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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 2000.
CYPRESS SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-10079 94-2885898
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
3901 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134-1599
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Address of principal executive offices
(408) 943-2600
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Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS
On January 10, 2000 Cypress Semiconductor Corporation (the "Company"),
Galvantech, Inc. ("Galvantech") and CE Acquisition Corporation, a wholly owned
subsidiary of the Company, entered into an Agreement and Plan and Reorganization
(the "Merger Agreement") pursuant to which the Company will acquire Galvantech.
A copy of the Merger Agreement is attached hereto as Exhibit 99.1.
Under the terms of the merger, up to 4,000,000 shares of Cypress common
stock will be exchanged for shares of Galvantech stock outstanding and applied
towards options, warrants and other rights to acquire Galvantech stock. Each
share of Galvantech stock issued and outstanding immediately prior to the
closing of the merger will be canceled and converted automatically into a number
of shares of Cypress common stock computed in accordance with the merger
agreement. Galvantech shareholders will not receive fractional shares. Instead,
such fraction will either be rounded up, or the Galvantech shareholder will
receive cash in payment for any fractional share, depending on the number of
shares of Galvantech stock held.
The merger will not be completed unless the conditions contained in the
Merger Agreement are satisfied or waived including (i) the approval of the
Merger Agreement by holders of at least 91% of the outstanding capital stock of
Galvantech, (ii) receipt of an opinion of the Company's accountants concurring
with the Company's management view that the merger will be accounted for as a
pooling of interests, (iii) there has not been a material adverse change to the
Company or Galvantech, and (iv) the receipt of certain regulatory approvals,
including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. Accordingly, there can be no assurances that the merger will occur.
The Merger Agreement may be terminated (i) by mutual agreement of the
parties thereto, (ii) if the merger is not completed on or before February 25,
2000 (or March 31, 2000 in the event of a delay in obtaining certain regulatory
approvals) or (iii) if certain other specified events occur before February 25,
2000.
The Company and Galvantech intend the merger to be accounted for as a
pooling of interests.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
99.1 Agreement and Plan and Reorganization dated as of January 10,
2000 by and among Cypress Semiconductor Corporation, CE
Acquisition Corporation,
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Galvantech, Inc., U.S. Bank Trust, N.A., as Escrow Agent, and
Dr. Tsu-Wei Frank Lee, as Securityholder Agent
99.2 Press release announcing the signing of the Merger Agreement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYPRESS SEMICONDUCTOR CORPORATION
/s/ Emmanuel Hernandez
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Emmanuel Hernandez, Vice President of Finance and
Administration and Chief Financial Officer
Date: January 17, 2000
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EXHIBIT INDEX
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Exhibit
Number Description
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99.1 Agreement and Plan and Reorganization dated as of January 10,
2000 by and among Cypress Semiconductor Corporation, CE
Acquisition Corporation, Galvantech, Inc., U.S. Bank Trust,
N.A., as Escrow Agent, and Dr. Tsu-Wei Frank Lee, as
Securityholder Agent
99.2 Press release announcing the signing of the Merger Agreement.
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EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CYPRESS SEMICONDUCTOR CORPORATION,
CE ACQUISITION CORPORATION
AND
GALVANTECH, INC.
Dated as of January 10, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................................................................2
1.1 The Merger..........................................................................................2
1.2 Effective Time......................................................................................2
1.3 Effect of the Merger................................................................................2
1.4 Articles of Incorporation; Bylaws...................................................................2
1.5 Directors and Officers..............................................................................3
1.6 Merger Consideration................................................................................3
1.7 Dissenting Shares for Holders of Company Capital Stock..............................................7
1.8 Surrender of Certificates...........................................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................10
2.1 Organization of the Company........................................................................10
2.2 Company Capital Structure..........................................................................10
2.3 Subsidiaries.......................................................................................11
2.4 Authority..........................................................................................11
2.5 Company Financial Statements.......................................................................12
2.6 No Undisclosed Liabilities.........................................................................13
2.7 No Changes.........................................................................................13
2.8 Tax and Other Returns and Reports..................................................................14
2.9 Restrictions on Business Activities................................................................16
2.10 Title to Properties; Absence of Liens and Encumbrances.............................................16
2.11 Intellectual Property..............................................................................16
2.12 Agreements, Contracts and Commitments..............................................................21
2.13 Interested Party Transactions......................................................................23
2.14 Compliance with Laws...............................................................................23
2.15 Litigation.........................................................................................23
2.16 Insurance..........................................................................................23
2.17 Minute Books.......................................................................................24
2.18 Environmental Matters..............................................................................24
2.19 Brokers' and Finders' Fees; Third Party Expenses...................................................25
2.20 Employee Matters and Benefit Plans.................................................................25
2.21 Representations Complete...........................................................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................................29
3.1 Organization, Standing and Power...................................................................29
3.2 Authority..........................................................................................29
3.3 Capital Structure..................................................................................30
3.4 SEC Documents; Parent Financial Statements.........................................................31
3.5 No Material Adverse Change.........................................................................31
3.6 Litigation.........................................................................................31
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TABLE OF CONTENTS
(CONTINUED)
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3.7 Information Supplied...............................................................................31
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................................32
4.1 Conduct of Business of the Company.................................................................32
4.2 No Solicitation....................................................................................35
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................35
5.1 Fairness Hearing; Shareholder Approval.............................................................35
5.2 Restrictions on Transfer...........................................................................36
5.3 Access to Information..............................................................................36
5.4 Confidentiality....................................................................................37
5.5 Expenses...........................................................................................37
5.6 Public Disclosure..................................................................................37
5.7 Consents...........................................................................................37
5.8 FIRPTA Compliance..................................................................................37
5.9 Reasonable Efforts.................................................................................37
5.10 Notification of Certain Matters....................................................................38
5.11 Pooling Accounting.................................................................................38
5.12 Affiliate Agreements...............................................................................38
5.13 Employee Compensation..............................................................................38
5.14 New York Stock Exchange Listing....................................................................39
5.15 Regulatory Filings; Reasonable Efforts.............................................................39
5.16 Non-Competition Agreements.........................................................................39
5.17 Indemnification....................................................................................39
5.18 No Actions Inconsistent With Tax-Free Reorganization...............................................39
5.19 Form S-8...........................................................................................40
5.20 Affiliate Status...................................................................................40
5.21 Termination of Rights Agreement....................................................................40
5.22 Additional Documents and Further Assurances........................................................40
5.23 Termination of 401(k) Plan.........................................................................40
5.24 Termination of Consulting Agreements...............................................................40
5.25 Tax Consequences...................................................................................40
ARTICLE VI CONDITIONS TO THE MERGER..................................................................................41
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................41
6.2 Additional Conditions to Obligations of the Company................................................41
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..................................42
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW.......................................................44
7.1 Survival of Representations and Warranties.........................................................44
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7.2 Escrow Arrangements................................................................................44
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................................50
8.1 Termination........................................................................................50
8.2 Effect of Termination..............................................................................52
8.3 Amendment..........................................................................................52
8.4 Extension; Waiver..................................................................................52
ARTICLE IX GENERAL PROVISIONS........................................................................................52
9.1 Notices............................................................................................52
9.2 Interpretation.....................................................................................54
9.3 Counterparts.......................................................................................54
9.4 Entire Agreement; Assignment.......................................................................54
9.5 Severability.......................................................................................54
9.6 Other Remedies.....................................................................................54
9.7 Governing Law......................................................................................55
9.8 Rules of Construction..............................................................................55
9.9 Specific Performance...............................................................................55
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of January 10, 2000 by and among Cypress Semiconductor
Corporation, a Delaware corporation ("Parent"), CE Acquisition Corporation, a
California corporation and a wholly-owned subsidiary of Parent ("Merger Sub"),
Galvantech, Inc., a California corporation (the "Company"), U.S. Bank Trust,
N.A. (the "Escrow Agent") and Dr. Tsu-Wei Frank Lee (the "Securityholder Agent")
(the Escrow Agent and the Securityholder Agent being signatories with respect to
Article VII hereof only).
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
options, warrants or other rights to acquire or receive shares of Company
Capital Stock shall be converted into shares of voting Common Stock of Parent
("Parent Common Stock") and options, warrants or rights to acquire or receive
shares of Parent Common Stock, respectively.
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
E. It is further intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
F. As a material inducement for Parent to consummate the Merger,
certain key employee-shareholders of the Company will enter into non-competition
agreements substantially in the form attached hereto as either Exhibit A-1,
Exhibit A-2 or Exhibit A-3 (collectively, the "Non-Competition Agreements") with
Parent, each of which shall become effective as of the Effective Time (as
defined herein).
G. In addition, concurrently with the execution of this Agreement, and
as a condition and inducement to Parent's willingness to enter into this
Agreement, certain shareholders of the
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Company are entering into Voting Agreements in substantially the form attached
hereto as Exhibit B (the "Voting Agreements").
H. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("California
Law"), Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation. The surviving corporation after the Merger is sometimes referred to
hereinafter as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than two (2) business days
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California, unless another place or time is agreed to in writing by Parent and
the Company. The date upon which the Closing actually occurs is herein referred
to as the "Closing Date." On the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing an Agreement of Merger in such form as
shall be agreed upon by Parent, Merger Sub and the Company (the "Agreement of
Merger") with the Secretary of State of the State of California, in accordance
with the relevant provisions of applicable law (the time of acceptance by the
Secretary of State of California of such filing being referred to herein as the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of California Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of Merger Sub as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until thereafter
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amended in accordance with California Law ("California Law") and as provided in
such Articles of Incorporation; provided, however, that at the Effective Time,
Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended and restated in its entirety to read as follows: "The name of the
corporation is Galvantech, Inc."
(b) Unless otherwise determined by Parent prior to the Effective
Time, the Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation at the Effective Time,
until thereafter amended in accordance with California Law and as provided in
the Articles of Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers. Unless otherwise determined by Parent prior
to the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
the office of a director of the Surviving Corporation in accordance with the
provisions of California Law and the Articles of Incorporation and Bylaws of the
Surviving Corporation until their successors are duly elected and qualified. The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6 Merger Consideration.
(a) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Aggregate Share Number" shall mean 3,630,000; provided, that if
the average closing price of a share of Parent Common Stock for the five trading
days prior to the Effective Time, as reported on the New York Stock Exchange
(the "5-Day Average Price") is less than $27.00, then the Aggregate Share Number
shall mean $98,000,000 divided by the 5-Day Average Price, but in no event shall
the Aggregate Share Number be greater than 4,000,000; provided further, that if
the 5-Day Average Price is greater than $30.00, then the Aggregate Share Number
shall mean $108,900,000 divided by the 5-Day Average Price, but in no event
shall the Aggregate Share Number be less than 3,260,000.
"Company Capital Stock" shall mean shares of Company Common Stock,
Company Preferred Stock and any shares of other capital stock of Company.
"Company Common Stock" shall mean shares of common stock of
Company.
"Company Convertible Securities" shall mean the Company Options and
other rights (other than Company Preferred Stock) to acquire or receive shares
of Company Capital Stock.
"Company Options" shall mean all issued and outstanding options to
purchase or otherwise acquire Company Capital Stock (whether or not vested) held
by employees or directors of or consultants to Company (other than Company
Preferred Stock).
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"Company Preferred Stock" shall mean shares of Company Series A
Preferred Stock, Company Series B Preferred Stock, and Company Series C
Preferred Stock.
"Company Series A Preferred Stock" shall mean shares of Series A
Preferred Stock of Company.
"Company Series B Preferred Stock" shall mean shares of Series B
Preferred Stock of Company.
"Company Series C Preferred Stock" shall mean shares of Series C
Preferred Stock of Company.
"Company Shareholders" shall mean holders of any shares of Company
Capital Stock immediately prior to the Effective Time.
"Escrow Amount" shall mean that number of shares of Parent Common
Stock equal to $5,000,000 divided by the 5-day Average Price.
"Merger Consideration" shall mean the Preferential Consideration
together with the Remaining Consideration.
"Option Exchange Ratio" shall mean (x) a number of shares of Parent
Common Stock equal to the quotient obtained by dividing (i) the Aggregate Share
Number by (ii) the Total Outstanding Shares (with the result rounded to four
decimal places).
"Remaining Consideration" shall mean the number of shares of Parent
Common Stock equal to the Aggregate Share Number less the Preferred
Consideration (as defined below).
"Total Outstanding Shares" shall mean the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, except shares to be cancelled pursuant to Section 1.6(b)(viii) below, but
including Company Common Stock issuable upon the exercise of Company Options
plus the aggregate number of shares of Company Common Stock issuable, with or
without the passage of time or satisfaction of other conditions, upon exercise
of or conversion of all Company Convertible Securities and Company Preferred
Stock outstanding, in all such cases immediately prior to the Effective Time.
(b) Shares to be Issued; Effect on Capital Stock. The maximum
number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any of the Company's options
and warrants to be assumed by Parent) in exchange for the acquisition by Parent
of all outstanding Company Capital Stock and all unexpired and unexercised
options, warrants or other rights to acquire Company Capital Stock shall be
determined immediately prior to the Effective Time and shall be equal to the
Aggregate Share Number; provided that such maximum number shall be adjusted to
the extent required by Section 1.6(b)(vii) below. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holder of
any
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shares of the Company Capital Stock, each share of the Company Capital Stock
issued and outstanding immediately prior to the Effective Time (other than any
Dissenting Shares, as defined in Section 1.7) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Company Capital Stock in the manner
provided in Section 1.8(c), as follows:
(i) Preferential Consideration. Prior and in preference to any
distribution of the Remaining Consideration to holders of Company Common Stock,
the holders of Company Series A Preferred Stock, Company Series B Preferred
Stock, and Company Series C Preferred Stock shall be entitled to receive the
following:
(1) Prior and in preference to any distribution pursuant to
paragraphs (2) or (3) below, each share of Company Series C Preferred Stock
issued and outstanding immediately prior to the Effective Time shall be entitled
to receive that number of shares of Parent Common Stock equal to the quotient of
(x) 4.50 divided by (y) the integer equal to the 5-Day Average Price (the "Per
Share Series C Preferential Consideration"). The Per Share Series C Preferential
Consideration multiplied by the sum of the number of shares of Company Series C
Preferential Stock issued and outstanding immediately prior to the Effective
Time is herein referred to as the "Series C Preferential Consideration." If the
Aggregate Share Number is insufficient to permit the full payment of the Series
C Preferential Consideration, then each share of Company Series C Preferred
Stock shall be entitled to receive its pro rata share of the Aggregate Share
Number.
(2) Prior and in preference to any distribution pursuant to
paragraph (3) below, in the event that the Aggregate Share Number minus the
Series C Preferential Consideration is greater than zero, each share of Company
Series B Preferred Stock issued and outstanding immediately prior to the
Effective Time shall be entitled to receive that number of shares of Parent
Common Stock equal to the quotient of (x) 1.50 divided by (y) the integer equal
to the 5-Day Average Price (the "Per Share Series B Preferential
Consideration"). The Per Share Series B Preferential Consideration multiplied by
the sum of the number of shares of Company Series C Preferred Stock issued and
outstanding immediately prior to the Effective Time is herein referred to as the
"Series B Preferential Consideration." If the difference of the Aggregate Share
Number minus the Series C Preferential Consideration is less than the Series B
Preferential Consideration, then each share of Company Series B Preferred Stock
shall be entitled to receive its pro rata share of such remaining Aggregate
Share Number.
(3) In the event that the number of shares of Parent Common
Stock equal to the Aggregate Share Number minus the Series C Preferential
Consideration and Series B Preferential Consideration is greater than zero, each
share of Company Series A Preferred Stock issued and outstanding immediately
prior to the Effective Time shall be entitled to receive that number of shares
of Parent Common Stock equal to the quotient (x) .125 divided by (y) the integer
equal to the 5-Day Average Price (the "Per Share Series A Preferential
Consideration"). The Per Share Series A Preferential Consideration multiplied by
the sum of the number of shares of Company Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time
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is herein referred to as the "Series A Preferential Consideration." If the
difference of the Aggregate Share Number minus the Series C Preferential
Consideration and Series B Preferential Consideration is less than the Series A
Preferential Consideration, then each share of Company Series A Preferred Stock
shall be entitled to receive its pro rata share of such remaining Aggregate
Share Number. Collectively, the Series C Preferential Consideration, Series B
Preferential Consideration and Series A Preferential Consideration are herein
referred to as "Preferential Consideration."
(ii) Remaining Consideration. After full payment of the
Preferential Consideration pursuant to Section 1.6(b)(i), the Remaining
Consideration shall be distributed as follows:
(1) Each holder of shares of Company Common Stock, issued
and outstanding immediately prior to the Effective Time, shall be entitled to
receive the number of shares of Parent Common Stock equal to (x) the Remaining
Consideration multiplied by (y) a fraction, the numerator of which shall be the
number of shares of Company Common Stock held by such holder immediately prior
to the Effective Time, and the denominator of which shall be the Total
Outstanding Shares less the number of shares of Company Common Stock issuable
upon conversion of any Company Preferred Stock which has not been converted
(with the result rounded to four decimal places).
In no event shall shares of Company Capital Stock be exchangeable for both
Preferential Consideration and consideration under this Section 1.6(b)(ii).
(iii) Assumption of Company Options. At the Effective Time,
each outstanding Company Option issued pursuant to Company's 1995 Equity
Incentive Plan (the "Option Plan") or otherwise, whether vested or unvested,
will be assumed by Parent in connection with the Merger. Each Company Option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plan and/or as
provided in the respective option agreements immediately prior to the Effective
Time (including, without limitation, any vesting schedule or repurchase rights),
except that (i) each Company Option will be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Option Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Capital Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Option Exchange Ratio, rounded up to the nearest whole cent.
(iv) Option Status. It is the intention of the parties hereto
that the Company Options assumed by Parent following the Closing pursuant to
this Section 1.6 will, to the extent permitted by applicable law, qualify as
incentive stock options as defined in Section 422 of the Code, to the extent any
such Company Options qualified as incentive stock options immediately prior to
the Effective Time.
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(v) Withholding Taxes. Any number of shares of Parent Common
Stock issuable pursuant to Section 1.6(b) shall be subject to, and reduced by,
the amount of any state, federal and foreign withholding taxes incurred (and not
previously paid by or on behalf of Company) in connection with the acquisition
of capital stock upon the exercise of Company Options, the acceleration of
vesting of any Company Capital Stock or Company Options, or the payment of a
bonus, if any.
(vi) Fractional Shares. No fractional share of Parent Common
Stock shall be issued in the Merger. In lieu thereof, any fractional share
(after aggregating all fractional shares of Parent Common Stock to be received
by each holder) shall be rounded to the nearest whole share of Parent Common
Stock (with .5 being rounded up); provided that if any holder would receive less
than 500 shares of Parent Common Stock any such fractional shares shall be
rounded up.
(vii) Adjustments to Parent Common Stock. The number of shares
of Parent Common Stock issuable hereunder shall be adjusted to reflect fully the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Parent Common Stock or Company Capital Stock after the date
hereof.
(viii) Cancellation of Parent-Owned and Company-Owned Stock. At
the Effective Time, by virtue of the Merger and without any action on the part
of any of the parties hereto, each share of Company Capital Stock owned by
Parent, Merger Sub, Company or any direct or indirect wholly-owned subsidiary
thereof immediately prior to the Effective Time, shall be cancelled and
extinguished without any conversion thereof.
(ix) Capital Stock of Merger Sub. At the Effective Time, by
virtue of the Merger and without any action on the part of any of the parties
hereto, each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
1.7 Dissenting Shares for Holders of Company Capital Stock.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal rights for such shares in accordance with California Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted into or represent
a right to receive Parent Common Stock pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Capital Stock who demands appraisal of such shares under
California Law shall
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effectively withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive Parent Common Stock as provided in Section
1.6 (and be subject to the provisions of Section 7.2 hereof), without interest
thereon, upon surrender of the certificate representing such shares.
(c) Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to California Law and
received by Company and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for appraisal under California Law.
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
(a) Exchange Agent. The transfer agent of Parent (or another entity
reasonably acceptable to Parent and the Company) shall serve as exchange agent
(the "Exchange Agent") in the Merger.
(b) Parent to Provide Parent Common Stock. Prior to the Closing,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I the shares of Parent Common Stock issuable to Company
Shareholders pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock, less the Escrow Amount which Parent shall deposit into
the Escrow Fund (as defined in Section 7.2(a) hereof) on behalf of the Company
Shareholders. The portion of the Escrow Amount contributed on behalf of each
Company Shareholder shall be in proportion to the aggregate number of shares of
Parent Common Stock each such Company Shareholder would otherwise be entitled to
receive in the Merger (excluding any shares of Parent Common Stock issuable upon
exercise of any assumed Company Options) by virtue of ownership of outstanding
shares of Company Capital Stock immediately prior to the Effective Time.
(c) Exchange Procedures. As soon as practicable following the
Closing, Parent shall cause to be mailed to each Company Shareholder (i) a
letter of transmittal (which shall be in such form and contain such provisions
as Parent and Company shall mutually agree and which shall specify that delivery
shall be effected, and risk of loss and title to the certificates (the
"Certificates") which immediately prior to the Effective Time represent
outstanding shares of Company Capital Stock whose shares are converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.6(b), shall
pass, only upon delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing such shares of Parent Common Stock to which such
Company Shareholder is entitled pursuant to Section 1.6(b) and any dividends or
other distributions pursuant to Section 1.8(d). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the Company
Shareholder shall be entitled to receive, and the Exchange Agent shall promptly
deliver in exchange therefor, a certificate
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representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 1.8(b) and Article 7 hereof) to which such
holder is entitled pursuant to Section 1.6, and the Certificate so surrendered
shall forthwith be canceled. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VII hereof,
Parent shall cause to be distributed to the Escrow Agent (as defined in Article
VII) a certificate or certificates representing that number of shares of Parent
Common Stock equal to the Escrow Amount which shall be registered in the name of
the Escrow Agent as nominee for the Company Shareholders. Such shares shall be
beneficially owned by the Company Shareholders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article VII. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital Stock
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends and other distributions, to evidence the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Capital Stock shall have been so converted and the right to
receive any dividends or distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder thereof
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, plus the amount of dividends or other distributions (without interest)
with a record date after the Effective Time theretofore paid with respect to
such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the delivery by the holder thereof of an
affidavit of that fact by the holder thereof containing customary
indemnification provisions certificates representing whole shares of Parent
Common Stock issued in exchange for such lost, stolen or destroyed Certificates.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither Parent nor any party hereto shall be liable to a holder of
shares of Parent Common Stock or
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Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(h) No Further Ownership Rights in Company Capital Stock. The
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to be full satisfaction of all rights pertaining to shares of Company
Capital Stock outstanding prior to the Effective Time, and there shall be no
further registration of transfers on the records of Parent of shares of Company
Capital Stock that were outstanding prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Parent for any reason, they shall
be canceled and exchanged as provided in this Article I.
(i) Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Parent are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company
represents and warrants to Parent and Merger Sub, subject to such exceptions as
are clearly disclosed in the disclosure letter (referencing the appropriate
section number or as otherwise may be obviously or clearly applicable to a
reasonable person) supplied by the Company to Parent (the "Company Schedules")
and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a Material Adverse Effect on
the Company. The Company has delivered a true and correct copy of its Articles
of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) Except as set forth on Schedule 2.2(a), as of the date hereof,
the authorized capital stock of the Company consists of 31,000,000 shares of
authorized Common Stock, $0.00003 par value per share, of which 6,049,956 shares
are issued and outstanding, and 10,000,000 shares of authorized Preferred Stock,
$0.00003 par value per share, 2,400,003 of which are designated Series A
Preferred Stock, of which 2,400,003 shares are issued and outstanding, 3,400,000
of which are designated Series B Preferred Stock, of which 3,333,333 shares are
issued and outstanding, and 4,100,000 of which are designated Series C Preferred
Stock, of which 3,244,326 shares are issued
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<PAGE> 15
and outstanding. The Company Capital Stock is held of record by the persons,
with the addresses of record and in the amounts set forth on Schedule 2.2(a).
All outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound. All
preferential rights of the Company Preferred Stock in connection with or arising
from the Merger are as set forth in the Articles of Incorporation of the Company
or as provided under California Law.
(b) Except as set forth on Schedule 2.2(b), as of the date of this
Agreement, the Company has reserved 3,660,000 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
1,246,481 shares are subject to outstanding, unexercised options and 1,138,437
shares remain available for future grant. The Company has reserved no shares of
Common Stock for issuance upon exercise of outstanding Company Options granted
outside the Option Plan. The Company has no outstanding warrant to purchase
capital stock of the Company. Schedule 2.2(b) sets forth for each outstanding
Company Option, the name of the holder of such option, the domicile address of
such holder, the number of shares of Common Stock subject to such option, the
exercise price of such option and the vesting schedule for such option,
including the extent vested to date and whether the exercisability of such
option will be accelerated and become exercisable by reason of the transactions
contemplated by this Agreement. Except for the Company Options described in
Schedule 2.2(b), there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The holders
of Company Options have been or will be given, or shall have properly waived,
any required notice prior to the Merger, and all such rights to notice will be
terminated at or prior to the Effective Time. As a result of the Merger, Parent
will be the record and sole beneficial owner of all capital stock of the Company
and rights to acquire or receive such capital stock. Except as contemplated by
this Agreement or set forth in Schedule 2.2(b) there are no rights agreements,
no voting trust, proxy or other agreement or understanding to which the Company
is a party or by which it is bound with respect to any equity security of any
class of the Company.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries other than Modern Video Technologies, a California corporation,
Modern Video Systems, Inc., a California corporation, and Galvant (BVI), Inc., a
British Virgin Islands corporation (collectively, the "Subsidiaries"), and
expects that Weida Technology, Inc., a Taiwanese corporation, may become a
subsidiary of the Company prior to Closing, and does not otherwise own and has
never otherwise owned any shares of capital stock or any interest in, or
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote
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required of the Company's shareholders to duly approve the Merger, the Agreement
of Merger and this Agreement is the holders of a majority of the Preferred
Stock, each Series of Preferred Stock voting as a separate class, and the
holders of a majority of the Common Stock, voting as a separate class. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger by the Company's shareholders. The Company's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and to rules of law governing specific performance, injunctive
relief and other equitable remedies. Except as set forth on Schedule 2.4,
subject only to the approval of the Merger, the Agreement of Merger and this
Agreement by the Company's shareholders, the execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the Articles of Incorporation or Bylaws of the
Company or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict) is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the California Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iii) the filing of such notices and the expiration of such
waiting periods as required by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and (iv) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4, and (v) where the failure to obtain such consents, waivers,
approvals and orders or authorizations of, or make such registration,
declaration or filing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
unaudited balance sheet as of September 26, 1999 (the "Balance Sheet") and the
related unaudited income statement and cash flows for the six-month period then
ended and the Company's unaudited balance sheet as of March 31, 1999 and the
related unaudited income statement and cash flow for the fiscal year then ended
(collectively, the "Company Financials"). The Company Financials are complete
and correct in all material respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other, except that the
unaudited Company Financials do not contain any footnotes. The Company
Financials present fairly the financial condition and operating results of the
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Company as of the dates and during the periods indicated therein, subject in the
case of interim Company Financials to normal year-end adjustments which will not
be material in amount.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other of a nature whether or not
required to be reflected in financial statements in accordance with GAAP, which
individually or in the aggregate are material to the business, results of
operations or financial condition of the Company that, (i) has not been
reflected in the Balance Sheet, or (ii) has not arisen in the ordinary course of
the Company's business since the date of the Balance Sheet, consistent with past
practices.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
the Balance Sheet, there has not been, occurred or arisen any:
(a) Material transaction by the Company except in the ordinary
course of business as conducted on the date of the Balance Sheet and consistent
with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $50,000;
(d) destruction of, material damage to or loss of any material
assets, business or customer of the Company (whether or not covered by
insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) event or condition that has or would be reasonably expected to
have a Material Adverse Effect on the Company;
(g) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(h) revaluation by the Company of any of its assets;
(i) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(j) increase in the salary or other compensation payable or to
become payable to any of its officers or directors, or the declaration, payment
or commitment or obligation of any kind for the payment of a bonus or other
additional salary or compensation to any such person except in the ordinary
course of business or as otherwise contemplated by this Agreement;
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<PAGE> 18
(k) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business
consistent with past practices;
(l) amendment or termination (other than pursuant to its terms) of
any material contract, agreement or license to which the Company is a party or
by which it is bound other than in the ordinary course of business;
(m) loan by the Company to any person or entity, incurring by the
Company of any material indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(n) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any account receivable
of the Company, except in the ordinary course of business;
(o) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities except for the issuance of Company Common Stock upon
the exercise of stock options;
(p) change in pricing or royalties set or charged by the Company to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property (as defined in Section 2.11) to the
Company other than in the ordinary course of business; or
(q) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) The Company as of the Effective Time will have prepared and
filed all required federal, state, local and foreign returns, estimates,
information statements and reports
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("Returns") relating to any and all Taxes concerning or attributable to the
Company or its operations (except such Returns which are not material to the
Company) and such Returns are true and correct in all material respects and have
been completed in accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have paid
all Taxes it is required to pay and (B) will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the Company
is currently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(vi) The Company has provided to Parent copies of all federal
and state income and all state sales and use Tax Returns for all periods since
the date of Company's incorporation.
(vii) There are (and as of immediately following the Effective
Date there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company relating
to or attributable to Taxes except for Liens for Taxes not yet due and payable.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
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(xii) Except as set forth on Schedule 2.8(xii), the Company is
not a party to a tax sharing or allocation agreement nor does the Company owe
any amount under any such agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably would be expected to have the effect of prohibiting or materially
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of the Company's
business. Without limiting the foregoing, the Company has not entered into any
agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property currently
leased by the Company, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and to the
knowledge of the Company there is not, under any of such leases, any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.10(b) and except
for Liens for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.11 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and applications therefor
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and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof ("PATENTS"); (ii) all
inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all semiconductor and
semiconductor circuit designs; (v) all rights to all mask works and
reticles, mask work registrations and applications therefor; (vi) all
industrial designs and any registrations and applications therefor
throughout the world; (vii) all trade names, logos, common law
trademarks and service marks; trademark and service mark registrations
and applications therefor and all goodwill associated therewith
throughout the world; (viii) all databases and data collections and all
rights therein throughout the world; (ix) all computer software
including all source code, object code, firmware, development tools,
files, records and data, all media on which any of the foregoing is
recorded, all Web addresses, sites and domain names; (x) any similar,
corresponding or equivalent rights to any of the foregoing; and (xi)
all documentation related to any of the foregoing.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by or exclusively licensed to Company or any of its
Subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations
or applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work
registrations and applications to register mask works; and (v) any
other Company Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public
legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or
any of its Subsidiaries.
(a) Schedule 2.11(a) is a complete and accurate list of all
Company Registered Intellectual Property and specifies, where applicable, the
jurisdictions in which each such item of Company Registered Intellectual
Property has been issued or registered and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property.
(b) Schedule 2.11(b) is a complete and accurate list (by name and
version number) of all products or service offerings (including related
software) of the Company or any of its Subsidiaries ("COMPANY PRODUCTS") that
have been distributed or provided since the date of
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incorporation of the Company or which the Company or any of its Subsidiaries
intends to distribute or provide in the future, including any products or
service offerings currently under development.
(c) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, Company knows of no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Registered Intellectual Property
invalid or unenforceable, or would adversely effect any pending application for
any Company Registered Intellectual Property and the Company has not
misrepresented, or failed to disclose, and has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Company Registered
Intellectual Property.
(d) No Company Intellectual Property or Company Product is subject
to any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company or any of its Subsidiaries, or which may affect the
validity, use or enforceability of such Company Intellectual Property or Company
Product.
(e) Each material item of Company Registered Intellectual Property
is valid and subsisting, all necessary registration, maintenance and renewal
fees currently due in connection with such Company Registered Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of perfecting and maintaining such Company Registered
Intellectual Property.
(f) Schedule 2.11(f) is a complete and accurate list of all
actions that are required to be taken by the Company within ninety (90) days of
the date hereof with respect to any of the foregoing Company Registered
Intellectual Property.
(g) Company or its subsidiaries owns and has good and exclusive
title to each material item of Company Intellectual Property free and clear of
any lien or encumbrance (excluding non-exclusive licenses and related
restrictions granted in the ordinary course). Without limiting the foregoing:
(i) Company or its subsidiaries is the exclusive owner of all trademarks and
trade names (other than trademarks and trade names licensed to the Company) used
in connection with the operation or conduct of the business of Company and its
Subsidiaries, including the sale, distribution or provision of any Company
Products by Company or its Subsidiaries; (ii) Company or its subsidiaries owns
exclusively, and has good title to, all copyrighted works that are Company
Products or which Company or any of its Subsidiaries otherwise purports to own.
(h) Except as set forth on Schedule 2.11(h), all Company
Intellectual Property will be fully transferable, alienable or licensable by
Surviving Corporation without restriction and without payment of any kind to any
third party other than off-the-shelf commercial software.
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(i) To the extent that any technology, software or material
Intellectual Property has been developed or created independently or jointly by
a third party for Company or any of its subsidiaries or is incorporated into any
of the Company Products, Company or its subsidiaries has a written agreement
with such third party with respect thereto and Company or its subsidiaries
thereby either (i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party's Intellectual Property in such work, material or
invention by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(j) Except as set forth on Schedule 2.11(j) and with exception of
"shrink-wrap" or similar widely-available commercial end-user licenses, all
Intellectual Property used in or necessary to the conduct of Company's business
as presently conducted or currently contemplated to be conducted by the Company
was written and created solely by either (i) employees of the Company acting
within the scope of their employment or (ii) by third parties who have validly
and irrevocably assigned all of their rights, including Intellectual Property
Rights therein, to the Company, and no third party owns or has any rights to any
of the Company Intellectual Property.
(k) All employees of the Company have entered into valid and
binding written agreements with the Company sufficient to vest title in the
Company of all Intellectual Property created by such employee in the scope of
his or her employment with the Company.
(l) Except as set forth on Schedule 2.11(l), no person who has
licensed any Intellectual Property to the Company has ownership rights or
license rights to improvements made by the Company in such Intellectual
Property.
(m) Neither Company nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party, or permitted Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(n) Schedule 2.11(n) lists all material contracts, licenses and
agreements to which Company or any of its Subsidiaries is a party: (i) with
respect to Company Intellectual Property licensed or transferred to any third
party (other than end-user licenses in the ordinary course); or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to Company.
(o) All contracts, licenses and agreements relating to either (i)
Company Intellectual Property or (ii) Intellectual Property of a third party
licensed to Company or any of its Subsidiaries, are in full force and effect.
The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of such contracts, licenses and agreements. Each of Company and its
Subsidiaries is in material compliance with, and has not materially breached any
term of any such contracts, licenses and agreements and, to the knowledge of
Company, all other parties to such contracts, licenses and agreements are in
compliance with, and have not materially breached any term of, such contracts,
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<PAGE> 24
licenses and agreements. Following the Closing Date, the Surviving Corporation
and its subsidiaries will be permitted to exercise all of Company's rights under
such contracts, licenses and agreements to the same extent Company and its
Subsidiaries would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which Company would
otherwise be required to pay.
(p) Except as set forth on Schedule 2.11(p), neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or Merger Sub by operation of law or otherwise of any
contracts or agreements to which the Company is a party, will result in: (i)
either Parent's or the Merger Sub's granting to any third party any right to or
with respect to any material Intellectual Property right owned by, or licensed
to, either of them; (ii) either the Parent's or the Merger Sub's being bound by,
or subject to, any non-compete or other material restriction on the operation or
scope of their respective businesses; or (iii) either the Parent's or the Merger
Sub's being obligated to pay any royalties or other material amounts to any
third party in excess of those payable by Parent or Merger Sub, respectively,
prior to the Closing.
(q) The operation of the business of the Company as it currently
is conducted or, to the knowledge of the Company, is contemplated to be
conducted by the Company, including but not limited to the design, development,
use, import, branding, advertising, promotion, marketing, manufacture and sale
of the Company Products (including products, technology or services currently
under development) does not and will not and will not when conducted by Parent
and/or Surviving Corporation in substantially the same manner following the
Closing, infringe or misappropriate any Intellectual Property right of any
person, violate any right of any person (including any right to privacy or
publicity) or constitute unfair competition or trade practices under the laws of
any jurisdiction, and the Company has not received notice from any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates any Intellectual Property right of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction (nor does the Company have knowledge of any basis therefor).
(r) Except as set forth on Schedule 2.11(r), the Company
Intellectual Property constitutes all the Intellectual Property used in and/or
necessary to the conduct of the business of the Company as it currently is
conducted, and, to the knowledge of the Company, as it is currently planned or
contemplated to be conducted by the Company, including, without limitation, the
design, development, manufacture, use, import and sale of products, technology
and performance of services (including products, technology or services
currently under development).
(s) Neither Company nor any of its Subsidiaries has received
notice from any third party that the operation of the business of Company or any
of its Subsidiaries or any act, product or service of Company or any of its
Subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
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(t) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property.
(u) Company and each of its Subsidiaries has taken reasonable
steps for companies of similar size and in similar businesses to protect
Company's and its Subsidiaries' rights in Company's material confidential
information and trade secrets or any trade secrets or confidential information
of third parties provided to Company or any of its Subsidiaries, and, without
limiting the foregoing, each of Company and its Subsidiaries has and enforces a
policy requiring each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Parent and all current and former employees and contractors of Company and any
of its Subsidiaries have executed such an agreement, except where the failure to
do so is not reasonably expected to be material to Company.
(v) The Company has a Y2K compliance program with respect to its
products designed to ensure that they (i) will record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans of
time including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"Year 2000 Compliant"); and (ii) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
The Company has polled its material vendors with respect to their Y2K compliance
and is not aware of any noncompliance which would have a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole.
2.12 Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 2.12(a), the Company does not
have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be
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increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $100,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $100,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $100,000 or more to be incurred by the Company following the
date of this Agreement,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which the Company has granted
or may grant in the future, to any party, a source-code license or option or
other right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that
involves $100,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) To the knowledge of the Company, except for such alleged
breaches, violations and defaults, and events that would constitute a breach,
violation or default with the lapse of time, giving of notice, or both, as are
all noted in Schedule 2.12(b), the Company has not breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the terms or conditions of any agreement, contract or commitment
required to be set forth on Schedule 2.12(a) or Schedule 2.11(g) (any such
agreement, contract or commitment, a
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"Contract"). Each Contract is in full force and effect and, except as otherwise
disclosed in Schedule 2.12(b), is not subject to any default thereunder of which
the Company has knowledge by any party obligated to the Company pursuant
thereto.
(c) Except as set forth on Schedule 2.12(c), the Company is not a
party to a Distributor Agreement or Representation Agreement with terms
different than the terms set forth in the forms of Galvantech, Inc. Distributor
Agreement and Galvantech Representation Contract provided to Parent prior to the
date of this Agreement.
2.13 Interested Party Transactions. Except as set forth on Schedule
2.13, no officer or director of the Company (nor, to the knowledge of the
Company, any ancestor, sibling, descendant or spouse of any of such persons, or
any trust, partnership or corporation in which any of such persons has or has
had an interest), has or has had, directly or indirectly, (i) an economic
interest in any entity which furnished or sold, or furnishes or sells, services
or products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11(g);
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation the violation of
which would have a Material Adverse Effect on the Company and its Subsidiaries
taken as a whole.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, to the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors in their respective capacities as such by or before any governmental
entity. Schedule 2.15 sets forth, with respect to any pending or, to the
knowledge of the Company, threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. To the knowledge of the Company, no
governmental entity has at any time challenged or questioned the legal right of
the Company to manufacture, offer or sell any of its products in the present
manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no
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knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and shareholders or actions by written consent since the time of incorporation
of the Company.
2.18 Environmental Matters.
(a) Hazardous Material. The Company has not operated any
underground storage tanks, and has no knowledge of the existence during the
period of its ownership, operation, occupation or leasehold, of any underground
storage tank at any property that the Company has at any time owned, operated,
occupied or leased. The Company has not released any amount of any substance
that has been designated by any applicable federal, state or local law to be a
"hazardous substance," "hazardous waste," "hazardous material" or "toxic
substance" or words of similar import, under any law, including but not limited
to, the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended; the Resource Conservation and Recovery Act of 1976, as
amended; the Federal Water Pollution Control Act, as amended; the Clean Air Act,
as amended, and the regulations promulgated pursuant to said laws, including,
without limitation, PCBs, asbestos, oil and petroleum products,
urea-formaldehyde (a "Hazardous Material"). To the Company's knowledge, no
Hazardous Materials are present as a result of the actions or omissions of the
Company, or, as a result of any actions of any third party or otherwise, in, on
or under any property that the Company has at any time owned, operated, occupied
or leased, including the land and the improvements, ground water and surface
water thereof.
(b) Hazardous Materials Activities. To its knowledge, the Company
has not transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any law
in effect on or before the Effective Time, nor has the Company disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(any or all of the foregoing being collectively referred to as "Hazardous
Materials Activities") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which is
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reasonably likely to involve the Company in any environmental litigation or
impose upon the Company any material environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Schedule 2.19 sets forth the principal terms
and conditions of any agreement, written or oral, with respect to such fees.
Schedule 2.19 also sets forth the Company's current reasonable estimate of all
Third Party Expenses (as defined in Section 5.5) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of 1986, as
amended;
(iii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has any liability or obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current employee, consultant or
director of the Company or any Affiliate;
(vii) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company or any Affiliate and any Employee;
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<PAGE> 30
(viii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(x) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(xiii) "Pension Plan" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan, International Employee Plan, and each
Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, International Employee Plan, or
Employee Agreement, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to adopt or enter into any Company Employee Plan, International
Employee Plan, or Employee Agreement.
(c) Documents. The Company has provided to Parent: (i) correct and
complete copies of all documents embodying each Company Employee Plan,
International Employee Plan, and each Employee Agreement including (without
limitation) all amendments thereto and all related trust documents; (ii) the
most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan; (iii) the three (3) most recent annual reports (Form Series 5500
and all schedules and financial statements attached thereto), if any, filed
under ERISA or the Code in connection with each Company Employee Plan; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the summary(ies) of material modifications thereto, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination, opinion, notification and advisory letters, and all
applications and correspondence to or from the IRS or the DOL with respect to
any such application or letter; (vii) all material written agreements and
contracts relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events
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which would result in any material liability to the Company; (ix) all
correspondence to or from any governmental agency relating to any Company
Employee Plan; (x) samples of all COBRA forms and related notices (or such forms
and notices as required under comparable law); (xi) all policies pertaining to
fiduciary liability insurance covering the fiduciaries for each Company Employee
Plan; (xii) the three (3) most recent plan years discrimination tests for each
Company Employee Plan; and (xiii) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses prepared in connection
with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) to the
knowledge of the Company, no "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan; (iv) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or reasonably anticipated (other
than routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (v) each Company Employee Plan (other
than any stock option plan) can be amended, terminated or otherwise discontinued
after the Effective Time, without material liability to the Parent, Company or
any of its Affiliates (other than ordinary administration expenses); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of the
Company or any Affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vii) to the knowledge of the Company, neither the
Company nor any Affiliate is subject to any penalty or tax with respect to any
Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code.
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer and Multiple Employer Plans. At no time has the
Company or any Affiliate contributed to or been obligated to contribute to any
Multiemployer Plan. Neither the Company, nor any Affiliate has at any time ever
maintained, established, sponsored, participated in, or contributed to any
multiple employer plan, as described in Section 413(c) of the Code.
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(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason, except as
may be required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) Health Care Compliance. Neither the Company nor any Affiliate
has, prior to the Effective Time and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of the Health Insurance Portability and Accountability Act of
1996, the requirements of the Women's Health and Cancer Rights Act, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such Act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(i), the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(ii) Except as set forth on Schedule 2.20(i), no payment or
benefit which will or may be made by the Company or its Affiliates with respect
to any Employee will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. The Company: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). To the knowledge of the Company
there are no pending, threatened or reasonably anticipated claims or actions
against the Company under any worker's compensation policy or long-term
disability policy.
(k) Labor. No work stoppage or labor strike against the Company is
pending, or to the knowledge of the Company, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. Except as set
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forth in Schedule 2.20(k), there are no actions, suits, claims, labor disputes
or grievances pending, or, to the knowledge of the Company, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to the
Company. Neither the Company nor any of its Subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
Except as set forth in Schedule 2.20(k), the Company is not presently, nor has
it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
(l) International Employee Plan. The Company does not now, nor has
it ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
2.21 Representations Complete. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor any
statement made in any schedule or certificate furnished by the Company pursuant
to this Agreement, or furnished in or in connection with documents mailed or
delivered to the shareholders of the Company in connection with soliciting their
consent to this Agreement and the Merger, contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on Parent and Merger Sub as a whole. Parent has
made available a true and correct copy of the Certificate of Incorporation and
Bylaws or Parent and Articles of Incorporation and Bylaws of Merger Sub, as
amended to date, to the Company.
3.2 Authority. Each of Parent and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Agreement of Merger and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
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on the part of Parent and Merger Sub. This Agreement and the Agreement of Merger
have been duly executed and delivered by Parent and Merger Sub and constitute
the valid and binding obligations of Parent and Merger Sub, enforceable in
accordance with their terms. The execution and delivery of this Agreement by
Parent and Merger Sub does not, and, as of the Effective Time, the consummation
of the transactions contemplated hereby will not, Conflict with (i) any
provision of the Certificate of Incorporation or Bylaws of Parent or Merger Sub
or (ii) any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent and Merger Sub
or its properties or assets, except for any such Conflicts that would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent
or Merger Sub. No material consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party (so as not to trigger any Conflict) is required by or with respect
to Parent or Merger Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (A) the filing of the Agreement of Merger with the California Secretary of
State, (B) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, (C) the filing of such notices and the
expiration of such waiting periods as required by the HSR Act, (D) such other
consents, waivers, authorizations, filings, approvals and registrations which
are set forth on Schedule 3.2 and (E) where the failure to obtain such consents,
waivers, approvals and orders or authorizations of, or make such registration,
declaration or filing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
3.3 Capital Structure.
(a) The authorized stock of Parent consists of 250,000,000 shares
of Common Stock, of which 111,198,700 shares were issued and outstanding as of
January 6, 2000, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, 1,000 shares of which, as of the date hereof, are
issued and outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issued,
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid,
non-assessable, free of any liens or encumbrances and not subject to any
preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Parent or Merger Sub or any agreement
to which Parent or Merger Sub is a party or is bound. The shares of Parent
Common Stock issued by Parent in the Merger shall be issued in compliance with
applicable federal and state securities laws, be freely transferable by the
Company Shareholders, and such shares shall not be legended, except that the
shares issued to affiliates of the Company shall be subject to certain
restrictions on transfer pursuant to the Securities Act of 1933, as amended, and
pursuant to Section 5.12 hereof and those affiliate
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agreements to be entered into between each such affiliate and Parent prior to
Closing (the "Company Affiliate Agreements"), and such shares may be legended to
such effect.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") for the prior three (3) years, all in the form so filed, including
the exhibits thereto (all of the foregoing being collectively referred to as the
"SEC Documents"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 (the "Securities Act") or the Securities Exchange Act of 1934 (the
"Exchange Act") as the case may be, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a document subsequently filed with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
may be indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) and present fairly the consolidated
financial position of Parent at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal audit adjustments). There has been no
change in Parent accounting policies except as described in the notes to the
Parent Financial Statements; provided, however, the Parent may have restated or
may restate one or more of the Parent Financial Statements to reflect
acquisitions entered into subsequent to the respective dates thereof.
3.5 No Material Adverse Change. Since the date of the balance sheet
included in the Parent's report on Form 10-Q filed November 17, 1999, there has
not occurred: (a) any Parent Material Adverse Effect; or (b) any amendments or
changes in the Certificate of Incorporation or Bylaws of Parent.
3.6 Litigation. There is no action, suit or proceeding, pending or, to
Parent's knowledge, threatened as to which Parent has received any notice of
assertion against Parent, which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement. To Parent's knowledge, there is no claim, arbitration or
investigation pending or as to which Parent has received any notice of assertion
against Parent, which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay any of the transactions contemplated by this
Agreement.
3.7 Information Supplied. The information supplied by Parent and Merger
Sub specifically for inclusion in any California Permit application shall not at
the time of the Company shareholders' meeting or at the time such Permit
Application is filed with the California Department of Corporations, is amended
or supplemented, and is approved by the Department of Corporations contain any
untrue statement of material fact or omit to state any material fact required to
be stated
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therein or necessary in order to make the statements therein not misleading. The
information supplied by Parent or Merger Sub specifically for inclusion in any
proxy or information statement to be sent to the Company Shareholders shall not,
on the date such proxy or information statement is first mailed to the Company
Shareholders and at the time of the meeting the Company Shareholders held to
vote on the approval of this Agreement and the transactions contemplated hereby
(or on the date of any written consent with respect thereto), contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or omit to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies or
consents for the approval of this Agreement and the transactions contemplated
hereby, which has become false or misleading. Notwithstanding the foregoing,
Parent and Merger Sub make no representations or warranties with respect to any
information supplied by the Company which is contained in any of the foregoing
documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of its business, and any material event involving or adversely
affecting the Company or its business. Except as expressly contemplated by this
Agreement or required by law, or set forth in Schedule 4.1, the Company shall
not, without the prior written consent of Parent:
(a) Enter into any commitment, activity or transaction not in the
ordinary course of business;
(b) Transfer to any person or entity any rights to any Company
Intellectual Property (other than pursuant to end-user licenses in the ordinary
course of business) or enter into any agreement with respect to Company
Intellectual Property with any person or entity other than in the ordinary
course of business consistent with past practice;
(c) Terminate any employees other than for cause or encourage any
employees to resign from the Company;
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(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(e) Commence or settle any litigation in an amount in the aggregate
in excess of $50,000;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor) except for (i)
repurchases of Company Capital Stock upon the termination of service of any
service providers of Company in accordance with the standard terms set forth in
the agreements governing such repurchases, all of which agreements have been
provided or made available to Parent, (ii) conversion of Company Preferred Stock
and (iii) exercises or conversion of Company Convertible Securities;
(g) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options or Warrants,
issue, sell, grant, contract to issue, grant or sell, or authorize the issuance,
delivery, sale or purchase of any shares of Company Capital Stock or securities
convertible into, or exercisable or exchangeable for, shares of Company Capital
Stock, or any securities, warrants, options or rights to purchase any of the
foregoing, except for (i) issuances of Company Capital Stock upon the exercise
thereof or upon exercise or conversion of Company Convertible Securities or
Company Preferred Stock outstanding as of the date of this Agreement and (ii)
issuances of Company Options in the ordinary course of business consistent with
past practice;
(h) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(j) Sell, lease, license or otherwise dispose of any of the assets
or properties of Company which are not Company Intellectual Property other than
in the ordinary course of business and consistent with past practices, including
but not limited to the performance of obligations under contractual arrangements
listed on the Company Schedules existing as of the date hereof, or create any
security interest in such assets or properties;
(k) Grant any loan to any person or entity, incur any indebtedness
or guarantee any indebtedness, issue or sell any debt securities, guarantee any
debt securities of others, purchase any debt securities of others or amend the
terms of any outstanding agreements related to borrowed
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money, except for advances to employees for travel and business expenses in the
ordinary course of business consistent with past practices;
(l) Grant any severance or termination pay (i) to any director
or officer or (ii) to any employee or consultant, except payments made pursuant
to standard written agreements outstanding as of the date hereof and disclosed
on Schedule 4.1(l), or increase in the salary or other compensation payable or
to become payable by Company to any of its officers, directors, employees or
advisors, or declare, pay or make any commitment or obligation of any kind for
the payment by Company of a bonus or other additional salary or compensation to
any such person, or adopt or amend any employee benefit plan or enter into any
employment contract;
(m) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business and consistent with past practice;
(n) Take any action to accelerate the vesting schedule of any of
the outstanding Company Options or Company Capital Stock other than as required
by existing agreements outstanding on the date hereof;
(o) Pay, discharge or satisfy, in an amount in excess of $50,000
(in the aggregate) any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Company Financial Statements;
(p) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Enter into any strategic alliance, joint development or joint
marketing arrangement or agreement;
(r) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(s) Waive or commit to waive any rights with a value in excess of
$50,000 (in the aggregate);
(t) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(u) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date hereof;
or
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(v) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (v) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, shareholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any person relating to any possible acquisition of the
Company or any of its Subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its
capital stock or assets or any equity interest in the Company or any of its
Subsidiaries, (b) provide information with respect to it to any person, other
than Parent, relating to, or otherwise cooperate with, facilitate or encourage
any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its capital stock or
assets or any equity interest in the Company or any of its Subsidiaries, (c)
enter into an agreement with any person, other than Parent, providing for the
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its capital stock or
assets or any equity interest in the Company or any of its Subsidiaries, or (d)
make or authorize any statement, recommendation or solicitation in support of
any possible acquisition of the Company or any of its Subsidiaries (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its capital stock or assets or any equity interest in the
Company or any of its Subsidiaries by any person, other than by Parent. The
Company shall immediately cease and cause to be terminated any such contacts or
negotiations with third parties relating to any such transaction or proposed
transaction. In addition to the foregoing, if the Company receives prior to the
Effective Time or the termination of this Agreement any offer or proposal
relating to any of the above, the Company shall immediately notify Parent
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Parent may reasonably request. Except as contemplated by this Agreement,
disclosure by the Company of the terms hereof (other than the prohibition of
this Section 4.2) shall be deemed to be a violation of this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Fairness Hearing; Shareholder Approval.
(a) As soon as reasonably practicable following the execution of
this Agreement, Parent and Company shall prepare the necessary documents and
Parent shall apply to obtain a permit (a "California Permit") from the
Commissioner of Corporations of the State of California (after a hearing before
such Commissioner) pursuant to Section 25121 of the California Corporate
Securities
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Law of 1968, so that the issuance of Parent Common Stock in the Merger shall be
exempt from registration under Section 3(a)(10) of the Securities Act. Company
and Parent will respond to any comments from the California Department of
Corporations and use their commercially reasonable efforts to have the
California Permit granted as soon as practicable after such filing. As promptly
as practical after the date of this Agreement, Parent and Company shall prepare
and make such filings as are required under applicable Blue Sky laws relating to
the transactions contemplated by this Agreement.
(b) As promptly as practicable after the receipt of a California
Permit, the Company shall submit this Agreement and the transactions
contemplated hereby to its shareholders for approval and adoption as provided by
California Law and its Articles of Incorporation and Bylaws. The Company shall
use its best efforts to solicit and obtain the consent of its shareholders
sufficient to approve the Merger and this Agreement and to terminate the First
Amended and Restated Rights Agreement dated September 11, 1997 between the
Company and certain of its stockholders (the "Rights Agreement") to terminate
prior to Closing, and to enable the Closing to occur as promptly as practicable
and, in any event, within 45 days following the date hereof. The materials
submitted to the Company's shareholders shall be subject to review and approval
by Parent and include information regarding the Company, the terms of the Merger
and this Agreement and the unanimous recommendation of the Board of Directors of
the Company in favor of the Merger and this Agreement, and the transactions
contemplated hereby.
5.2 Restrictions on Transfer. All certificates representing Parent
Common Stock deliverable to any shareholder of the Company pursuant to this
Agreement and in connection with the Merger and any certificates subsequently
issued with respect thereto or in substitution therefor (including any shares
issued or issuable in respect of any such shares upon any stock split stock
dividend, recapitalization, or similar event) also shall bear any legend
required by the Commissioner of Corporations of the State of California or such
as are required pursuant to any federal, state, local or foreign law governing
such securities; provided that in the event that the Commissioner of
Corporations of the State of California shall require that any such certificate
shall bear a legend which has the effect of restricting transfer of such
certificate (in any event, other than a legend with respect to Rule 145
promulgated under the Securities Act ("Rule 145") or such legend as may be
required pursuant to the Company Affiliate Agreements or Section 5.12 hereof)
Parent shall prepare and file with the Securities and Exchange Commission and
shall use its commercially reasonable efforts to cause to become effective, at
such time as the holders thereof would otherwise be able to sell such securities
in compliance with applicable provisions applicable to pooling-of-interests
treatment of the Merger, a Registration Statement on Form S-3 permitting the
sale by the shareholders of the Company which acquire Parent Company Stock as a
result of the Merger, and to maintain the effectiveness of such registration
until the earlier of (a) a period of two years has elapsed or (b) such time as
the holders of such certificates can sell the shares of Parent Company Stock in
any three month period.
5.3 Access to Information. Each party shall afford the others and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, commitments and records, and (b) all
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other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request, subject, in the case of Parent, to reasonable limits on access to its
technical and other nonpublic information. No information or knowledge obtained
in any investigation pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 Confidentiality. Each of the parties hereto hereby agrees to keep
the terms of this Agreement (except to the extent contemplated hereby) and such
information or knowledge obtained in any investigation pursuant to Section 5.3,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party without confidentiality restrictions from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena powers
(provided that such party shall have provided the other party with prior notice
of such order and an opportunity to object or take other available action) or
(f) which is disclosed in the course of any litigation between any of the
parties hereto.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall, subject to
Section 7.2(k), be the obligation of the respective party incurring such fees
and expenses.
5.6 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of the New York Stock Exchange, prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Company prior to release, provided that such approval shall not
be unreasonably withheld.
5.7 Consents. The Company shall promptly apply for or otherwise seek
and use its best efforts to obtain all consents and approvals required to be
obtained by it for the consummation of the Merger including all consents,
waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of and benefits to the
Company thereunder.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.9 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
ensure that its representations and
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warranties remain true and correct in all material respects, and to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings, and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.10 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, such that the conditions set
forth in Section 6.2(a) or (b) or Section 6.3(a) or (b) would not be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 5.10
shall not limit or otherwise affect any remedies available to the party
receiving such notice.
5.11 Pooling Accounting. Parent and the Company shall each use its
reasonable best efforts to cause the Merger to be accounted for as a pooling of
interests. Each of Parent and the Company shall use its reasonable best efforts
to cause the Company Affiliates (as defined in Section 5.12) not to take any
action that would adversely affect the ability of Parent to account for the
Merger or a pooling of interests.
5.12 Affiliate Agreements. Schedule 5.12 sets forth those persons who,
in the Company's reasonable judgment and knowledge, are or may be "affiliates"
of the Company within the meaning of Rule 145 (each such person a "Company
Affiliate"). The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list. The Company
shall deliver or cause to be delivered to Parent, concurrently with the
execution of this Agreement (and in any case prior to the Closing) from each of
the Company Affiliates, an executed Affiliate Agreement in the form attached
hereto as Exhibit C. Parent shall be entitled to place appropriate legends on
the certificates evidencing any Parent Common Stock to be received by such
Company Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, consistent with the terms of such Affiliate Agreements.
5.13 Employee Compensation. Each person who was an employee of the
Company immediately prior to the Effective Time, shall be, at the Effective
Time, an at-will employee of Parent or the Surviving Corporation, to the extent
permitted by applicable law; provided that each
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employee employed in the United States shall provide proof of the right to work
in the United States. Each employee of the Company who remains an employee of
Parent or the Surviving Corporation after the Effective Time shall be eligible,
upon completion of Parent's standard employee background and reference check, to
receive salary and benefits (such as medical benefits, bonuses, 401(k) and stock
options) consistent with Parent's standard human resource policies.
5.14 New York Stock Exchange Listing. Parent agrees to authorize for
listing on the New York Stock Exchange the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, upon official notice of issuance.
5.15 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, the Company and Parent each shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") Notification and Report forms
relating to the transactions contemplated herein as required by the HSR Act, as
well as comparable premerger notification forms required by the merger
notification or control laws and regulations of any applicable jurisdiction, as
agreed to by the parties. The Company and Parent each shall promptly (a) supply
the other with any information which may be required in order to effectuate such
filings and (b) supply any additional information which reasonably may be
required by the FTC, the DOJ or the competition or merger control authorities of
any other jurisdiction and which the parties may reasonably deem appropriate.
5.16 Non-Competition Agreements. On or before the Closing, the Company
will use its best efforts to cause the employees listed on Schedule 5.16 to
execute a Non-Competition Agreement in the form set forth as either Exhibit A-1,
Exhibit A-2, or Exhibit A-3, as indicated on Schedule 5.16.
5.17 Indemnification. From and after the Effective Time, Parent shall
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of the Company pursuant to indemnification agreements between the
Company and its directors and officers existing prior to the date hereof. The
Surviving Corporation and Parent shall (i) assume as of the Effective Time all
obligations of the Company pursuant to the Company's Articles of Incorporation,
Bylaws and indemnification agreements as they are in effect on the date hereof
and (ii) pay all amounts that become due and payable under such provisions. This
Section 5.17 shall survive the consummation of the Merger, is intended to
benefit the Company, the Surviving Corporation and each indemnified party, shall
be binding, jointly and severally, on all successors and assigns of the
Surviving Corporation and Parent, and shall be enforceable by the indemnified
parties. For purposes of clarity, the parties acknowledge and agree that any
such amounts that the Surviving Corporation or Parent shall pay pursuant to this
Section 5.17 shall constitute a Loss (as defined below) as to which Parent shall
be entitled to indemnification under Article VII hereof.
5.18 No Actions Inconsistent With Tax-Free Reorganization. Parent,
Merger Sub and the Company shall (and, following the Effective Time, Parent
shall cause the Company to) take no action that would cause the Merger to fail
to qualify as a "reorganization" within the meaning of Section 368(a) of the
Code.
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5.19 Form S-8. Parent agrees to file, if available for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options as soon as possible, but in no
event more than 30 days after the Effective Time.
5.20 Affiliate Status. Parents hereby acknowledges and agrees that
based solely on his stock ownership in Parent immediately following the Merger,
Parent will not regard Dr. Frank Lee as an "affiliate" of Parent for the
purposes of Rule 144 or Rule 145(d) promulgated under the Securities Act of
1933, as amended.
5.21 Termination of Rights Agreement. The Company shall use its
commercially reasonable efforts to cause the Rights Agreement to terminate and
be of no further force or effect prior to Closing.
5.22 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.23 Termination of 401(k) Plan. The Company agrees to terminate its
401(k) plan immediately prior to Closing, unless Parent, in its sole and
absolute discretion agrees to sponsor and maintain such plan by providing the
Company with notice of such election as least ten (10) days before the Effective
Time.
5.24 Termination of Consulting Agreements. The Company agrees to
terminate any consulting agreement to which it is a party and pursuant to which
the other party to such agreement provides consulting services to the Company,
other than the consulting agreement between the Company and Steve Ou, dated July
16, 1999, effective as of immediately after the Closing (provided that all
obligations through the Closing shall remain in full force and effect), and to
obtain full releases of liability in connection with such agreements; provided,
that all provisions of such consulting agreements relating to confidentiality
and invention assignment shall not be terminated and shall survive the
termination of such agreements.
5.25 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368(a) of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the Treasury Regulations. Parent shall, and shall cause the Surviving
Corporation to, report to the extent required by the Code or the Treasury
Regulations thereunder, the Merger for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the shareholders of the Company by the requisite
vote under applicable law and the Company's Articles of Incorporation.
(b) California Permit. The Commissioner of Corporations for the
State of California shall have approved the terms and conditions of the
transactions contemplated by this Agreement, and the fairness of such terms and
conditions following a hearing for such purpose, and shall have issued a
California Permit.
(c) No Injunctions or Restraints; Illegality; HSR Act. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect. All
waiting periods under the HSR Act shall have expired or been terminated early.
(d) Tax Opinions. The Company and Parent shall each have received
written opinions from their respective counsel, Orrick, Herrington & Sutcliffe
LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; provided, however, that if the counsel to either the
Company or Parent does not render such opinion, this condition shall nonetheless
be deemed to be satisfied with respect to such party if counsel to the other
party renders such opinion to such party. The parties to this Agreement agree to
execute and deliver Tax Representation Letters in a customary form to such
counsel for the purposes of rendering such opinions.
6.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct in all material respects as
of such date), with the same force and effect as if made on and as of the
Closing Date; and the Company shall have received a certificate to such effect
signed on behalf of Parent by a duly authorized officer of Parent.
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) No Material Adverse Changes or Effect. Since the date of this
Agreement, there shall not have occurred any material adverse change in the
business, assets (including intangible assets), financial condition or results
of operations of Parent.
(d) Legal Opinion. At or prior to the Closing, Wilson Sonsini
Goodrich & Rosati, Professional Corporation, shall execute and deliver to the
Company a legal opinion in the form of Exhibit D hereto.
(e) Secretary's Certificate. Each of Parent and Merger Sub shall
have delivered to the Company a copy of (i) the text of the resolutions adopted
by the Board of Directors of Parent and Merger Sub authorizing the execution,
delivery and performance of this Agreement and the Agreement of Merger and the
consummation of all of the transactions contemplated by this Agreement and the
Agreement of Merger and (ii) the certificates of incorporation and bylaws of
Parent and Merger Sub, along with certificates executed on behalf of each of
Parent and Merger Sub by such entity's corporate secretary certifying to the
Company that such copies are true, correct and complete copies of such
resolutions, certificate of incorporation and bylaws, respectively, and that
such resolutions, certificate of incorporation and bylaws were duly adopted and
have not been amended or rescinded.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct in all material respects as of such
date), with the same force and effect as if made on and as of the Closing Date
and Parent and Merger Sub shall have received a certificate to such effect
signed on behalf of the Company by the chief executive officer and chief
financial officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by a duly authorized officer of the Company;
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
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(d) Legal Opinion. Parent shall have received a legal opinion from
Orrick, Herrington & Sutcliffe LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit E.
(e) Affiliate Agreements. Each of the parties identified by the
Company as being a Company Affiliate shall have delivered to Parent an executed
Affiliate Agreement in the form of Exhibit C, which shall be in full force and
effect.
(f) Non-Competition Agreements. Each of the persons listed on
Schedule 5.16 shall be an employee of the Company as of immediately prior to the
Closing and shall have executed and delivered to Parent a Non-Competition
Agreement in substantially the form of Exhibit A-1, Exhibit A-2, or Exhibit A-3,
as appropriate, and all of the Non-Competition Agreements shall be in full force
and effect.
(g) Letter from Independent Accountants. Parent shall have received
a letter from PricewaterhouseCoopers regarding such firm's concurrence with
Parent management's conclusions as to the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board Opinion
No. 16 if closed and consummated in accordance with this Agreement. Such letter
shall be in form and substance satisfactory to Parent (it being understood that
the Company shall use its reasonable best efforts to have such letter provided).
(h) No Dissenters. Holders of at least 91% of the Company Capital
Stock, including not less than a majority of the outstanding Company Common
Stock and not less than a majority of the outstanding Company Preferred Stock,
shall have approved this Agreement, the Merger and the transactions contemplated
hereby and thereby, and holders of more than 9% of the outstanding shares of
Company Capital Stock shall not have exercised, nor shall they have any
continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(i) No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred any material adverse change in the business,
assets (including intangible assets) financial condition, or results of
operations of the Company.
(j) Product Development. The Company shall have achieved the
milestones on Device A and at least two of the three devices including Device B,
Device C, and Device D, listed on Schedule 6.3(j), prior to Closing.
(k) Secretary's Certificate. The Company shall have delivered to
Parent a copy of (i) the text of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement and the Articles of Merger and the consummation of all of the
transactions contemplated by this Agreement and the Articles of Merger, (ii) the
text of the resolutions adopted by the shareholders of the Company approving and
adopting this Agreement and the Merger and (iii) the articles of incorporation
and bylaws of the Company, along with a certificate executed on behalf of the
Company by its corporate secretary certifying to Parent that such copies are
true, correct and complete copies of such resolutions, articles of
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incorporation and bylaws, respectively, and that such resolutions, articles of
incorporation and bylaws were duly adopted and have not been amended or
rescinded.
(l) (i) The transaction(s) by which the Company shall have
purchased all of the issued and outstanding capital stock of Weida Technology
Inc. (other than those shares held by persons as nominees for and on behalf of
the Company in order to satisfy local ownership requirements in Taiwan) shall
have closed; and (ii) the shareholders of Weida Technology Inc. immediately
prior to the transaction(s) contemplated in the foregoing clause (i) shall have
purchased 200,000 shares of the Series C Preferred Stock of the Company for an
aggregate purchase price of $900,000 and the Company shall have received such
amount.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on the date
which is one year following the Closing Date (the "Expiration Date"); provided,
however, that the representations and warranties set forth in Section 2.8 shall
survive the Merger and continue until the applicable statute of limitations
period shall have expired and the representations and warranties set forth in
Section 2.11 shall survive the Merger and continue indefinitely.
7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the Company Shareholders
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any Company Shareholder. As soon as
practicable after the Effective Time, the Escrow Amount, without any act of any
Company Shareholder, will be deposited with U.S. Bank Trust, N.A. (or other
institution acceptable to Parent and the Securityholder Agent (as defined in
Section 7.2(g) below)), as Escrow Agent (the "Escrow Agent"), such deposit to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth herein and at Parent's cost and expense. The Escrow Fund shall be
available to compensate Parent and its affiliates for any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense
(hereinafter individually a "Loss" and collectively "Losses") incurred by
Parent, its officers, directors, or affiliates (including the Surviving
Corporation) directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty of the Company (as modified by the Company
Schedules), or any failure by the Company to perform or comply with any covenant
contained herein. Parent and the Company each acknowledge that such Losses, if
any, would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in the
aggregate Merger Consideration. Parent may not receive any shares from the
Escrow Fund unless and until Officer's Certificates (as defined in paragraph (d)
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below) identifying Losses, the aggregate amount of which exceed $250,000, have
been delivered to the Escrow Agent as provided in paragraph (e); provided that
no claim for Losses with respect to a single breach or failure to comply or
perform in an amount less than $10,000 shall be delivered by Parent to the
Escrow Agent or otherwise claimed by Parent. Once the aggregate amount of Losses
claimed by Parent against the Escrow as to which there are no unresolved
objections under Section 7.2(e) exceeds $250,000, Parent may recover from the
Escrow Fund the total of such Losses.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
California time, on the Expiration Date (the "Escrow Period"); provided that the
Escrow Period shall not terminate with respect to such amount (or some portion
thereof), that together with the aggregate amount remaining in the Escrow Fund
is necessary in the reasonable judgment of Parent, subject to the objection of
the Securityholder Agent and the subsequent arbitration of the matter in the
manner provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the termination of such
Escrow Period specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. As soon as all such claims
have been resolved, the Escrow Agent shall deliver to the Company Shareholders
the remaining portion of the Escrow Fund and not required to satisfy such
claims. Deliveries of Escrow Amounts to the Company Shareholders pursuant to
this Section 7.2(b) shall be made in proportion to their respective original
contributions to the Escrow Fund as determined pursuant to Section 1.8(b).
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund shall be added to the Escrow Fund
and become a part thereof. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Escrow Fund shall not be added to
the Escrow Fund but shall be distributed to the recordholders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the recordholders thereof.
(iii) Each Company Shareholder shall be shown as the record
owner on the Parent's books and records and shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such Company Shareholder (and on any voting securities added to the Escrow Fund
in respect of such shares of Parent Common Stock).
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(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Parent (an "Officer's Certificate"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(e) hereof,
deliver to Parent out of the Escrow Fund, as promptly as practicable, shares of
Parent Common Stock held in the Escrow Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(d)(i) hereof, each such share of Parent Common Stock shall be valued
at the average closing price of a share of Parent Common Stock for the five
trading days prior to the date the Escrow Agent releases such share from the
Escrow Fund in satisfaction of Parent's Losses.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent (as defined in Section 7.2(g)) and for a
period of thirty (30) days after such delivery, the Escrow Agent shall make no
delivery to Parent of any Escrow Amounts pursuant to Section 7.2(d) hereof
unless the Escrow Agent shall have received written authorization from the
Securityholder Agent to make such delivery. After the expiration of such thirty
(30)-day period, the Escrow Agent shall make delivery of shares of Parent Common
Stock from the Escrow Fund in accordance with Section 7.2(d) hereof, provided
that no such payment or delivery may be made if the Securityholder Agent shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent prior to the
expiration of such thirty (30)-day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in writing
to any claim or claims made in any Officer's Certificate, the Securityholder
Agent and Parent shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the Securityholder
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute shares of Parent Common Stock from the Escrow Fund in accordance
with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Securityholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Parent and the
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Securityholder Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator. The arbitrators shall set a limited
time period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrators, to discover relevant information from the opposing
parties about the subject matter of the dispute. The arbitrators shall rule upon
motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the extent as a court of
competent law or equity, should the arbitrators determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of a majority of the
three arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 7.2(e) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be held
in Santa Clara County, California under the rules then in effect of the American
Arbitration Association.
(g) Securityholder Agent of the Shareholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any Company Shareholder, Dr. Tsu-Wei Frank
Lee shall be appointed as agent and attorney-in-fact (the "Securityholder
Agent") for each Company Shareholder (except such shareholders, if any, as shall
have perfected their appraisal or dissenters' rights under California Law), for
and on behalf of the Company Shareholders, to give and receive notices and
communications, to authorize delivery to Parent of shares of Parent Common Stock
from the Escrow Fund in satisfaction of claims by Parent, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of Securityholder Agent for the accomplishment of
the foregoing. Such agency may be changed by the Company Shareholders from time
to time upon prior written notice to Parent; provided that the Securityholder
Agent may not be removed unless holders of a two-thirds interest of the Escrow
Fund agree to such removal and to the identity of the substituted agent. Any
vacancy in the position of Securityholder Agent may be filled by approval of the
holders of a majority in interest of the Escrow Fund. No bond shall be required
of the Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the Company
Shareholders.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment. The Company Shareholders on whose behalf
the Escrow Amount was
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contributed to the Escrow Fund shall severally indemnify the Securityholder
Agent and hold the Securityholder Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on the part of the
Securityholder Agent and arising out of or in connection with the acceptance or
administration of the Securityholder Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by the Securityholder
Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent
or instruction of the Securityholder Agent shall constitute a decision of all
the shareholders for whom a portion of the Escrow Amount otherwise issuable to
them are deposited in the Escrow Fund and shall be final, binding and conclusive
upon each of such Company Shareholder, and the Escrow Agent and Parent may rely
upon any such decision, act, consent or instruction of the Securityholder Agent
as being the decision, act, consent or instruction of each every such Company
Shareholder. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Securityholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent, as representative for the shareholders of the Company,
shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its reasonable discretion to settle any
such claim; provided, however, that except with the consent of the
Securityholder Agent, no settlement of any such claim with third-party claimants
shall alone be determinative of the amount of any claim against the Escrow Fund.
In the event that the Securityholder Agent has consented to any such settlement,
the Securityholder Agent shall have no power or authority to object under any
provision of this Article VII to the amount of any claim by Parent against the
Escrow Fund with respect to and in the amount of such settlement.
(j) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court of law, notwithstanding
any notices, warnings or other communications from any party or any other person
to the contrary. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
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notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon initiating
such action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may be
imposed on Escrow Agent or incurred by Escrow Agent in connection with the
performance of its duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter.
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(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the State of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(k) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(l) Exclusive Remedy. Except as provided in the following sentence,
resort to the Escrow Fund shall be the exclusive right and remedy of Parent for
breaches of the representations, warranties, covenants and agreements of the
Company contained herein, or any claims, demand, actions or other causes of
action brought against the Company and its shareholders, officers or directors.
Notwithstanding the foregoing, the existence of this Article VII and the rights
and restrictions set forth herein do not limit any other potential remedies of
Parent with respect to any fraudulent breach by the Company or its officers or
directors of the representations, warranties or covenants of the Company
contained in this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on February 25, 2000 (the "End Date");
provided that if but for the satisfaction of the condition to Closing set forth
in Section 6.1(b) or the condition to Closing with respect to the expiration of
the HSR Act waiting period in Section 6.1(c), the parties would be able
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to effect the Closing (it being understood that the condition to closing set
forth in Section 6.1(a) is contingent upon the satisfaction of that set forth in
Section 6.1(b)), such date shall be automatically extended to March 31, 2000 if,
in the case of Section 6.1(b) the California Permit has been filed and is
pending or, in the case of Section 6.1(c) the HSR filings have been filed and
are pending; provided further that the right to terminate this Agreement under
this Section 8.1(b)(i) shall not be available to any party whose willful failure
to fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date; (ii) there shall
be a final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of all or any portion of the business of
the Company or (ii) compel Parent or the Company to dispose of or hold separate
all or a portion of the business or assets of the Company or Parent as a result
of the Merger;
(d) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement
which breach has a Material Adverse Effect on Company, or if any representation
or warranty of the Company shall have become untrue, in either case such that
the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided that if such inaccuracy in the
Company's representations and warranties or breach by the Company is curable by
the Company within 30 days through the exercise of its reasonable best efforts,
then for so long as the Company continues to exercise such reasonable best
efforts Parent may not terminate this Agreement under this Section 8.1(d) unless
such breach is not cured within 30 days (it being understood that Parent may not
terminate this Agreement pursuant to this Section 8.1(d) if it shall have
materially breached this Agreement);
(e) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement which
breach has a Material Adverse Effect on Parent, or if any representation or
warranty of Parent shall have become untrue, in either case such that the
conditions set forth in Section 6.3(a) or Section 6.3(b) would not be satisfied
as of the time of such breach or as of the time such representation or warranty
shall have become untrue, provided, that if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent within
30 days through the exercise of its reasonable best efforts, then for so long as
Parent continues to exercise such reasonable best efforts the Company may not
terminate this agreement under this Section 8.1(e) unless such breach is not
cured within 30 days (it being understood that the Company may not terminate
this Agreement pursuant to this Section 8.1(e) if it shall have materially
breached this Agreement).
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Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or shareholders,
provided that the provisions of Sections 5.4, 5.5 and 5.6 and Article VIII of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Cypress Semiconductor Corporation
3901 North First Street
San Jose, CA 95134
Attention: Chief Executive Officer
Telephone No.: (408) 943-2600
Facsimile No.: (408) 943-6822
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with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Larry W. Sonsini, Esq.
Peter H. Bergman, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to the Company, to:
Galvantech, Inc.
3080 Oakmead Village Drive
Santa Clara, CA 95051
Attention: Dr. Frank Lee
Telephone No.: (408) 566-0688
Facsimile No.: (408) 566-0699
with a copy to:
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, CA 94025
Attention: Peter Cohn, Esq.
Telephone No.: (650) 614-7400
Facsimile No.: (650) 614-7401
(c) if to the Securityholder Agent:
Dr. Tsu-Wei Frank Lee
15997 Grandview Ave.
Monte Sereno, CA 95030
With a copy to:
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, CA 94025
Attention: Peter Cohn, Esq.
Telephone No.: (650) 614-7400
Facsimile No.: (650) 614-7401
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(d) if to the Escrow Agent:
U.S. Bank Trust, N.A.
Escrow Services
One California Street, 4th Floor
San Francisco, CA 94111
Attention: Ann Gadsby
Telephone No.: (415) 273-4532
Facsimile No.: (415) 273-4593
9.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." As used herein, the term "Material Adverse Effect" shall
mean a material adverse effect on the business, assets (including intangible
assets), financial condition, or results of operations of the specified entity.
In addition, as used herein, the term "knowledge" shall mean, with respect to
Company or Parent, what is within the actual knowledge of any of the officers of
Company listed on Schedule 9.2(a) or Parent listed on Schedule 9.2(b), as the
case may be. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent and Merger Sub may assign their respective rights and delegate their
respective obligations hereunder to their respective affiliates.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other
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remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
(Remainder of page intentionally left blank.)
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and, with respect
to Article VII only, the Escrow Agent and the Securityholder Agent, and have
caused this Agreement to be signed by their duly authorized respective officers,
all as of the date first written above.
CYPRESS SEMICONDUCTOR GALVANTECH, INC.
CORPORATION
By: /s/ T.J. Rodgers By: /s/ Dr. Tsu-Wei Frank Lee
-------------------------------- --------------------------------
Name: T.J. Rodgers Name: Dr. Tsu-Wei Frank Lee
------------------------------ ------------------------------
Title: President and Chief Title: President
Executive Officer -----------------------------
-----------------------------
SECURITYHOLDER AGENT: CE ACQUISITION CORPORATION
/s/ Dr. Tsu-Wei Frank Lee By: /s/ Emmanuel Hernandez
- ---------------------------------- --------------------------------
Dr. Tsu-Wei Frank Lee
Name: Emmanuel Hernandez
------------------------------
Title: President
-----------------------------
ESCROW AGENT:
U.S. BANK TRUST, N.A.
By: /s/ Ann Gadsby
--------------------------------
Name: Ann Gadsby
------------------------------
Title: Vice President
-----------------------------
***REORGANIZATION AGREEMENT***
<PAGE> 1
EXHIBIT 99.2
CYPRESS SEMICONDUCTOR TO ACQUIRE GALVANTECH, INC.
DEAL TO EXPAND CYPRESS'S COMMUNICATIONS PRODUCT PORTFOLIO
SAN JOSE, Calif. -- January 11, 2000 -- Cypress Semiconductor Corporation (NYSE:
CY) and Galvantech, Inc., a privately held company, today announced the signing
of a definitive agreement for Galvantech to merge with Cypress. Galvantech, a
company specializing in niche ultra-high performance memories for data
communications applications, had average quarterly revenues of approximately
$10.7 million during the last three quarters.
T.J. Rodgers, Cypress's President and CEO said, "Galvantech complements Cypress
in four ways: First, it has important design wins at Cypress strategic accounts
such as Lucent and Cisco. Second, it is a preferred vendor to several hot new
datacom startups such as Redback and Extreme Networks. Third, it brings foundry
capacity to us at a time when capacity is scarce, and finally, its
ultra-high-speed datacom memories are compatible with ours, but faster. The
Galvantech acquisition will also increase our available design resources to
speed up new product development.
Rodgers continued, "The Galvantech acquisition is not only a good strategic fit,
its added revenue will also raise Cypress's revenue target to $1Billion for 2000
and add substantially to our pre-tax earnings."
<PAGE> 2
Dr. Frank Lee, founder and CEO of Galvantech, said, "Cypress has developed very
strong worldwide alliances with virtually every important electronics
manufacturer in the communications field. In addition, it has a large,
world-class sales, marketing and applications organization to facilitate market
penetration of our state-of-the-art products. The combined product portfolios of
our companies will provide a line of communication memories literally second to
none."
The agreement provides for Cypress to issue approximately 3.6 million shares in
exchange for all outstanding stock and options of Galvantech. The merger is
intended to be accounted for as a pooling of interests. The closing is subject
to regulatory approvals, Galvantech shareholder approval, and other customary
conditions to closing.
ABOUT CYPRESS
Cypress Semiconductor provides high-performance integrated circuit solutions "By
Engineers. For Engineers.(TM)" for fast-growing companies in fast-growing
markets, including data communications, telecommunications, computation,
consumer products, and industrial-control. With a focus on emerging
communications applications, Cypress's product lines include
networking-optimized and micropower static RAMs; high-bandwidth multi-port and
FIFO memories; high-density programmable logic devices; timing technology for
PCs and other digital systems; and controllers for Universal Serial Bus (USB).
Cypress is No. 1 in the USB and clock chip markets.
More than two-thirds of Cypress's sales come from fast-growing datacom/telecom
markets and dynamic companies such as Lucent, Cisco, 3Com, Alcatel, Motorola,
Ericsson, and Nortel Networks. Cypress's ability to mix and match its broad
portfolio of intellectual property enables targeted, integrated solutions for
high-speed systems that feed bandwidth-hungry Internet applications. Cypress
aims to become the preferred silicon supplier for Internet switching systems and
for every Internet data stream to pass through at least one Cypress IC.
Cypress employs more than 3,600 people worldwide with international headquarters
in San Jose, California. Its shares are listed on the New York Stock Exchange
under the symbol CY. More information about Cypress is accessible electronically
on the company's worldwide web site at http://www.cypress.com or by CD-ROM (call
1-800-858-1810). An electronic investor forum, and other investor information,
is located at http://www.cypress.com/investor/index.html.
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ABOUT GALVANTECH
Galvantech, Inc. designs, manufactures and markets leading-edge static random
access memories (SRAMs). The company's memory products are available from
Galvantech's field sales force, from distributors, and from a network of U.S.
and international sales reps covering all major markets in North America,
Europe, and Asia. For more information, contact Galvantech, Inc. at 3080 Oakmead
Village Drive, Santa Clara, CA 95051. Phone (408) 566-0688; or Fax (408)
566-0699. In the Eastern U.S., call (508) 660-301. Or visit Galvantech's Web
Site at http://www.galvantech.com.
The above news release contains forward-looking statements regarding the
completion of the acquisition, the impact of the acquisition on Cypress's
operating results, future market demand and acceptance of Cypress's and
Galvantech's products and development of new business and products of the
combined company which involve risks and uncertainties. Cypress's actual results
may vary materially from the results discussed in the forward-looking
statements. Factors that may cause such a difference include those risks
surrounding the closing of the acquisition, timely development, production and
continued and increased market acceptance of the combined companies' products.
Cypress's ability to successfully combine the operation of the two companies,
the ability of the combined company to compete in the highly competitive and
rapidly changing marketplace and the other risks detailed in Cypress's most
recent filings with the Securities and Exchange Commission.
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