR CORPORATION, a Delaware corporation ("Exar"), SILICON
MICROSTRUCTURES, INC., a California corporation ("SMI"), ROHM CORPORATION, a
California Corporation (as to Section 1.5 only) and the following parties; JAMES
W. KNUTTI, HENRY V. ALLEN (collectively, the "Founders") AND ROHM U.S.A. INC., a
Delaware corporation ("Rohm") (the "Agreement"). James W. Knutti, Henry V.
Allen and Rohm are referred to herein collectively as the "Selling
Shareholders." Exar, SMI, Rohm, James Knutti and Henry Allen are referred to
herein collectively as the "parties". Certain capitalized terms used in this
Agreement are defined on Exhibit A.
RECITALS
A. WHEREAS, the Selling Shareholders own 1,000,000 shares of the Common
Stock of SMI and 40,909 shares of Series A Preferred Stock of SMI (collectively,
the "Shares"), which constitute 87.4% of the outstanding capital stock of SMI;
B. WHEREAS, Exar desires to purchase, and the Selling Shareholders desire
to sell, the Shares on the terms set forth in this Agreement; and
C. WHEREAS, Exar has agreed to loan SMI up to $500,000 for working
capital, of which $50,000 shall be advanced before the closing of the stock
purchase contemplated hereby; and
D. WHEREAS, upon completion of the sale Exar shall hold 100% of the
outstanding capital stock of SMI.
AGREEMENT
Therefore, Exar, SMI and the Selling Shareholders, intending to be
legally bound, agree as follows:
SECTION 1 SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS
1.1 Sale and Purchase of Shares. At the Closing, the Selling Shareholders
shall sell, assign, transfer and deliver the Shares to Exar, and Exar shall
purchase the Shares from the Selling Shareholders, on the terms and subject to
the conditions set forth in this Agreement (the "Transaction").
1.2 Purchase Price.
(a) The aggregate purchase price payable by Exar for the Shares (the
"Purchase Price") shall be $1,170,018, plus the contingent earn-out payments
based on the future performance of SMI as further set forth in Section 9. The
Purchase Price shall be paid by Exar to the Selling Shareholders as set forth in
Sections 1.2(b) and 1.2(c).
(b) At the Closing, the Selling Shareholders shall receive (i) for
each share of SMI Common Stock outstanding, a number of shares of Exar Common
Stock equal to $1.02 divided by the Fair Market Value per share of Exar Common
Stock, and (ii) for each share of SMI Series A Preferred Stock, a number of
shares of Exar Common Stock equal to $3.6667 divided by the Fair Market Value
per share of Exar Common Stock. For these purposes, the "Fair Market Value per
share of Exar Common Stock" shall be the average of the closing bid and asked
price per share of Exar Common Stock on the last trading day prior to the date
of the Closing.
(c) The Founders shall also have the right to receive earn-out
payments based on the future performance of SMI as further set forth in Section
9. The rights of the Founders to participate in distributions of earn-out
payments shall not be transferable, except by will or descent.
1.3 Closing.
(a) The closing of the sale of the Shares to Exar (the "Closing")
shall take place at the offices of Cooley Godward Castro Huddleson & Tatum, Palo
Alto, California at 4:00 p.m. (California time) on June 12, 1995, or at such
other time and place as the parties may mutually agree.
(b) At the Closing or within three business days thereafter:
(i) the Selling Shareholders shall deliver to Exar the stock
certificates representing the Shares, duly endorsed (or accompanied by duly
executed stock powers), and Exar shall deliver stock certificates for the Exar
Common Stock representing the portion of the Purchase Price set forth in Section
1.2(b);
(ii) Exar shall deliver to SMI $500,000 in the form of a loan for
working capital less the $50,000 which will have been previously provided to
SMI; and
(iii) Exar, SMI and the Selling Shareholders shall provide
such other agreements as are required in this Agreement.
1.4 Tax Treatment.
The Transaction is intended to qualify as a tax-free reorganization within
the meaning of the provisions of Section 368 of the Code and to be accounted for
as a purchase.
1.5 Agreements with Selling Shareholders.
(a) Effective as of the Closing or within three business days
thereafter, Exar shall cause SMI to do the following:
(i) Pay amounts owed by SMI to Rohm Corporation for delinquent
lease payments on its equipment (which amount, as of June 12, 1995, is an
aggregate of $77,214.75) plus property tax of $1,065.25;
(ii) Purchase the equipment listed on Exhibit B attached hereto
currently being leased by SMI from Rohm Corporation under the Equipment Lease
Agreement dated February 8, 1993 (the "Lease Agreement"), for an aggregate
purchase price of $304,520.50 plus sales tax, pursuant to a Bill of Sale in the
form attached hereto as Exhibit C. Effective with such purchase, the Lease
Agreement including Sections 18 and 19 shall terminate and be of no further
force or effect.
(b) Effective as of the Closing, the Series A Preferred Stock
Investors' Rights Agreement by and among SMI, Exar and Rohm dated as of February
8, 1993, is hereby terminated and shall have no further force or effect.
(c) Effective as of the Closing, the First Refusal and Co-Sale
Agreements between Henry V. Allen and James W. Knutti, respectively, SMI, Exar
and Rohm dated February 8, 1993, are hereby terminated and shall have no further
force or effect.
(d) Exar and Rohm hereby confirm that the Supplemental Agreement
between Exar and Rohm Corporation dated as of March 31, 1994 shall survive the
transactions described in this Agreement, shall continue to be in full force and
effect and that SMI, as an Exar subsidiary, shall have the benefit of such
agreement. Exar and Rohm hereby confirm their supply obligations thereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS
The Founders represent and warrant to Exar that, except as disclosed or
otherwise referred to in the SMI Disclosure Schedule attached hereto as Exhibit
D (the "Disclosure Schedule"), the statements made in Sections 2.1 through 2.23
are true and correct. In addition, each of the Selling Shareholders make the
representations and warranties set forth in Sections 2.24, 2.25 and 2.26 only on
behalf of himself or itself, and not on behalf of the other Selling
Shareholders.
2.1 Subsidiaries. SMI has no subsidiaries.
2.2 Corporate Existence. SMI is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California. SMI
has all necessary corporate power to enter into and perform its obligations
under this Agreement. SMI has all necessary corporate power to carry on its
business substantially as it is being conducted as of the date of this
Agreement, and is duly qualified to conduct business as a foreign corporation
and in good standing in the jurisdictions required by the nature of its business
and where the failure to qualify would have a material adverse effect.
2.3 Capitalization. The authorized capital stock of SMI consists of
2,250,000 shares of which: (a) 2,000,000 shares are Common Stock, of which
1,000,000 shares are outstanding as of the date of this Agreement; and (b)
250,000 shares Preferred Stock of which 238,609 are designated Series A
Preferred Stock, of which 190,909 shares are outstanding as of the date of this
Agreement. All of the outstanding shares of the capital stock of SMI have been
validly issued and are fully paid and nonassessable. Except as set forth in the
Disclosure Schedule there are no options or rights to acquire capital stock of
SMI outstanding as of the date of this Agreement nor any securities or
obligations convertible into or exchangeable for capital stock of SMI
outstanding as of the date of this Agreement.
2.4 Financial Statements of SMI. SMI has delivered to Exar copies of
unaudited financial statements for the last three fiscal years and unaudited
interim financial statements as of March 31, 1995. The unaudited financial
statements present fairly, in all material respects, the financial position of
SMI as of the dates thereof and the results of operations of SMI for the fiscal
years covered thereby and have been prepared in accordance with the books and
records of SMI. Except to the extent that normal year-end audit adjustments
would need to be made and footnotes would need to be included, the interim
financial statements present fairly, in all material respects, the financial
position of SMI as of March 31, 1995 and the results of operations of SMI for
the period then ended and have been prepared in accordance with the books and
records of SMI.
2.5 Changes. Between March 31, 1995 and the date of this Agreement: (i)
there has not been any adverse change in the financial condition or results of
operations of SMI, other than changes which have not had a material adverse
effect on the business or operations of SMI taken as a whole and changes
relating to general economic conditions or conditions generally affecting the
industry in which SMI operates; (ii) no dividend or other distribution in
respect of the shares of the capital stock of SMI has been declared, paid or
made; (iii) SMI has not increased the compensation of, or paid any bonus to, any
employee of SMI, except in connection with annual performance reviews of non-
officer employees; (iv) SMI has not conducted its business in a manner that
departs materially from the manner in which such business was being conducted
prior to March 31, 1995; and (v) SMI has not entered into any material
transaction, other than transactions contemplated by this Agreement or by any of
the contracts or other documents referred to in the Disclosure Schedule.
2.6 No Undisclosed Liabilities. As of the date of this Agreement, SMI
does not have any liabilities of the type required to be shown in the
"Liabilities" column of a balance sheet prepared in accordance with generally
accepted accounting principles, other than: (i) liabilities which are reflected
or reserved against in the financial statements; (ii) liabilities incurred in
connection with the transactions contemplated by this Agreement; and (iii)
liabilities which are not material from the standpoint of the business or
operations of SMI taken as a whole.
2.7 Taxes. SMI has filed, within the time and in the manner required by
law, all Tax returns required to be filed by it and has paid all Taxes shown as
due and payable on such returns. SMI has established on its books reserves that
are adequate for the payment of all Taxes not yet due and payable. SMI has not
consented to any waiver or extension of any statute of limitations relating to
the assessment or collection of any Tax. The federal income tax returns of SMI
have not been audited by the Internal Revenue Service for any periods.
2.8 Real Property. SMI does not own any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in the Disclosure Schedule.
2.9 Tangible Personal Property. The books and records of SMI contain
accurate descriptions of all tangible personal property leased or owned thereby.
All of the tangible personal property used by SMI in its business is owned free
and clear of any liens or encumbrances, except for the leased equipment
identified in the Disclosure Schedule.
2.10 Intellectual Property.
(a) The Disclosure Schedule lists all domestic and foreign patents
and patent applications owned by or licensed to SMI as of the date of this
Agreement ("SMI Patents"), and identifies all material license agreements that
are in effect as of the date of this Agreement and that relate to SMI Patents,
other than any license agreement contained in packaging delivered to an end user
customer or implied by the sale of a product.
(b) To the best of the Founders' knowledge, SMI has the right to use
all copyrights and copyright registrations owned by or licensed to SMI as of the
date of this Agreement ("SMI Copyrights"). The Disclosure Schedule lists all
registered SMI Copyrights and identifies all material license agreements that
are in effect as of the date of this Agreement and that relate to SMI
Copyrights, other than any license agreement contained in packaging delivered to
an end user customer or implied by the sale of a product.
(c) The Disclosure Schedule lists all domestic and foreign registered
trademarks and trademark applications owned by or licensed to SMI as of the date
of this Agreement ("SMI Trademarks"), and identifies all material license
agreements that are in effect as of the date of this Agreement and that relate
to SMI Trademarks, other than any license agreement contained in packaging
delivered to an end user customer or implied by the sale of a product.
(d) SMI may own or have in its possession certain technical
information and know-how that constitute trade secrets under applicable law
("SMI Trade Secrets"). SMI has taken reasonable precautions to maintain SMI
Trade Secrets in confidence and to prevent their disclosure to unauthorized
persons.
(e) All SMI Patents, registered SMI Copyrights and SMI Trademarks
owned by SMI are owned free of any liens or encumbrances, and no licenses
thereunder have been granted to any person except as identified in the
Disclosure Schedule.
(f) To the best of the Founders' knowledge, there is no existing
infringement by SMI upon the patents, trademarks, copyrights, trade secrets or
other similar intellectual property rights of others, and no such infringement
would result from products currently under development by SMI, except for any
infringement that does not or would not subject SMI to a loss which is material
from the standpoint of the business or operations of SMI taken as a whole.
During the three years preceding the date of this Agreement, SMI has not been a
defendant or plaintiff in any legal proceeding relating to its business which
has not been finally terminated prior to the date hereof and which involves a
claim of infringement of any patents, copyrights, trademarks, trade secrets or
other similar intellectual property rights of others, except for such
infringements that do not subject SMI to a loss which is material from the
standpoint of the business or operations of SMI taken as a whole. To the best
of the Founders' knowledge, except for infringements that do not subject SMI to
a loss which is material from the standpoint of the business or operations of
SMI taken as a whole, there are no continuing infringements by any Person of any
SMI Patent, SMI Copyright, SMI Trademark or SMI Trade Secret owned by SMI. No
SMI Patent, SMI Copyright or SMI Trademark has been involved in any
interference, opposition or cancellation proceeding during the three years
preceding the date of this Agreement and SMI has not received any notice of
actual or alleged infringement of any third party intellectual property rights.
2.11 Compliance with Laws. SMI conducts its business in substantial
compliance with all applicable laws and governmental regulations.
2.12 Contracts. The Disclosure Schedule lists all material agreements to
which SMI is a party as of the date of this Agreement. Copies of the contracts
set forth in Section 2.12 of the Disclosure Schedule have been made available to
Exar, and, to the best of the Founders' knowledge, none of the parties to any of
such contracts is in default thereunder, except where the default would not have
a material adverse effect on the business or operations of SMI taken as a whole.
2.13 Employees, Salaries and Fringe Benefits. The Disclosure Schedule sets
forth the name, position and annual salary of each person who is employed by SMI
as of the date of this Agreement and whose annual salary exceeds $50,000 as of
the date of this Agreement. Except as set forth on the Disclosure Schedule, the
Company has no employment agreement providing for employee remuneration or
benefits which is not terminable at will by the Company. The Disclosure
Schedule provides a brief description of all material fringe benefits made
available to the employees of SMI as of the date of this Agreement.
(a) The SMI Disclosure Schedule contains a true and complete list of
each material bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits, profit-
sharing, pension, or retirement plan, program or agreement (collectively, the
"Plans"), sponsored, maintained or contributed to or required to be contributed
to by SMI for the benefit of any current employee of SMI ("Employee").
(b) SMI does not sponsor or maintain any employee pension benefit
plan (as such term is defined in Section 3(2) of ERISA).
(c) SMI has not engaged in a transaction in connection with which it
could become subject to a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code.
(d) SMI is not liable for any accumulated funding deficiencies (as
defined in Section 302 of ERISA and Section 412 of the Code) with respect to any
Plan.
(e) To the actual knowledge of SMI, each Plan conforms in all
material respects with, and is administered in all material respects in
compliance with, all applicable requirements of ERISA and the Code.
2.14 Insurance. The Disclosure Schedule identifies all material insurance
policies held by SMI as of the date of this Agreement.
2.15 Receivables.
(a) The SMI Disclosure Schedule provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other
receivables of SMI as of March 31, 1995.
(b) All existing accounts receivable of SMI (including those accounts
receivable reflected on the March 31, 1995 balance sheet that have not yet been
collected and those accounts receivable that have arisen since March 31, 1995 in
the ordinary course of business and have not yet been collected): (i) represent
valid obligations of customers of SMI arising from bona fide transactions
entered into in the ordinary course of business consistent with past practices;
and (ii) are current and, except as fully reserved in the Balance Sheet, SMI has
no reason to believe they will not be collected in full (without any
counterclaim or setoff) on or before September 30, 1995.
2.16 Inventory. The SMI Disclosure Schedule provides an accurate and
complete breakdown of all inventory (including raw materials, work in process
and finished goods) of SMI as of March 31, 1995. All of SMI's existing
inventory (including all inventory that is reflected on the March 31, 1995
balance sheet and that has not been disposed of by SMI since March 31, 1995):
(a) is of such quality and quantity as to be usable and saleable by SMI in the
ordinary course of business consistent with past practices; (b) has been priced
at the lower of estimated cost or market value using the first-in, first-out
method; and (c) is free of any defect or deficiency. The inventory levels
maintained by SMI: (a) are not excessive in light of SMI's normal operating
requirements; and (b) are adequate for the conduct of SMI's operations in the
ordinary course of business consistent with past practices.
2.17 Sale of Products; Performance of Services.
(a) To the best of the Founders' knowledge, each product that has
been sold by SMI to any person: (i) conformed and complied in all material
respects with the terms and requirements of any applicable warranty or other
Contract and with all applicable Legal Requirements; and (ii) was free of any
design defects, construction defects or other defects or deficiencies at the
time of sale. To the best of the Founders' knowledge, all repair services and
other services that have been performed by SMI were performed properly and in
full conformity with the terms and requirements of all applicable warranties and
other Contracts and with all applicable Legal Requirements.
(b) SMI has no reason to believe that it will incur or otherwise
become subject to any Liability arising directly or indirectly from any product
manufactured or sold, or any repair services or other services performed by, SMI
on or at any time prior to the Closing.
2.18 Litigation. There is no legal proceeding pending against SMI before
any court, governmental body or arbitrator (or, to the best of the Founders'
knowledge being threatened against SMI).
2.19 Non-Contravention. Except for violations which would not subject SMI
to a penalty or loss that is material from the standpoint of the business or
operations of SMI taken as a whole, the execution, delivery and performance of
this Agreement by SMI: (i) will not result in a violation of the Articles of
Incorporation or Bylaws of SMI; (ii) will not result in a violation of any
agreement to which SMI is a party, assuming that the consents, waivers and
approvals identified in the Disclosure Schedule are obtained prior to the
Closing; and (iii) will not result in a violation of any law or governmental
regulation to which SMI is subject, assuming that any applicable federal and
state securities laws and regulations are complied with.
2.20 Corporate Authority; Authorization. SMI has full corporate power and
authority to execute, deliver and perform this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Boards of Directors of SMI
and no other corporate proceedings on the part of SMI are necessary for SMI to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by duly authorized officers
of SMI. This Agreement constitutes a legal, valid and binding obligation of
SMI, enforceable against it in accordance with its terms (except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws, both state and federal, affecting the enforcement of
creditors' rights or remedies in general from time to time in effect and the
exercise by courts of equity powers).
2.21 Governmental Approvals. No authorization, consent or approval of, or
registration or filing with, any governmental authority is required to be
obtained or made on or before the Closing by SMI in connection with SMI's
execution and delivery of this Agreement or the consummation by SMI of the
transactions contemplated hereby, except for any authorizations, approvals or
filings required to be obtained or made under applicable federal and state
securities laws and regulations, and except where the failure to obtain or make
any such authorization, consent, approval, registration or filing would not
subject SMI to a penalty or loss that is material from the standpoint of the
business or operations of SMI taken as a whole.
2.22 Brokers. SMI has not agreed to pay any brokerage fees, finder's fees
or other similar fees or commissions with respect to the transactions
contemplated by this Agreement.
2.23 Full Disclosure. None of the representations and warranties made by
Founders, or made in any certificate or memorandum furnished or to be furnished
by them or by SMI, or on their behalf, contains or will contain any untrue
statements of a material fact or omit any material fact the omission of which
would be misleading.
2.24 Title To Shares. Each Selling Shareholder is the owner, beneficially
and of record, of all of the shares listed beside his or its name on the
Disclosure Schedule, free and clear of any liens, encumbrances, security
agreements, equities, options, claims, charges or restrictions, and effective
with the Closing, such Selling Shareholder's entire right, title and interest in
and to such shares shall have been conveyed to Exar. Except for such shares,
Selling Shareholder has no interest in any equity security of SMI and is not the
beneficiary of any subscription, option, right, warrant, convertible security,
or other agreement or commitment obligating SMI to issue or to transfer from
treasury any additional shares of its capital stock.
2.25 No Claim Against SMI. Except as set forth on the Disclosure Schedule,
each Selling Shareholder has no contract, agreement or arrangement with SMI of
any kind that will survive the Closing, and no claim or right against SMI of any
nature whatsoever, absolute or contingent, except for (i) rights arising from
such Selling Shareholder's ownership of the shares being conveyed to Exar
pursuant to this Agreement, or (ii) in the case of the Founders, employment
compensation that is accrued and unpaid.
2.26 Investment Representations. Each of the Selling Shareholders (with
each Selling Shareholder providing an undertaking only as to himself or itself,
to the extent references are made to the actions of Selling Shareholders):
(a) represents and warrants that it is acquiring the shares of Exar
Common Stock solely for its account for investment and not with a view to or for
sale or distribution of said shares or any part thereof; and represents that the
entire legal and beneficial interests of the shares of Exar Common Stock the
selling Shareholder is acquiring is being acquired for, and will be held for,
its account only;
(b) understands that the shares Exar Common Stock have not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the shares is to be effected
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, it has in mind merely acquiring the shares of Exar Common
Stock for a fixed or determinable period in the future, or for a market rise, or
for sale if the market does not rise. Each Selling Shareholder has no such
intention;
(c) recognizes that the shares of Exar Common Stock being acquired by
it must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available and that,
except as provided in the Agreement, Exar has no obligation to register the
shares or to comply with any exemption from such registration;
(d) is aware that the shares of Exar Common Stock may not be sold
pursuant to Rule 144 adopted under the Securities Act unless certain conditions
are met and until the undersigned has held the shares for at least two years;
(e) further agrees not to make any disposition of all or any part of
the shares of Exar Common Stock being acquired in any event unless and until:
(i) Exar shall have received a letter secured by the undersigned
from the Securities and Exchange Commission stating that no action will be
recommended to the Commission with respect to the proposed disposition; or
(ii) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(iii) (a) The Selling Shareholder shall have notified Exar
of the proposed disposition and shall have furnished Exar with a detailed
statement of the circumstances surrounding the proposed disposition, (b) the
undersigned shall have furnished Exar with an opinion of counsel for the
undersigned to the effect that such disposition will not require registration of
such shares under the Securities Act, and (c) such opinion of counsel for the
undersigned shall have been concurred in by Exar's counsel and Exar shall have
advised the undersigned of such concurrence; and
(f) understands and agrees that all certificates evidencing the
shares to be issued to the undersigned may bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT."
SECTION 3. REPRESENTATIONS AND WARRANTIES OF EXAR
Exar represents and warrants to SMI and the Selling Shareholders as of the
date of this Agreement and as of the Closing as follows:
3.1 Acquisition of Shares. Exar is not acquiring the Shares with the
current intention of making a public distribution thereof.
3.2 Due Organization. Exar is a corporation duly organized, existing and
in good standing under the laws of the State of Delaware. Exar has all
necessary power and authority under applicable corporate law and its
organizational documents to own or lease its properties and to carry on its
business as presently conducted.
3.3 Corporate Authority; Authorization. Exar has full corporate power and
authority to execute, deliver and perform this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Boards of Directors of Exar
and no other corporate proceedings on the part of Exar are necessary for Exar to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by duly authorized officers
of Exar. This Agreement constitutes a legal, valid and binding obligation of
Exar, enforceable against it in accordance with its terms (except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws, both state and federal, affecting the enforcement of
creditors' rights or remedies in general from time to time in effect and the
exercise by courts of equity powers).
3.4 Governmental Approvals; No Conflicts. Except as may be required by
the Securities Act of 1933 (the "Securities Act"), state securities laws, and
the Delaware General Corporation Law, there is no material Legal Requirement
that Exar make any filing with, or obtain any permit, authorization, consent or
approval of, any Governmental Authority as a condition to the lawful
consummation by Exar of the transactions contemplated by this Agreement.
Neither the execution and delivery of this Agreement by Exar nor the
consummation by Exar of the transactions contemplated by this Agreement will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of Exar, (ii) result in a violation of a material
agreement to which Exar is a party or (iii) violate any Legal Requirement,
order, writ, injunction, decree or arbitration award applicable to Exar or its
respective assets which violation could have a material adverse effect on Exar.
3.5 Changes. Between March 31, 1995 and the date of this Agreement: (i)
except with respect to the matters addressed in Exar's press release dated May
25, 1995 (regarding its hard disk drive products), there has not been any
adverse change in the financial condition or results of operations of Exar,
other than changes which have not had a material adverse effect on the business
or operations of Exar taken as a whole and changes relating to general economic
conditions or conditions generally affecting the industry in which Exar
operates; (ii) no dividend or other distribution in respect of the shares of the
capital stock of Exar has been declared, paid or made and (iii) Exar has not
conducted its business in a manner that departs materially from the manner in
which such business was being conducted prior to March 31, 1995.
3.6 SEC Filings; Financial Statements.
(a) Exar has provided to SMI a complete and accurate copy of each
report, schedule, registration statement and definitive proxy statement filed by
Exar with the Securities and Exchange Act (the "SEC") on or after May 31, 1994
and prior to the date of this Agreement (the "Exar SEC Reports"), which are all
the forms, reports and documents required to be filed by Exar with the SEC since
May 31, 1994. The Exar SEC Reports (i) complied with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case may be, at the times they were filed (or if amended or
superseded by a filing prior to the date of this Agreement then or the date of
such filing), 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 light of the circumstances under which they were made,
not misleading.
(b) Each of the sets of consolidated financial statements (including,
in each case, any notes thereto) contained in the Exar SEC Reports fairly
presents the consolidated financial position of Exar and its material
subsidiaries as at the respective dates thereof and the consolidated results of
their 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.
3.7 Offering Valid. The issuance of the shares of Exar Common Stock
pursuant to Section 1.2 hereof will be exempt from the registration requirements
of the Securities Act and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
3.8 Disclosure.
(a) The copies of all documents furnished by Exar pursuant to the
terms of this Agreement are complete and accurate.
(b) For purposes of this Agreement and the transactions contemplated
thereby, none of (i) the representations and warranties made by Exar in this
Agreement, (ii) the Exar Disclosure Schedule or, (iii) any statement by Exar or,
to the best of Exar's knowledge, any other person, contained in any document,
certificate or other writing furnished by Exar to SMI specifically identified as
supplemental disclosure in connection with this Agreement or the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make the
statements made herein or therein, in light of the circumstances in which they
were made, not misleading.
3.9 Finders. Exar has not dealt with any person, firm, or corporation
who, as a result, is or may be entitled to a broker's commission, finder's fee,
investment banker's fee, or similar payment from Exar for arranging the
transactions contemplated hereby or introducing the parties to each other.
SECTION 4. PRE-CLOSING COVENANTS OF SMI AND THE SELLING
SHAREHOLDERS
4.1 Access and Investigation. SMI and each of the Selling Shareholders
shall ensure that, at all times during the Pre-Closing Period, SMI and its
Representatives will cooperate with Exar and its Representatives and prepare and
make available such documents and information relating to SMI and take such
other actions as Exar may request in good faith.
42. Operation of Business. SMI and each of and the Selling Shareholders
(with each Selling Shareholder providing an undertaking only as to himself or
itself, to the extent references are made to the actions of Selling
Shareholders) shall ensure that, during the Pre-Closing Period without the prior
written consent of Exar:
(a) such Selling Shareholder does not directly or indirectly sell or
otherwise transfer, or offer, agree or commit (in writing or otherwise) to sell
or otherwise transfer, any of the Shares or any interest in or right relating to
any of the Shares;
(b) such Selling Shareholder does not permit, and does not offer,
agree or commit (in writing or otherwise) to permit, any of the Shares to become
subject, directly or indirectly, to any Encumbrance;
(c) SMI and the each of Selling Shareholders does not take or permit
any action which would prevent the Transaction from qualifying as a tax-free
reorganization under Section 368 of the Code, and Exar will use its best efforts
to prevent any of its officers or directors from taking or permitting any such
action.
(d) SMI conducts its operations exclusively in the Ordinary Course of
Business and in the same manner as such operations have been conducted prior to
the date of this Agreement;
(e) other than in the Ordinary Course of Business, SMI does not incur
any indebtedness for borrowed money or incur any contingent liability as a
guarantor or otherwise with respect to the obligations of any person or entity
except as contemplated in this Agreement;
(f) SMI uses its Best Efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and maintain its relations and good will with all suppliers, customers,
landlords, creditors, licensors, licensees, employees and other Persons having
business relationships with SMI;
(g) SMI keeps in full force all insurance policies identified in
Section 2.14 of the Disclosure Schedule;
(h) SMI's officers confer regularly with Exar concerning operational
matters and otherwise report regularly to Exar concerning the status of SMI's
business, condition, assets, liabilities, operations, financial performance and
prospects;
(i) SMI immediately notifies Exar of any inquiry, proposal or offer
from any Person relating to any Acquisition Transaction;
(j) SMI does not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and does
not repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities;
(k) SMI does not sell or otherwise issue any shares of capital stock
or grant any options, warrants or rights to acquire any capital shares;
(l) SMI does not amend its Articles of Incorporation or bylaws, and
does not effect or become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(m) SMI does not form any subsidiary or acquire any equity interest
or other interest in any other Entity;
(n) SMI does not make any capital expenditure, except for capital
expenditures that are made in the Ordinary Course of Business, and that, when
added to all other capital expenditures made on behalf of SMI during the Pre-
Closing Period, such capital expenditures do not exceed $50,000 in the
aggregate;
(o) SMI does not enter into, amend or terminate any Contract or any
material agreement except for in the Ordinary Course of Business;
(p) SMI does not make any loans to or engage in any transactions with
any of its shareholders, directors or employees other than in the Ordinary
Course of Business.
(q) SMI does not incur, assume or otherwise become subject to any
Liability, except for current liabilities (of the type required to be reflected
in the "liabilities" column of a balance sheet prepared in accordance with GAAP)
incurred in the Ordinary Course of Business;
(r) SMI does not establish or adopt any Employee Benefit Plan, and
does not pay any bonus or make any profit-sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees except pursuant to annual performance reviews in the Ordinary Course
of Business and except for up to $50,000 which may be expended by SMI at the
discretion of its officers as employee bonuses;
(s) SMI does not change any of its methods of accounting or
accounting practices in any respect;
(t) SMI does not make any Tax election;
(u) SMI does not commence any Proceeding except for routine
collection of bills or for breach of this Agreement;
(v) SMI does not enter into any transaction or take any other action
outside the Ordinary Course of Business; and
(w) SMI does not enter into any transaction or take any other action
that might cause or constitute a Breach of any representation or warranty made
by SMI or any of the Selling Shareholders in this Agreement or in the Closing
Certificate.
4.3 Filings and Consents. SMI and each of the Selling Shareholders shall
ensure that:
(a) each other filing or notice required to be made or given
(pursuant to any applicable Legal Requirement, Order or Contract, or otherwise)
by SMI or any of the Selling Shareholders in connection with the execution and
delivery of the transactional agreements or in connection with the consummation
or performance of the Transaction (including each of the filings and notices
identified in Part 2.21 of the Disclosure Schedule) is made or given as soon as
possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by SMI or any of the Selling
Shareholders in connection with the execution and delivery of any of the
transactional agreements or in connection with the consummation or performance
of any of the Transactions (including each of the Consents identified in Part
2.21 of the Disclosure Schedule) is obtained as soon as possible after the date
of this Agreement and remains in full force and effect through the Closing;
(c) SMI promptly delivers to Exar a copy of each filing made, each
notice given and each Consent obtained by SMI or any Selling Stockholder during
the Pre-Closing Period; and
(d) during the Pre-Closing Period, SMI and its Representatives
cooperate with Exar and with Exar's Representatives, and prepare and make
available such documents and take such other actions as Exar may request in good
faith, in connection with any filing, notice or Consent that Exar is required or
elects to make, give or obtain.
4.4 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, SMI and the Selling Shareholders
shall promptly notify Exar in writing of:
(i) the discovery by SMI or any of the Selling Shareholders of
any event, condition, fact or circumstance that occurred or existed on or prior
to the date of this Agreement and that caused or constitutes a breach of any
representation or warranty made by SMI or any of the Selling Shareholders in
this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a breach of any representation or warranty made by SMI or any of the
Selling Shareholders in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement; and
(iii) any breach of any covenant or obligation of SMI or any
of the Selling Shareholders.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.4(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then SMI and the Selling Shareholders shall promptly deliver to
Exar an update to the Disclosure Schedule specifying such change. No such
update shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by SMI or any of the Selling Shareholders in this Agreement or
in the Closing Certificate, or (ii) determining whether any of the conditions
set forth in Section 6 has been satisfied.
4.5 Best Efforts. During the Pre-Closing Period, SMI and the Selling
Shareholders shall use their Best Efforts to cause the conditions set forth in
Section 6 to be satisfied on a timely basis.
SECTION 5. COVENANTS OF EXAR
Exar covenants and agrees as follows:
5.1 Negative Covenants. From the date of this Agreement until the
Closing, Exar will not, except as otherwise contemplated by this Agreement or
unless SMI shall otherwise consent in writing:
(a) Take any action which would cause any of its representations or
warranties in this Agreement to become inaccurate (except for such actions as
would not individually or in the aggregate have a material adverse effect on
Exar) or which would prevent any conditions precedent to its obligations under
this Agreement from being satisfied at or prior to the Closing; or
(b) Take or permit any action which would prevent the Transaction
from qualifying as a tax-free reorganization under Section 368 of the Code and
Exar will use its best efforts to prevent any of its officers or directors from
taking or permitting any such action.
5.2 Affirmative Covenants. Prior to the Closing, Exar will do the
following:
(a) Use its Best Efforts to perform and fulfill all conditions and
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement shall be fully
carried out;
(b) Use its Best Efforts to obtain all authorizations, consents and
permits of others required to permit the consummation by Exar of the
transactions contemplated by this Agreement; and
(c) Promptly advise SMI in writing of the occurrence of any event
which causes the representations or warranties made by Exar in this Agreement or
the information contained in the Exar Disclosure Schedules to be incomplete or
inaccurate in any material respect.
5.3 Post-Closing Covenants.
(a) Effective as of the Closing or promptly thereafter, Exar shall
cause SMI to do the following:
(1) cancel the $1,250,000 loan owed to Exar pursuant to the
Credit Agreement dated May, 1994, together with all interest then accrued and
unpaid. Such cancellation shall constitute a capital contribution by Exar to
SMI;
(2) complete the transactions with Rohm listed in Section
1.5(a).
(b) Exar also agrees to vote its SMI stock in favor of James Knutti
as a director of SMI during the Employment Term as defined in Exhibit G; such
board of directors shall be made up of three directors a majority of which shall
be Exar appointees.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF EXAR
The obligations of Exar to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or upon the Closing, of the
following conditions precedent:
6.1 Due Diligence. Exar shall have received all documents it may
reasonably request related to SMI. Exar shall have satisfactorily completed its
investigation and review of SMI's business, assets, liabilities, operations,
financial performance and prospects including, but not limited to, regulatory
matters, and shall be satisfied with the results of that investigation and
review.
6.2 Compliance with Covenants and Conditions; Representations and
Warranties Correct. SMI shall have complied with and performed in all material
respects each covenant and condition contained in this Agreement to be performed
by it at or prior to the Closing; the representations and warranties of SMI
contained in this Agreement shall have been true and correct as of the date
hereof and shall be true and correct as of the Closing with the same effect as
though made on the Closing.
6.3 No Material Adverse Effect. After the date hereof, there shall have
been no event which has had a material adverse effect on SMI.
6.4 Officer's Certificate. SMI shall have delivered to Exar a certificate
of SMI, evidencing compliance with the conditions set forth in Sections 6.2 and
6.3.
6.5 Consents of Others. The consent to the Transaction of each third
party whose consent is required for SMI to consummate the transactions
contemplated hereby shall have been received, including, without limitation, the
parties to the contracts listed on the SMI Disclosure Schedule.
6.6 Continuity of Interest Certificates. Exar shall have received prior
to the Closing Continuity of Interest Certificates signed by each of James
Knutti and Henry Allen in the form attached hereto as Exhibit E.
6.7 Legal Opinion. Exar shall have received the opinion of Carr,
DeFilippo & Ferrell, counsel to SMI and the Founders, dated as of the Closing,
substantially in the form of Exhibit F hereto.
6.8 Employment Agreements. James Knutti and Henry Allen shall have each
entered into Employment and Noncompetition Agreements with Exar providing for
their employment at Exar or SMI upon mutually agreed upon terms a form of which
is attached hereto as Exhibit G.
6.9 Resignations. Exar shall have received the written resignation,
effective as of the Closing, of Henry Allen as a director of SMI.
6.10 Securities Law Compliance. The issuance of the Exar Common Stock to
the shareholders of SMI in accordance with this Agreement shall be a valid
offering under the Securities Act, in the reasonable judgment of Exar.
6.11 Absence of Restraint. No Proceeding shall be pending or threatened
before any Governmental Authority to restrain, enjoin or otherwise prevent the
consummation of, or which questions the validity or legality of, this Agreement
or the transactions contemplated hereby, and no Legal Requirement, order, writ,
injunction or decree shall have been enacted, entered, issued or promulgated by
any court or Governmental Authority which prohibits or materially restricts the
consummation of this Agreement and the transactions contemplated hereby, and no
such Proceeding shall be threatened.
6.12 No Proceedings. No Proceedings shall have commenced against SMI which
could have a material adverse effect on SMI.
6.13 Required Approvals. Exar and SMI shall have received all such
governmental approvals, consents, authorizations or modifications as may be
required to permit the performance by Exar and SMI, of their respective
obligations under this Agreement, the consummation of the transactions herein
contemplated and the continuation of SMI's business after the consummation of
the transactions contemplated herein.
6.14 Legal Requirements. All permits, licenses, consents and approvals
necessary under any Legal Requirements relating to the sale of securities shall
have been issued or given, and no such permit, license, consent or approval
shall have been revoked, canceled, terminated, suspended or made the subject of
any stop order or proceeding therefor.
6.15 FIRPTA. Exar, as agent for the shareholders of SMI, shall have
received a properly executed "FIRPTA" Notification Letter, in form and substance
reasonably acceptable to Exar, which states that shares of SMI do not constitute
"United States Real Property Interests" under Section 897(c) of the Code for
purposes of satisfying Exar's obligations under Treasury Regulations Section
1.1445-2(c)(3).
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING
SHAREHOLDERS
The obligation of the Selling Shareholders to consummate the transactions
contemplated herein is subject to the fulfillment, prior to or upon the Closing,
of the following conditions precedent:
7.1 Compliance with Covenants and Conditions; Representations and
Warranties Correct. Exar shall have performed in all material respects each
covenant and condition contained in this Agreement to be performed by them at or
prior to the Closing; the representations and warranties of Exar contained in
this Agreement shall be true and correct as of the Closing with the same effect
as though made as of the Closing.
7.2 Officers' Certificate. Exar shall have delivered to SMI a certificate
of the Chief Executive Officer and Chief Financial Officer of Exar evidencing
compliance with the conditions set forth in Section 7.1.
7.3 Absence of Restraint. No order, statute, rule, regulation, executive
order, decree, judgment, injunction or court order shall have been enacted,
entered, issued, or promulgated by any court or governmental authority which
prohibits or materially restricts the consummation of this Agreement or the
transactions contemplated hereby.
7.4 No Material Adverse Effect. After the date hereof, there shall have
been no event which has had a material adverse effect on Exar which was not
disclosed at least three trading days prior to the Closing.
7.5 Securities Law Compliance. The issuance of the Exar Common Stock to
the shareholders of SMI in accordance with this Agreement shall be a valid
offering under the Securities Act, in the reasonable judgment of the Selling
Shareholders.
7.6 No Proceedings. No Proceedings shall have commenced against Exar
which could have a material adverse effect on Exar.
7.7 Required Approvals. Exar and SMI shall have received all such
governmental approvals, consents, authorizations or modifications as may be
required to permit the performance by Exar and SMI, of their respective
obligations under this Agreement, the consummation of the transactions herein
contemplated and the continuation of SMI's business after the consummation of
the transactions contemplated herein.
7.8 Legal Requirements. All permits, licenses, consents and approvals
necessary under any Legal Requirements relating to the sale of securities shall
have been issued or given, and no such permit, license, consent or approval
shall have been revoked, canceled, terminated, suspended or made the subject of
any stop order or proceeding therefor.
SECTION 8 INDEMNITY BY FOUNDERS
8.1 Indemnity.
(a) The Founders hereby agree, on the terms and conditions set forth
herein, to jointly and severally indemnify, hold harmless, reimburse and defend
Exar against any Damages incurred in connection with, or arising from, or
attributable to (i) any breach or inaccuracy in any representation made by the
Founders under this Agreement or any schedule, disclosure document or
certification referenced herein, (ii) any breach or failure to perform any
covenant or agreement of SMI or the Founders contained herein and (iii)
enforcement of this Section 8. The term Damages as used herein shall apply to
Damages incurred or sustained by Exar or SMI, as the case may be, even in the
absence of third party claims and shall not be limited to claims asserted by
third parties.
(b) Except as provided in Section 8.4, the indemnification provisions
of this Section 8 shall be the exclusive remedy of Exar for any Damages incurred
in connection with, or arising from, or attributable to the transactions
contemplated by this Agreement.
(c) As used in this Section 8, a "Claim" shall be any claim for
indemnification pursuant to this Section 8.
(d) The indemnification provided pursuant to this Section 8 shall
apply only to Claims asserted by Exar prior to June 7, 1997.
(e) The indemnification provided in this Section 8 shall apply to all
Damages incurred in connection with or arising from or attributable to a Claim.
8.2 Satisfaction of Indemnification. Indemnification under this Article 8
shall be satisfied jointly and severally by the Founders (including, without
limitation, by right of setoff against any Earn-Out Payments (as defined
below)). However, (i) neither Founder shall be liable for Damages in excess of
the aggregate of (A) the fair market value of any Exar Common Stock received by
him in this Transaction and held by him on the date of satisfaction of the
Claim, plus (B) the net sale price of any Exar Common Stock received by him in
this Transaction and sold by him prior to the date of satisfaction of the Claim,
(ii) except with respect to misrepresentations made in Section 2.24, 2.25 or
2.26, a Founder making payment to Exar for such breaches shall be entitled to
contribution from the other Founder in proportion to the aggregate purchase
price received by each of them under this Agreement and, (iii) except with
respect to misrepresentations made in Section 2.24, 2.25 or 2.26, the Founders
shall not be liable for Damages unless and until the aggregate, cumulative
Damages exceed $25,000, provided that if aggregate, cumulative Damages exceed
such amount, the Founders shall be liable, jointly and severally, for the entire
amount of such Damages from the first dollar, provided further, that all
materiality and dollar qualifications contained in this Agreement shall be
disregarded in calculating the amount of aggregate, cumulative Damages.
Founders may satisfy Claims hereunder by means of either paying cash or
cancelling outstanding shares of Exar Common Stock owned by them, with such
shares to be valued at the trading price of such shares on the day prior to
their cancellation.
8.3 Third-Party Claims. In the event Exar becomes aware of a third-party
claim which Exar believes may result in a demand under this Section 8, Exar
shall notify the Founders of such claim, and the Founders shall be entitled, at
their own expense, to participate in any defense of such claim. Exar will use
its best efforts to defend such third party claim and the Founders shall be kept
fully informed of such claim at all stages thereof. Exar will not consent to
the entry of any judgment or enter into any settlement with respect to any such
claim without the prior written consent of the Founders (not to be unreasonably
withheld), and in any event, any such settlement shall not be determinative of
liability for indemnification hereunder.
8.4 Fraud. Notwithstanding any provision of this Agreement to the
contrary, (i) liability of any Selling Shareholder for common law fraud,
intentional misrepresentation or other claim involving intentional misconduct
shall not be limited in amount, procedure for dispute resolution or as to the
time during which a claim may be made and (ii) no Selling Shareholder shall be
personally liable for the fraud, intentional misrepresentation or intentional
misconduct of another Selling Shareholder.
8.5 Survival of Representations and Warranties. No disclosure by SMI or
the Founders nor any investigation by or on behalf of Exar with respect to SMI
shall be deemed to affect Exar's reliance on the representations, warranties,
covenants or agreements contained herein or to waive Exar's rights to indemnity
as provided herein for the breach or inaccuracy or failure to perform or comply
with any representation, warranty, covenant or agreement of SMI or any Founder.
The indemnity obligations of the Founders under this Section 8 (and the
representations, warranties, covenants and agreements of SMI and the Founders
under this Agreement) shall survive the Closing and shall terminate as provided
in Section 8.1(d) (with such representations and warranties terminating
concurrently with the termination of such indemnity obligations).
SECTION 9. EARN-OUT PAYMENTS FOR FOUNDERS
9.1 Calculation of Earn-Out Payments.
(a) Earn-Out Payments. As soon as practicable following completion
of the audit of Exar's consolidated financial statements by Exar's independent
auditors for each fiscal year ending March 31 between 1996 and 2001, the "Earn-
Out Payments" shall be determined as follows:
(i) if SMI's Gross Margin Dollar Contribution (as defined below)
for any Exar fiscal year ending on or before March 31, 2001 (the "Measurement
Period") is less than $5,000,000, then the Earn-Out Payment for such fiscal year
shall be zero (0);
(ii) if SMI's Gross Margin Dollar Contribution for any fiscal
year within the Measurement Period equals or exceeds $5,000,000 then the Earn-
Out Payment for such fiscal year shall equal $500,000, subject to Section 9.1(b)
below; and
(iii) if SMI's Gross Margin Dollar Contribution for any
fiscal year within the Measurement Period equals or exceeds $10,000,000, then
the Earn-Out Payment for such fiscal year shall be $1,000,000, subject to
Section 9.1(b) below.
(b) Maximum Earn-Out Payments. Only a single payment shall be made
pursuant to each of Section 9.1(a)(ii) and 9.1(a)(iii). If the benchmark
established under Section 9.1(a)(iii) is achieved in a particular fiscal year
and no payment has been made previously under Section 9.1(a)(ii), then the Earn-
Out Payment at that time shall be $1,500,000. In no event shall the aggregate
Earn-Out Payments exceed $1,500,000.
(c) Reductions in Earn-Out Payments. Any one or more distributions
(such distributions collectively, the "Distributions") of the Earn-Out Payments
pursuant to Section 9.2 shall be subject to reduction if Exar elects pursuant to
Section 8.2 to set off against one or more of the Distributions an amount equal
to the amount of any Damages.
(d) Definitions.
"Gross Margin Dollar Contribution" shall mean the gross margin of the
SMI business included in Exar's consolidated financial statements, before
consolidating elimination entries, prepared in accordance with GAAP on a basis
consistent with Exar's audited financial statements for the year ended March 31,
1995 as certified by the independent accountants for Exar. Exar hereby confirms
to the Founders that (i) the calculation of gross margin as described above is
the net product sales of the SMI business, plus nonrecurring engineering fees,
less the cost of goods sold, and (ii) such gross margin calculation excludes all
research and development costs, sales costs, general and administrative costs,
and engineering costs (other than that involved in production functions such as
QA/QC).
For purposes of measuring Gross Margin Dollar Contribution, Exar shall
account for the SMI Business (as defined below) as a separate business segment.
Any accrual, deduction or allocation made or taken for any management, service,
overhead or other charge shall be applied against the SMI Business only when SMI
elects, because it expects to realize a cost advantage thereby, to utilize
services or facilities of Exar in lieu of procuring such services or facilities
from another source. Any such allocation or charge shall be applied by Exar at
rates or deemed prices that are no less favorable to the SMI Business than those
that Exar applies to its other independent business units. The "SMI Business"
shall mean all revenues (together with the associated costs) derived from the
sale of products designed and developed by SMI or from the licensing of any such
designs or elements of such designs, whether developed before or after the
Closing, and regardless of the brand name under which such products may be sold.
The Founders may challenge the calculation of the Gross Margin Dollar
Contribution and shall use an independent auditor (the "Founders' Auditor") to
assist it in reviewing the calculation and proposing an alternative calculation,
at the expense of the Founders. The identity of the Founders' Auditor shall be
subject to the approval of Exar, such approval not to be unreasonably withheld,
and the execution of a confidentiality agreement in customary form. If the
Founders' calculation for the Measurement Period exceeds Exar's calculation of
the Gross Margin Dollar Contribution for such period in a manner that would have
resulted in the payment of an additional Earn-Out Payment, then the Founders may
deliver a notice to Exar disagreeing with Exar's calculation and setting forth
the Founders calculation of such amount. If a notice of disagreement shall have
been delivered to Exar by the Founders pursuant to the preceding sentence, Exar
and the Founders shall, during the 20 days following such delivery, use all
commercially reasonable efforts to reach agreement. If during such period the
parties are unable to reach agreement regarding the Gross Margin Dollar
Contribution for such period, Exar and the Founders shall promptly thereafter
select an Accounting Referee (as defined below) and cause such Accounting
Referee promptly to review this Agreement and the respective parties'
calculations for the purpose of calculating the Gross Margin Dollar
Contribution. The Accounting Referee shall deliver to Exar and the Founders as
promptly as practicable a report setting forth such calculation. Such report
shall be final and binding upon Exar and the Founders. The cost of such review
and report shall be borne by (i) Exar if the Founders' calculation of the Gross
Margin Dollar Contribution is closer to the Accounting Referee's calculation, or
(ii) the Founders if the Exar's calculation of the Gross Margin Dollar
Contribution is closer to the Accounting Referee's calculation, or (iii) both
parties equally if each party's calculation differs from the Accounting
Referee's calculation by the same amount. The "Accounting Referee" shall mean a
reputable firm of independent auditors of national standing other than Exar's or
the Founders' independent auditors.
9.2 Distributions of Earn-Out Payments. As soon as practicable following
the calculation of the Earn-Out Payment, Exar shall distribute additional shares
of Exar Common Stock, as calculated below, reduced by any amounts specified in
Section 9.1(b), to the Founders pro rata based on their shares of SMI Common
Stock owned by each of them immediately before the Closing. Each date on which
Exar makes such a distribution is referred to herein as a "Distribution Date."
For purposes of calculating the value of shares of Exar Common Stock,
if any, distributed to the Founders on each of the Distribution Dates, the price
per share of Exar Common Stock shall be deemed to be the average of the closing
prices of Exar Common Stock, as reported by the national edition of The Wall
Street Journal on the Nasdaq National Market (or such other principal securities
exchange or quotation system on which Exar's Common Stock shall be traded or
quoted, or if Exar Common Stock shall not then be so traded or quoted, then the
fair market value of the Exar Common Stock as agreed to by Exar and the Selling
Shareholders) for the 30 trading days ending on the day prior to each such
Distribution Date.
9.3 Post-Closing Covenants of Exar.
(a) Exar shall maintain SMI as a separate business segment, the
financial results for which can be reported as an independent business unit.
Exar shall operate SMI in a manner that is, to the extent practical, consistent
with the manner in which it operates other businesses owned by Exar, taking into
consideration the opportunities, risks and resource requirements of such
businesses. In this regard, Exar recognizes that the future growth of SMI will
require additional capital to fund operations. Exar shall take into
consideration the objectives of the Founders to realize the Earn-Out Payments,
and shall seek to achieve a Gross Margin Dollar Contribution which is sufficient
to cause such payments to be made. However, nothing contained in this Section 9
shall require Exar to make capital investments, incur risks or take actions
which it believes not to be prudent or would be inconsistent with the manner in
which it operates other businesses owned by Exar.
(b) In the event there is a Change of Control (as defined below) of
Exar, either (i) the third party acquiring Exar pursuant to such Change of
Control shall agree to assume the obligations of Exar under this Section 9, or
(ii) if such third party does not agree to assume Exar's obligations under this
Section 9, the maximum amount of Earn-Out Payments to which the Founders are
entitled under this Section 9 (less any Earn-Out payments previously distributed
to the Founders) shall become due and payable by Exar upon such Change of
Control and shall be distributed in accordance with Section 9.2 promptly
thereafter. "Change of Control" shall mean the consummation of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of Exar immediately prior to such
reorganization, merger, consolidation, or a purchase or exchange of Shares do
not immediately thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merger or consolidated company's then outstanding voting securities, or a
liquidation or dissolution of Exar or of the sale or all of substantially all of
the assets of Exar.
SECTION 10. REGISTRATION RIGHTS.
10.1 Registration Rights. Exar shall file with the SEC a registration
statement on Form S-3 (or any successor form to Form S-3) for a public resale
offering of the shares of Exar Common Stock to be issued to the Selling
Shareholders at the Closing (the "Initial Shares") and shall use all
commercially reasonable efforts to cause the Initial Shares to be registered for
the offering on such form and to be qualified in such jurisdictions as the
Selling Shareholders shall reasonably request, and shall use all commercially
reasonable efforts to cause such registration statement to become and remain
effective for the period commencing on the 90th day after the Closing (or such
earlier practicable date) and ending two years after the Closing or, if earlier,
on the date the distribution described in the registration statement is
complete.
(a) Exar shall file with the SEC a registration statement or
registration statements on Form S-3 (or any successor form to Form S-3) for a
public resale offering of any shares of Exar Common Stock that may be issued
pursuant to Section 9 ("Earn-Out Shares") and shall use all commercially
reasonable efforts to cause the Earn-Out Shares to be registered for the
offering on such form and to be qualified in such jurisdictions as the Founders
shall reasonably request, and shall use all commercially reasonable efforts to
cause such registration statement or registration statements to become and
remain effective for the periods commencing on the 90th day after each
Distribution Date (or such earlier practicable date) and ending two years after
such Distribution Date or, if earlier, on the date the distribution described in
the registration statement is complete. Such registration shall be conditioned
on each Selling Shareholder agreeing that all sales made pursuant to such
registration statement or registration statements shall be made to or through
brokerage firm designated by Exar in its discretion and identified in writing to
the Selling Shareholder.
(b) In the case of any registration pursuant to this Section 10.1,
Exar shall keep each Selling Shareholder advised of the initiation and
completion of such registrations. At its expense, Exar will promptly:
(i) Prepare and file with the SEC the registration statements
described in Sections 10.1(a) and (b) above and thereafter use its best efforts
to cause such registration statements to become effective;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statements and the prospectuses used in
connection with such registration statements 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 statements;
(iii) Furnish to the Selling Shareholders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the securities
covered by such registration statements;
(iv) Use all commercially reasonable efforts to register and
qualify the securities covered by such registration statements under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Selling Shareholders, provided that Exar 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;
(v) Notify each Selling Shareholder covered by such registration
statements 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 statements, 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 in the light of the circumstances then existing;
(vi) Cause all such shares of Exar Common Stock to be listed on
each securities exchange or market system on which similar securities issued by
the Exar are then listed; and
(vii) Provide a transfer agent and registrar for all such
shares of Exar Common Stock not later than the effective dates of such
registration statements.
10.2 Piggyback Registration.
(a) If (but without any obligation to do so) Exar proposes to
register any of its securities under the Securities Act (other than a
registration effected solely to implement an employee benefit plan, a
transaction to which Rule 145 of the SEC is applicable or any other form or type
of registration in which the Shares and the shares of Exar Common Stock that may
be issued pursuant to Section 9 (collectively the "Registrable Securities")
cannot be included pursuant to SEC rule of practice), including for this purpose
a registration effected by Exar for stockholders other than the holders of
Registrable Securities (the "Holders"), Exar will promptly give written notice
to all Holders of such registration. If such registration is proposed to be on
a form which permits inclusion of the Registrable Securities, upon the written
request (stating the intended method of disposition of such securities) of any
Holders given within ten (10) days after transmittal by Exar to the holders of
such notice, Exar will, subject to the limits contained in Section 10.2(b), use
all commercially reasonable efforts to cause all such Registrable Securities of
said requesting holders to be registered under the Securities Act.
(b) If the registration of which Exar gives notice pursuant to
Section 10.2(a) is for a registered public offering involving an underwriting,
Exar shall so advise the Holders as a part of the written notice given pursuant
to Section 10.2(a). In such event the right of any Holder to registration
pursuant to this Section 10.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with Exar and the other holders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by Exar.
Notwithstanding any other provision of this Section 10.2, if the underwriter
managing such registration determines that marketing or economic conditions
require a limitation of the number of securities to be underwritten, the
underwriter may exclude some or all Registrable Securities from such
registration and underwriting. Exar shall so advise all Holders (except those
Holders who have indicated to Exar their decision not to distribute any of their
Registrable Securities through such underwriting), and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among such Holders in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities owned by such Holders at the
time of filing the registration statement. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. If any Holder disapproves of the terms of any
such underwriting, such person may elect to withdraw therefrom by written notice
to Exar and the underwriter. The Registrable Securities so withdrawn from such
underwriting shall also be withdrawn from such registration; provided, however,
that, if by the withdrawal of such shares a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
maximum of any limitation imposed by the underwriters), then Exar shall offer to
all Holders who have included Registrable Securities in the registration the
right to include additional Registrable Securities in the same proportion used
above in determining the underwriter limitation.
(c) All underwriting discounts and selling commissions applicable to
the sale of Registrable Securities pursuant to this Section 10.2 shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of shares so registered and, all other expenses incurred in connection
with any registration under Section 10.2 shall be borne by Exar.
(d) The Holder or Holders of Registrable Securities included in any
registration shall furnish to Exar such information regarding such Holder or
Holders and the distribution proposed by such Holder or Holders as Exar may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 10.
10.3 Indemnification.
(a) Exar agrees to indemnify, to the extent permitted by law, each
holder of Exar Common Stock with rights under this Section 10, against all
Damages caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to Exar by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after Exar has furnished such holder with a sufficient number of copies of the
same.
(b) In connection with any registration statement in which a holder
of Exar Common Stock with rights under this Section 10 is participating, each
such holder will furnish to Exar in writing such information and affidavits as
Exar reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
Exar, its directors and officers and each Person who controls Exar (within the
meaning of the Securities Act) against all Damages resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify will be several, not joint and
several, among such holders and the liability of each such holder will be in
proportion to and limited to the net amount received by such holder from the
sale of Exar Common Stock with rights under this Section 10, pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any consent to the
entry of any judgment or any settlement made by the indemnified party without
its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities and the
Transaction. Exar also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
Exar's indemnification is unavailable for any reason.
10.4 Current Public Information. Until the rights specified in Sections
10.1(a) and (b) are fully exercised or expire, Exar will timely file all reports
required to be filed by it under the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations adopted by the SEC
thereunder, and will take such further action as any holder or holders of Exar
Common Stock with rights under Section 10.1 may reasonably request, all to the
extent required to enable such holders to sell their shares pursuant to Form S-3
or similar registration form hereafter adopted by the SEC. Upon written
request, Exar will deliver to such holders a written statement as to whether it
has complied with such requirements.
10.5 Termination of Registration Rights. Notwithstanding the foregoing
provisions of this Section 10, Exar's obligations pursuant to this Section 10
shall terminate upon (a) July 3, 2003 or (b) if earlier, with respect to a given
Holder, at the time such Holder may sell his or her shares of Exar Common Stock
in compliance with Rule 144 or 145 under the Securities Act.
10.6 Transferability of Registration Rights. The rights under this Section
10 are not transferable except in connection with (a) a transfer by will or
intestacy and (b) estate planning transfers consisting of gifts to the spouse or
issue of the transferee and transfers to trusts for the benefit of the spouse or
issue of the transferee.
SECTION 11. TERMINATION OF AGREEMENT
11.1 Termination. At any time prior to the Closing, this Agreement may be
terminated:
(a) by mutual consent of all the parties;
(b) by Exar if (i) there has been a material breach by SMI or the
Selling Shareholders of any covenant, representation or warranty contained in
this Agreement, Exar has notified SMI or the Selling Shareholders in writing of
the existence of such breach and SMI or the Selling Shareholders has failed to
cure such breach within 10 days after receiving such notice, or (ii) the Closing
shall not have occurred prior to July 7, 1995, and Exar is not, at the time of
termination, in default of the observance of or the due and timely performance
of any of its covenants and agreements contained in this Agreement;
(c) by SMI or the Selling Shareholders if (i) there has been a
material breach by Exar of a covenant, representation or warranty contained in
this Agreement, SMI has notified Exar in writing of the existence of such breach
and Exar has failed to cure such breach within 10 days after receiving such
notice, or (ii) the Closing shall not have occurred prior to July 7, 1995, and
SMI is not, at the time of termination, in default of the observance of or the
due and timely performance of any of its covenants and agreements contained in
this Agreement; or
(d) by either Exar or SMI if (i) there shall be a non-appealable
order of a federal or state court in effect preventing consummation of the
Transaction or (ii) there shall be any action taken, or any statute, rule,
regulations or order enacted, promulgated, issued or deemed applicable to the by
any Governmental Authority that would make consummation of the illegal.
11.2 Effect of Termination. If this Agreement shall be terminated as
provided in Section 11.1, this Agreement shall be of no further force or effect
(except as otherwise provided in Section 12.3) and:
(a) there shall be no liability on the part of any party hereto to
any other party except for (i) payment of expenses, fees and payments pursuant
to Section 11.3, (ii) if appropriate, payment of legal fees pursuant to Section
12.3 and (iii) any damages for breach of this Agreement; and
(b) each party shall redeliver all documents, work papers or other
materials of the other party relating to the transaction contemplated hereby,
whether obtained before or after the execution of this Agreement, to the party
furnishing the same and all filings, applications or other submissions made
pursuant to this Agreement shall, at SMI's or Exar's option, respectively be
withdrawn from the agency or other person to which made.
11.3 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement will be paid by the party incurring such expense. The Founders
confirm that they will be solely responsible for the fees and expenses of Carr,
DeFilippo & Ferrell up to $20,000 in connection with this Agreement and the
transactions contemplated hereby and SMI shall be responsible for any fees and
expenses over $20,000; however, the aggregate amount of such fees and expenses
paid by the Founders and SMI shall not exceed $25,000.
11.4 Extension of Time; Waivers. At any time prior to the Closing:
(a) Exar may (i) extend the time for the performance of any of the
obligations or other acts of SMI, and (ii) waive compliance with any of the
agreements or conditions contained herein to be performed by SMI. Any agreement
on the part of Exar to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by Exar; and
(b) SMI may (i) extend the time for the performance of any of the
obligations or other acts of Exar and (ii) waive compliance with any of the
agreements or conditions contained herein to be performed by Exar. Any
agreement on the part of SMI to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of SMI.
SECTION 12 MISCELLANEOUS
12.1 Amendment. This Agreement may be amended with the approval of the
Board of Directors of Exar and SMI and with the approval of the Selling
Shareholders at any time before the Closing. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
12.2 Entire Agreement; Counterparts; Applicable Law. This Agreement and
the agreements contemplated hereby and by the exhibits hereto (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be deemed an
original and all of which shall constitute one and the same instrument and (c)
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of California as applied to contracts entered
into and to be performed entirely within California.
12.3 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of the parties hereunder, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
12.4 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors; provided, however, that without the prior written consent
of the other parties, this Agreement may not be assigned by any party except (a)
to a successor in interest through merger, consolidation, reorganization, sale
of substantially all assets or similar transaction for any party that is an
entity or (b) a transfer to another entity that is a member of the same
affiliated group. Any attempted assignment in violation of this Section 13.4
shall be void and of no effect.
12.5 Notices. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
To SMI: with a copy to:
Silicon Microstructures, Inc. Carr, DeFilippo & Ferrell
46725 Fremont Blvd. 2225 East Bayshore Road
Fremont, CA 94538 Second Floor
Attn: Chief Executive Officer Palo Alto, CA 94303
Telephone: (510) 490-5010 Attn: Barry Carr, Esq.
Fax: (510) 490-1119 Telephone: (415) 812-3410
Fax: (415) 812-3444
To Exar: with a copy to:
Exar Corporation Cooley Godward Castro Huddleson
& Tatum
2222 Qume Drive Five Palo Alto Square
San Jose, CA 95161 3000 El Camino Real
Attn: Chief Financial Officer Palo Alto, CA 94306
Telephone: (408) 434-6400 Attn: Robert L. Jones, Esq.
Fax: (408) 435-1712 Telephone: (415) 843-5000
Fax: (415) 857-0663
To Rohm:
Rohm Corporation
2150 Commerce Drive
San Jose, CA 95131
Attn: Jerry Fielder
Telephone: (408) 432-0500
Fax: (408) 434-6444
To the Selling Shareholders:
James Knutti and Rohm U.S.A. Inc.
Henry Allen at the At the address set forth
address set forth above above for Rohm Corporation
for SMI
with a copy to
Carr, DeFilippo & Ferrell
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally-
recognized, overnight courier, on the business day following dispatch and (d) in
the case of mailing, on the fifth business day following such mailing.
12.6 Severability. If any provision of this Agreement is declared invalid
in a court proceeding between the parties, such invalidity shall not invalidate
this Agreement, and this Agreement shall be construed as if the invalid part
were not contained herein, and the rights and obligations of the parties shall
be construed and enforced accordingly.
12.7 Shareholder Consent. The parties to this Agreement constitute all of
the shareholders of SMI. The parties recognize that each of the Founders, as
well as Ronald Guire (who is an officer of Exar as well as a director of SMI),
has a financial interest in the transactions contemplated by this Agreement. By
their execution hereof, the parties hereby grant their unanimous written
consent, as shareholders of SMI, to this Agreement and the transactions
contemplated hereby.
12.8 Waiver of Right of First Refusal. The parties to this Agreement
constitute all of the parties to the First Refusal and Co-Sale Agreements dated
February 8, 1993 which gave Rohm and Exar certain co-sale rights in connection
with any sale of the Founders' stock. By their execution hereof, each of the
parties hereby waives any rights that it may have had under such First Refusal
and Co-Sale Agreements in connection with the transactions contemplated hereby.
12.9 Waiver of Liquidation Rights. Pursuant to the Restated Articles of
Incorporation dated February 3, 1993, (the "Restated Articles") Exar and Rohm as
the holders of all of the outstanding shares of Series A Preferred Stock of SMI
are entitled to a liquidation preference upon the occurrence of a "Company Sale
Liquidation" as defined in the Restated Articles. By its execution hereof, each
of Exar and Rohm hereby waives its liquidation rights pursuant to the Restated
Articles in connection with the transactions contemplated hereby.
12.10 Titles. The titles and captions of the sections and paragraphs
of this Agreement are included for convenience of reference only and shall have
no effect on the construction or meaning of this Agreement.
12.11 Cooperation. Exar and SMI each agree to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate
expeditiously or implement the transactions contemplated by this Agreement.
12.12 Third Party Beneficiary Rights. No provision of this Agreement
is intended, or shall be interpreted, to provide or create for any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, shareholder, employee, or any party hereto or any other person or
entity, and all provisions hereof will be personal solely among the parties
hereto.
12.13 Publicity. Subject to Exar's obligations under applicable
securities laws, the issuance of any reports, statements or press releases
pertaining to this Agreement or the transactions contemplated hereby prior to
the Closing will be subject to the mutual approval of Exar and SMI.
The parties hereto have caused this Agreement to be executed and delivered
as of , 1995.
-----------------
EXAR CORPORATION, SILICON MICROSTRUCTURES, INC.,
a Delaware corporation a California corporation
By: By:
Title: Title:
ROHM CORPORATION,
a California corporation
(as to Section 1.5 only)
By:
Title:
SELLING SHAREHOLDERS
James W. Knutti
Henry V. Allen
ROHM U.S.A. INC.,
a Delaware corporation
By:
Title:
Exhibit B: Schedule of Leased Equipment from Rohm Corporation
Exhibit C: Bill of Sale
Exhibit D: SMI Disclosure Schedule
Exhibit E: Continuity of Interest Certificates
Exhibit F: Opinion of Carr, DeFilippo & Ferrell
Ehxibit G: Form of Employment Agreement
EXHIBIT 5.1
Exar Corporation
2222 Qume Drive
San Jose, CA 95131
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing on July 29, 1995 by Exar Corporation (the "Company") of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission, with respect to the Company's registration
of 43,334 shares of the Company's Common Stock, $.0001 par value (the "Common
Stock") for resale, issued pursuant to the Agreement and Plan of Reorganization
dated as of June 8, 1995 (the "Plan") between the Company, Silicon
Microstructures, Inc., Rohm Corporation and James W. Knutti, Henry V. Allen and
Rohm U.S.A. Inc.
In connection with this opinion, we have examined and relied upon the
Registration Statement, the Company's Certificate of Incorporation, as amended,
and Bylaws and the Plan, and the originals or copies certified to our
satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock is validly issued, fully paid and nonassessable.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By:
Peter M. Stone
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of SMI's
business or assets (other than in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any capital stock
of SMI, (ii) any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock of SMI, or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any capital stock of SMI; or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving SMI.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible.
Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
Code. "Code" shall mean the Internal Revenue Code of 1986.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
Employee Benefit Plan. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
GAAP. "GAAP" shall mean generally accepted accounting principles, applied
on a basis consistent with the basis on which the SMI Financial Statements were
prepared.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is, has been or may in the future be issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or
(b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is, has been or may in the future be issued, enacted,
adopted, passed, approved, promulgated, made, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature (including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is, has been or may in the future be issued, made, entered,
rendered or otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Body or any arbitrator or
arbitration panel; or
(b) Contract with any Governmental Body that is, has been or may in
the future be entered into in connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of SMI shall
not be deemed to have been taken in the "Ordinary Course of Business" unless:
(a) such action is recurring in nature, is consistent with SMI's past
practices and is taken in the ordinary course of SMI's normal day-to-day
operations;
(b) such action is taken in accordance with sound and prudent
business practices;
(c) such action is not required to be authorized by SMI's
stockholders, SMI's board of directors or any committee of SMI's board of
directors and does not require any other separate or special authorization of
any nature; and
(d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other Entities that are
engaged in businesses similar to SMI's business.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Pre-Closing Period. "Pre-Closing Period" shall mean the period commencing
as of the date of the Agreement and ending on the Closing.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation that is,
has been or may in the future be commenced, brought, conducted or heard by or
before, or that otherwise has involved or may involve, any Governmental Body or
any arbitrator or arbitration panel.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives. The
Selling Shareholders and all other Related Parties shall be deemed to be
"Representatives" of SMI.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax-sharing
agreement or similar Contract.
