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UNITED STATES
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
FEBRUARY 28, 1997
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(Date of earliest event reported)
INTEGRATED CIRCUIT SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 0-19299 23-2000174
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
2435 BOULEVARD OF THE GENERALS
NORRISTOWN, PENNSYLVANIA 19403
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(Address of principal executive offices) (Zip Code)
(610) 630-5300
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(Registrant's telephone number including area code)
NOT APPLICABLE
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(Former name former address and former fiscal year,
if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 28, 1997, Integrated Circuit Systems, Inc., a Pennsylvania
corporation ("ICS" or the "Company"), signed a definitive agreement for the
acquisition of MicroClock, Inc. ("MicroClock"), a leading producer of clock
synthesizer integrated circuits for multimedia applications. ICS acquired the
entire capital stock of MicroClock for approximately $15.6 million to be paid in
the form of approximately .6 million shares of ICS common stock plus $5.6
million in cash. For financial reporting purposes, the transaction was accounted
for by the purchase method of accounting. ICS will immediately write off the
portion of the acquisition premium related to in-process research and
development of approximately 11.0 million. The remaining excess of the purchase
price over the fair value of net assets acquired will be allocated to
identifiable assets and goodwill as appropriate.
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(c) Exhibits:
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2.1 Agreement and Plan of Merger, dated as of February 28, 1997, among
Integrated Circuit Systems, Inc., ICS Acquisition Company,
MicroClock, Inc. and the Stockholders of MicroClock, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 17, 1996 INTEGRATED CIRCUIT SYSTEMS, INC.
By: /S/ Hock E. Tan
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Hock E. Tan
Senior Vice President and CFO
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EXHIBIT 2.1
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
among
INTEGRATED CIRCUIT SYSTEMS, INC.,
ICS ACQUISITION COMPANY
MICROCLOCK, INC.
and
THE STOCKHOLDERS OF MICROCLOCK, INC.
________________________________________________________________________________
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AGREEMENT AND PLAN OF MERGER
among
INTEGRATED CIRCUIT SYSTEMS, INC.
ICS ACQUISITION COMPANY
MICROCLOCK, INC.
and
THE STOCKHOLDERS OF MICROCLOCK, INC.
<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. Definitions........................................................... 1
2. The Merger............................................................ 7
3. Representations and Warranties of the Company and the Company
Stockholders..........................................................11
4. Representations and Warranties of the Buyer...........................21
5. Post-Closing Covenants................................................25
6. Conditions Precedent to the Buyer Parties' Obligations................25
7. Conditions Precedent to the Company's Obligations.....................26
8. General...............................................................26
</TABLE>
Exhibits
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A Certificate of Merger
B Escrow Agreement
Schedules
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Schedule 2.5 -- Officers and Directors
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER is made as of the 28/th/ day of
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February 1997 by and among Integrated Circuit Systems, Inc., a Delaware
corporation (the "Buyer"), ICS Acquisition Company, a Delaware corporation and a
wholly-owned subsidiary of the Buyer (the "Acquisition Company" and, together
with the Buyer, the "Buyer Parties"), MicroClock, Inc., a California corporation
(the "Company") and the stockholders of the Company listed on the Signature Page
hereto (the "Company Stockholders").
Background
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The Boards of Directors of the Company, the Buyer and the Acquisition
Company, have approved a merger (the "Merger") of the Company with and into the
Acquisition Company in accordance with the California General Corporation Law
(the "CGCL") and the Delaware General Corporation Law (the "DGCL"), on the terms
and conditions set forth herein.
WITNESSETH:
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In consideration of the mutual promises, representations and warranties,
covenants, payments and actions herein provided, the parties hereto, each
intending to be legally bound hereby, do agree as follows:
1. Definitions.
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For convenience, certain terms used in this Agreement are listed in
alphabetical order and defined or referred to below (such terms as well as any
other terms defined elsewhere in this Agreement shall be equally applicable to
both singular and plural forms of the terms defined).
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Accounts Receivable" mean as of any date any trade accounts receivable,
notes receivable, bid or performance deposits, employee advances and other
miscellaneous receivables.
"Affiliates" means, with respect to a particular Party, persons or entities
controlling, controlled by or under common control with that Party, as well as
any officers and directors of that Party and of its other Affiliates. For the
purposes of the foregoing, ownership, directly or indirectly, of 20% or more of
the voting stock or other equity interest shall be deemed to constitute control.
"Agreement" means this Agreement and the Exhibits and Schedules hereto.
"Assets" means with respect to a particular Party all of the assets,
properties, goodwill and rights of every kind and description, real and
personal, tangible and intangible, wherever situated
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and whether or not reflected in such Party's most recent Financial Statements,
that are owned or possessed by such Party.
"Balance Sheet Date" is defined in Section 3.5.
"Benefit Plan" means: (i) "employee benefit plan" as defined in Section
3(3) of ERISA, and (ii) supplemental retirement, bonus, deferred compensation,
severance, incentive plan, program or arrangement or other employee fringe
benefit plan, program or arrangement.
"Business" means with respect to a particular Party its entire business,
operations and facilities.
"Buyer" is defined in the preamble.
"Buyer Balance Sheet" is defined in Section 4.5.
"Buyer Common Shares" means the Buyer's Common Stock, no par value per
share.
"Buyer Disclosure Documents" is defined in Section 4.6.
"Buyer Financial Statements" is defined in Section 4.5.
"Buyer Parties" is defined in the preamble.
"Cash Ratio" is defined in Section 2.6(a).
"Certificate of Merger" is defined in Section 2.2.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 2.7(a).
"Closing Date" is defined in Section 2.7(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" is defined above in the preamble.
"Company Assets" means the Assets of the Company.
"Company Balance Sheet" is defined in Section 3.5.
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"Company Business" means the Business of the Company.
"Company Common Shares" means shares of common stock, par value $0.001 per
share, of the Company.
"Company Contracts" is defined in Section 3.16(b).
"Company Financial Statements" is defined in Section 3.5.
"Company's knowledge" or "knowledge of the Company" means the actual
knowledge of any director or officer of the Company.
"Company Non-Real Estate Leases" is defined in Section 3.9.
"Company Parties" means the Company and each of the Company Stockholders.
"Company Preferred Shares" means the Company Series A Preferred Shares and
the Company Series B Preferred Shares.
"Company Real Estate Leases" is defined in Section 3.7.
"Company Real Property" is defined in Section 3.7.
"Company Series A Preferred Shares" means shares of Series A Preferred
Stock, par value $0.001 per share, of the Company.
"Company Series B Preferred Shares" means shares of Series B Preferred
Stock, par value $0.001 per share, of the Company.
"Company Stockholders" is defined in the preamble.
"Confidential Information" means any confidential information or trade
secrets of the Company or the Buyer, as indicated by the context in which used,
including personnel information, know-how and other technical information,
customer lists, customer information and supplier information.
"Contract" means any written or oral contract, agreement, lease,
instrument, or other commitment that is binding on any person or its property
under applicable law.
"Converted Share" is defined in Section 2.6(a).
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
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"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or right to receive damages or payment of
penalties.
"Disclosure Schedule" is defined in the introductory paragraph of Section
3.
"Dissenting Shares" is defined in Section 2.8.
"Effective Time" is defined in Section 2.2.
"Employment Agreements" means the Employment Agreements between the Buyer
and each of MicroClock Founders and certain other Company employees.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 3.15(b).
"Environmental Law" means all Laws and Court Orders relating to pollution
or protection of the environment as well as any principles of common law under
which a Party may be held liable for the release or discharge of any materials
into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" is defined in Section 2.6(c).
"Escrow Shares" is defined in Section 2.6(c).
"GAAP" means generally accepted accounting principles.
"Governmental Permits" means all governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hazardous Substances" means any toxic or hazardous gaseous, liquid or
solid material or waste that may or could pose a hazard to the environment or
human health or safety including (i) any "hazardous substances" as defined by
the federal Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. (S)(S) 9601 et seq., (ii) any "extremely hazardous
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substance," "hazardous chemical," or "toxic chemical" as those terms are defined
by the federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
(S)(S) 11001 et seq., (iii) any "hazardous waste," as defined under the federal
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Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act, 42 U.S.C. (S)(S) 6901 et seq., (iv) any "pollutant," as defined under the
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federal Water Pollution Control Act, 33 U.S.C. (S)(S) 1251 et seq., as any of
-- ---
such laws in clauses (i) through (iv) may be amended from time to time, and (v)
any regulated substance or waste under any Laws or Court Orders that currently
exist or that may be enacted, promulgated or issued in the future by any
federal, state or local governmental authorities concerning protection of the
environment.
"Holder" is defined in Section 2.10(a).
"Immaterial Lease" is defined in Section 3.9.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, any Software Products (including any related
source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions and other intellectual property.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental agency or body or of any
other type of regulatory body, including those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business
of the Company or on the Business of the Buyer, as indicated by the context in
which used, including the Assets, financial condition, results of operations,
liquidity, products, competitive position, customers and customer relations
thereof.
"Merger" means the merger of the Company with and into the Acquisition
Company, with the Acquisition Company as the surviving corporation, in
accordance with the Merger Documents.
"Merger Consideration" is defined in Section 2.6(a).
"MicroClock Founders" means Christopher J. Bland and Barry Olsen.
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"Minor Contract" means any Contract that is terminable by a party on not
more than 30 days' notice without any Liability and any Contract under which the
executory obligation of a party involves an amount of less than $10,000.
"Nasdaq National Market" means the Nasdaq National Market of The Nasdaq
Stock Market, Inc.
"Non-Real Estate Leases" is defined in Section 3.9.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Party" means the Company, the Buyer or the Acquisition Company.
"Patents" means all patents and patent applications.
"PBGC" is defined in Section 3.20(e).
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Real Estate Leases" is defined in Section 3.7.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated the date hereof, between the Buyer and each of the Company Stockholders.
"Required Consents" is defined in Section 3.3.
"SEC" means the Securities and Exchange Commission.
"Securityholder Documents" is defined in Section 2.10(a).
"Share Ratio" is defined in Section 2.6(a).
"Surviving Corporation" is the Acquisition Company at the Effective Time.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, capital, sales, use, ad valorem, value
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added, franchise, bank shares, withholding, payroll, employment, disability,
workers' compensation, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax or additional amounts with
respect thereto.
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"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement, the Certificate of Merger,
the Escrow Agreement, the Employment Agreements and the Registration Rights
Agreement.
"Transactions" means the Merger and the other transactions contemplated by
the Transaction Documents.
2. The Merger.
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2.1 The Merger.Upon the terms and subject to the conditions hereof, and in
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accordance with the relevant provisions of the CGCL and DGCL, the Company shall
be merged with and into the Acquisition Company on the date hereof. Following
the Merger, the Acquisition Company shall continue as the surviving corporation
(the "Surviving Corporation") under the name "MicroClock, Inc.." and shall
continue its existence under the laws of the State of Delaware, and the separate
corporate existence of the Company shall cease. For Federal income tax
purposes, the parties intend that the Merger shall be treated as a tax-free
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code, and that accordingly for such purposes the Merger Consideration
represents the full and complete consideration for the Converted Shares. Each
party shall on any return or report filed with an Tax authority report the
Transactions in a manner consistent with this Section 2.1 and shall use its
reasonable efforts to sustain such reporting as set forth herein To the extent
not prohibited by law each party shall give the other prompt notice of any
challenges or investigations undertaken by any Tax authority in connection with
such reporting, and shall keep such other party fully informed of all aspects of
such ongoing challenge or investigation..
2.2 Effective Time. The Merger shall be consummated by filing with the
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California Secretary of State and the Delaware Secretary of State certificates
of merger in the form attached hereto as Exhibit A (the "Certificate of
Merger"), as is required by, and executed in accordance with, the relevant
provisions of the CGCL and DGCL. The Merger shall be effective at the time of
such filing (the "Effective Time").
2.3 Effects of the Merger. The Merger shall have the effects set forth in
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Section 1107 of the CGCL and Section 259 of the DGCL.
2.4 Certificate of Incorporation and Bylaws. The Certificate of
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Incorporation of the Acquisition Company shall be the Certificate of
Incorporation of the Surviving Corporation. The Bylaws of the Acquisition
Company shall be the Bylaws of the Surviving Corporation.
2.5 Directors and Officers. Schedule 2.5 sets forth the names of the
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Persons who shall be the directors and officers of the Surviving Corporation at
the Effective Time.
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2.6 Conversion of Shares.
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(a) Each Company Common Share and Company Series A Preferred Share
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the Holder (defined below)
thereof, receive $ 0.751 in cash for each converted Company Common Share
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and Company Series A Preferred Share, truncated to the nearest whole dollar (the
"Series A Cash Ratio"), and 0.081 Buyer Common Shares for
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each Company Common Share and Company Series A Preferred Share issued and
outstanding immediately prior to the Effective Time, truncated to the nearest
whole share (the "Series A Share Ratio"), and each Company Series B Preferred
Share issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the Holder (defined
below) thereof, be converted into the right to receive $ 0.827 in cash
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for each converted Company Series B Prefered Share, truncated to the nearest
whole dollar (the "Series B Cash Ratio" and with the Series A Cash Ratio, each a
"Cash Ratio"), and 0.089 Buyer Common Shares for each Company
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Series B Preferred Share issued and outstanding immediately prior to the
Effective Time, truncated to the nearest whole share (the "Series B Share Ratio"
and with the Series B Shares Ratio, each a "Share Ratio") (the cash to be paid
pursuant to the Series A Cash Ratio and the Series B Cash Ratio and the shares
issuable pursuant to the Series A Share Ratio and the Series B Share Ratio are
referred to together as the "Merger Consideration"). Any Company Common Share
held in the treasury of the Company shall be canceled. The Share Ratio is
determined using the average of the closing prices for the 20 trading days prior
to the fifth trading day prior to the Closing Date (the "Buyer Common Share
Price"). The Company Common Shares and Company Preferred Shares issued and
outstanding immediately prior to the Effective Time, other than Dissenting
Shares, are sometimes referred to herein as Converted Shares.
(b) Each option or any portion of an option to acquire Common Shares
that is outstanding immediately prior to the Effective Time, but is unvested (an
"Unvested Option") shall, by virtue of the Merger and without any action on the
part of the Holder thereof except as provided below in this paragraph (b), be
converted into the right to receive an option to purchase Buyer Common Shares (a
"Buyer Option") as set forth in SCHEDULE 2.6(B). It is the intention of the
parties that no adjustment called for in such converted option will affect the
status of the options as incentive stock options within the meaning of the Code.
Each Buyer Option shall be issued pursuant to an existing stock option plan of
the Buyer or a stock option plan to be adopted by the Buyer in the future. Such
Buyer Options shall be registered pursuant to a registration statement on Form
S-8 within three months of the date hereof.
(c) The aggregate Merger Consideration will be payable upon the
surrender of the certificates and other documentation specified in Section 2.9.
As to each Company Stockholder who properly surrenders such certificates and
other documentation, the Buyer will instruct the Exchange Agent to issue to such
Company Stockholder cash and Buyer Common Shares that represent 90 % of such
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Holder's Merger Consideration, truncated to the nearest whole dollar and whole
share, respectively, and to deposit the remainder of such Holder's Merger
Consideration, in the form of Buyer Common Shares, into an escrow account to be
established with the Exchange Agent pursuant to an escrow agreement
substantially in the form of Exhibit B (the "Escrow
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Agreement"). Such shares deposited with the Escrow Agent on behalf of all such
Holders are referred to herein as the "Escrow Shares." For so long as the Escrow
Shares are held pursuant to the Escrow Agreement, the Escrow Shares will appear
as issued and outstanding Buyer Common Shares on the Buyer's balance sheet and
will be duly and validly issued and outstanding.
(d) The Buyer shall take all steps necessary to provide the
Surviving Corporation with the Buyer Common Shares, as of the Effective Time, in
an amount sufficient to issue all of the shares contemplated by this Section 2.6
at the Effective Time in accordance with Section 2.9.
2.7 Closing.
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(a) The closing (the "Closing") of the Transactions will be held at
3:00 p.m., local time, on the date hereof (the "Closing Date"), at the offices
of Morgan, Lewis & Bockius LLP, One Logan Square, Philadelphia, PA (or such
other place as the parties may agree). At the Closing, the respective
designated parties thereto shall deliver (i) the documents referred to in
Sections 6 and 7, and (ii) the Certificate of Merger, executed and otherwise
prepared for filing. The Surviving Corporation shall also deliver at the
Closing to the Exchange Agent the aggregate Merger Consideration that may be
issuable to all Holders upon delivery of the appropriate documents under Section
2.9. As between the Buyer and the Company Stockholders, the Transactions shall
be deemed effective January 1, 1997 for purposes of economic benefit and
transfer of value to the Buyer.
(b) Contemporaneously with the Closing, the Surviving Corporation
shall deliver to the California Secretary of State and the Delaware Secretary of
State a duly executed and verified Certificate of Merger, as required by the
CGCL and DGCL, respectively, and the parties shall take all such other and
further actions as may be required by applicable Law to make the Merger
effective upon the terms and subject to the conditions hereof.
2.8 Dissenting Shares. Notwithstanding anything in this Agreement to the
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contrary, the Company Common Shares and Company Preferred Shares that are issued
and outstanding immediately prior to the Effective Time and that are held by a
stockholder who did not vote in favor of the Merger and who complies with all of
the relevant provisions of Sections 1300 et. seq. of the CGCL (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration, unless and until such Holder shall have failed to perfect or
shall have effectively withdrawn or lost such Holder's rights to appraisal under
the CGCL; and any such Holder shall have only such rights in respect of the
Dissenting Shares owned by such Holder as are provided by Sections 1300 et. seq.
of the CGCL. If any such Holder shall have failed to perfect or shall have
effectively withdrawn or lost such right, such Holder's Dissenting Shares shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive the Merger Consideration
without any interest thereon, pursuant to the terms of Section 2.6. The Company
shall give the Buyer prompt notice of any demand received by the Company for
appraisal of any Company Common Shares and Company Preferred Shares, and, prior
to the Effective Time, the Buyer shall have the right to direct all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company will not, except with the prior written
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consent of the Buyer, voluntarily make any payment with respect to, or settle or
offer to settle, any claim made by any Holders owning the Dissenting Shares.
2.9 Exchange of Converted Shares.
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(a) At and after the Effective Time, the Surviving Corporation shall
issue to each record holder (a "Holder"), as of the Effective Time, of an
outstanding certificate or certificates that immediately prior to the Effective
Time represented Converted Shares (the "Certificates"), upon the Holder's
delivery of the respective Securityholder Documents (defined below), that number
of shares of Buyer Common Shares equal to the product of the number of Converted
Shares represented by such Certificate multiplied by the appropriate Share Ratio
and that amount of cash equal to the product of the number of Converted Shares
represented by such certificate multiplied by the appropriate Cash Ratio. The
documents to be delivered by Holders of Converted Shares at and after the
Effective Time (the "Securityholder Documents") shall be the Certificates
representing the Converted Shares and a duly executed letter of transmittal in
the form provided by the Buyer. The Securityholder Documents shall include such
representations on the part of each Holder as the Buyer may deem reasonably
necessary in order to qualify for the exemption from registration under the 1933
Act that is provided by Regulation D promulgated thereunder. All such
surrendered Certificates shall be canceled upon their delivery. Except as
provided in Section 2.9(c), the Surviving Corporation shall pay any transfer or
similar taxes required by reason of the exchange of Converted Shares.
(b) With respect to each Certificate not so surrendered at the
Closing, the Surviving Corporation shall promptly thereafter mail to the Holder
thereof, a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss of title to such Certificate shall pass, only upon
proper delivery of the Certificate and such letter of transmittal to the
Surviving Corporation) and instructions for delivering such Certificate in
exchange for payment of the Merger Consideration. Upon delivery to the
Surviving Corporation of such Certificate, together with such letter of
transmittal, the Holder of the Certificate shall be paid in exchange therefor
cash and Buyer Common Shares as calculated pursuant to Section 2.9(a) in an
amount equal to the product of the number of Converted Shares represented by
such Certificate multiplied by the Merger Consideration, and such Certificate
shall then be canceled.
(c) No interest will be paid or accrued on the amounts payable upon
the surrender of the Securityholder Documents. If payment is to be made to a
Person other than the Person in whose name a Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such payment shall pay any transfer or similar
taxes required by reason of the payment to a Person other than the Holder of the
Certificate surrendered or shall establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.9, each Certificate (other
than Certificates evidencing Dissenting Shares) shall represent for all
purposes, the right to receive payment of the amounts specified in Section 2.6
in respect of such Converted Shares.
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(d) Any portion of the Buyer Common Shares deposited with the
Exchange Agent (other than the Escrow Shares) that remain undistributed to the
Holders of Converted Shares for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any Holder of Converted
Shares who has not theretofore complied with this Section 2.9 shall thereafter
look only to the Surviving Corporation for payment of the sums to which such
Holder is entitled pursuant to this Agreement.
(e) Neither the Buyer nor the Surviving Corporation shall be liable
to any Holder of Converted Shares for any cash or Buyer Common Shares delivered
by the Exchange Agent or the Surviving Corporation in good faith to a public
official pursuant to an applicable abandoned property, escheat or similar law.
(f) The Buyer or the Surviving Corporation (or the Exchange Agent on
their behalf) shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any Holder of Converted Shares
such amounts, if any, as the Buyer or the Surviving Corporation is required to
deduct and withhold with respect to the making of such payment under the Code or
any provisions of any Law related to Taxes. To the extent that amounts are so
withheld by the Buyer or the Surviving Corporation (or the Paying Agent on their
behalf), such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Holder of the relevant Converted Shares in
respect of which such deduction and withholding was made by the Buyer or the
Surviving Corporation (or the Exchange Agent on their behalf).
(g) None of the Buyer Common Shares issued in connection with the
Merger will be registered under the 1933 Act except to the extent registered
under the Registration Rights Agreement. None of the Buyer Common Shares may be
transferred in any manner other than if registered under the 1933 Act or if an
exemption from such registration is available. Each certificate for such Buyer
Common Shares shall bear a legend describing the foregoing restrictions.
2.1 No Further Transfer of Shares. After the Effective Time, there shall
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be no transfers of Converted Shares that were outstanding immediately prior to
the Effective Time on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, they shall be canceled and exchanged for cash as
provided in this Section 2. At the Effective Time, the stock ledger of the
Company shall be closed.
3. Representations and Warranties of the Company and the Company Stockholders.
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The Company and the Company Stockholders, jointly and severally, represent
and warrant to the Buyer and the Acquisition Company as follows, except to the
extent specified on the disclosure schedule that the Company has provided to the
Buyer on the date hereof (the "Disclosure Schedule"):
3.1 Corporate Status. The Company is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of California
and is qualified to do business as a foreign corporation in any jurisdiction
where it is required to be so qualified except where the failure to so
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<PAGE>
qualify would not have a Material Adverse Effect. The Charter Documents and
bylaws of the Company that have been delivered to the Buyer as of the date
hereof are effective under applicable Laws and are current, correct and
complete.
3.2 Authorization. The Company has the requisite power and authority to
-------------
own its Assets and to carry on its Business. The Company and each Company
Stockholder have the requisite power and authority to execute and deliver the
Transaction Documents to which such Person is a party and to perform the
Transactions performed or to be performed by it. Such execution, delivery and
performance by the Company have been duly authorized by all necessary corporate
action. Each Transaction Document executed and delivered by the Company and the
Company Stockholders has been duly executed and delivered by such Person and
constitutes a valid and binding obligation of such Person, enforceable against
such Person in accordance with its terms.
3.3 Consents and Approvals. Except for any consents specified in the
----------------------
DISCLOSURE SCHEDULE (the "Required Consents") and except for any approvals or
filings required by the SEC and by state securities law agencies, neither the
execution and delivery by the Company and the Company Stockholders of the
Transaction Documents to which such Person is a party, nor the performance of
the Transactions performed or to be performed by such Person, require any
filing, consent or approval, constitute a Default or cause any payment
obligation to arise under (a) any Law or Court Order to which such Person is
subject, (b) the Charter Documents or bylaws of the Company or (c) any Contract
or Governmental Permit to which the Company is a party or by which the
properties or other assets of the Company may be subject.
3.4 Capitalization and Stock Ownership. The total authorized capital
----------------------------------
stock of the Company consists of (i) 10,000,000 Company Common Shares, of which
5,345,164 shares are issued and outstanding on the date hereof, and (ii)
1,900,000 Company Preferred Shares, of which 1,200,000 Series A Preferred Shares
and 666,667 Series B Preferred Shares are issued and outstanding on the date
hereof. All previously outstanding Company Preferred Shares have been converted
into Company Common Shares. No dividends are or will be payable with regard to
the Company Preferred Shares. Except as set forth on the DISCLOSURE SCHEDULE,
there are no existing options, warrants, calls, commitments or other rights of
any character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued capital stock or other securities of the
Company. All of the Company Common Shares are duly and validly authorized and
issued, fully paid and non-assessable. The DISCLOSURE SCHEDULE lists all of the
record owners of the Company Common Stock.
3.5 Financial Statements. The Company has delivered to the Buyer correct
--------------------
and complete copies of unaudited monthly financial statements for the Company
consisting of a balance sheet as of the end of January 1997 and the related
statements of income and cash flows for the period then ended. The Company has
also delivered to the Buyer correct and complete copies of financial statements
consisting of a balance sheet of the Company as of September 30, 1994
(unaudited), 1995 (audited) and 1996 (audited) and the related statements of
income for the period then ended. All such financial statements are referred to
herein collectively as the "Company Financial Statements." The Company Financial
Statements are consistent in all material respects with the books and records
-12-
<PAGE>
of the Company, and there have not been or will not be any material transactions
that have not been or will not be recorded in the accounting records underlying
such Financial Statements. The Company Financial Statements have been prepared
in accordance with GAAP, consistently applied, and the Company Financial
Statements present fairly the financial position and assets and liabilities of
the Company as of the dates thereof, and the results of its operations for the
periods then ended, subject to normal recurring year-end adjustments and the
absence of notes. The Company's balance sheet as of January 31, 1997 that is
included in the Company Financial Statements is referred to herein as the
"Company Balance Sheet," and the date thereof is referred to as the "Balance
Sheet Date."
3.6 Title to Assets and Related Matters. The Company has good and
-----------------------------------
marketable title to, valid leasehold interests in or valid licenses to use, all
of the Company Assets, free from any Encumbrances except those specified in the
DISCLOSURE SCHEDULE. The use of the Company Assets is not subject to any
Encumbrances (other than those specified in the preceding sentence), and such
use does not materially encroach on the property or rights of anyone else. All
Company Real Property (defined below) and tangible personal property included in
the Company Assets are suitable for the purposes for which they are used, in
good working condition, reasonable wear and tear excepted, and are free from any
known defects, except such minor defects that would not have a Material Adverse
Effect.
3.7 Real Property. The DISCLOSURE SCHEDULE describes all real estate
-------------
used in the operation of the Company Business as well as any other real estate
that is in the possession of or leased by Company and the improvements
(including buildings and other structures) located on such real estate
(collectively, the "Company Real Property"), and lists any leases under which
any such Company Real Property is possessed (the "Company Real Estate Leases").
The Company does not have any ownership interest in any real property. The
DISCLOSURE SCHEDULE also describes any other real estate previously owned,
leased or otherwise operated by the Company or any predecessor thereof and the
time periods of any such ownership, lease or operation. All of the Company Real
Property (a) is usable in the ordinary course of business and (b) to the
Company's knowledge conforms in all material respects with any applicable Laws
relating to its construction, use and operation. To the Company's knowledge, the
Company Real Property complies with applicable zoning Laws. The Company or the
landlord of any Company Real Property leased by the Company has obtained all
licenses and rights-of-way from governmental entities or private parties that
are necessary to ensure vehicular and pedestrian ingress and egress to and from
the Company Real Property.
3.8 Certain Personal Property. The DISCLOSURE SCHEDULE describes all
-------------------------
items of tangible personal property that were included in the Company Balance
Sheet at a carrying value of at least $10,000. Except as specified in the
DISCLOSURE SCHEDULE, since the Balance Sheet Date, the Company has not acquired
any items of tangible personal property that have a carrying value in excess of
$10,000, or an aggregate carrying value of $100,000. All of such personal
property included in the DISCLOSURE SCHEDULE is usable in the ordinary course of
business, and all such personal property included in the DISCLOSURE SCHEDULE to
the Company's knowledge conforms in all material respects with any applicable
Laws relating to its construction, use and operation. Except
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<PAGE>
for those items subject to the Company Non-Real Estate Leases (defined below),
no Person other than the Company owns any vehicles, equipment or other tangible
assets located on the Company Real Property that have been used in the Company
Business or that are necessary for the operation of the Company Business.
3.9 Non-Real Estate Leases. The DISCLOSURE SCHEDULE lists all assets and
----------------------
property (other than Company Real Property) that are possessed by the Company
under an existing lease, including all trucks, automobiles, machinery,
equipment, furniture and computers, except for any lease under which the
aggregate annual payments are less than $25,000 (each, an "Immaterial Lease").
The DISCLOSURE SCHEDULE also lists the leases under which such assets and
property listed in the DISCLOSURE SCHEDULE are possessed. All of such leases
(excluding Immaterial Leases) are referred to herein as the "Company Non-Real
Estate Leases."
3.10 Accounts Receivable. The Accounts Receivable included in the Company
-------------------
Assets are bona fide Accounts Receivable created in the ordinary course of
business. Except for Accounts Receivable for which reserves have been
established, all of the Accounts Receivable included in the Company Assets are
collectible within 90 days from the respective dates of billing. The Company
does not know of any facts or circumstances (other than general economic
conditions) that are likely to result in any material increase in the
uncollectability of such Accounts Receivable in excess of any reserves therefor
set forth in the Company Balance Sheet.
3.11 Unbilled Accounts Receivable and Customer Advances. The DISCLOSURE
--------------------------------------------------
SCHEDULE lists all unbilled accounts receivable and customer advances of the
Company, including the name of the customer, the nature of the services provided
and the amount of such unbilled account receivable or customer advance, as of
the date hereof. The unbilled accounts receivable listed are bona fide accounts
receivable and the unbilled accounts receivable and customer advances listed
were created in the ordinary course of business. The Company does not know of
any facts or circumstances (other than general economic conditions) that are
likely to result in the uncollectability of such unbilled accounts receivable
and customer advances.
3.12 Liabilities. The Company does not have any Liabilities, except (a)
-----------
as specified in the DISCLOSURE SCHEDULE, (b) as contemplated by the Company
Balance Sheet (except as heretofore paid or discharged), (c) Liabilities under
any Contracts included in the Company Assets that are specifically disclosed in
the DISCLOSURE SCHEDULE (or not required to be disclosed because of the term or
amount involved) that were not required under GAAP to have been specifically
disclosed or reserved for on the Company Balance Sheet or (d) Expenses
referenced in Section 9 and other Liabilities that in the aggregate do not
exceed $25,000.
3.13 Taxes. Except as set forth in the DISCLOSURE SCHEDULE, the Company
-----
has duly filed all returns for Taxes that are required to be filed and has paid
all material Taxes shown as being due pursuant to such returns or pursuant to
any assessment received. All Taxes that the Company has been required by Law to
withhold or to collect have been duly withheld and collected and have been paid
over to the proper governmental authorities or are properly held by the Company
for such payment. There are no proceedings or
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<PAGE>
other actions, nor is there any basis for any proceedings or other actions, for
the assessment and collection of additional Taxes of any kind with respect to
the Company for any period for which returns have or should have been filed.
3.14 Subsidiaries. The Company does not own, directly or indirectly, any
------------
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, trust, joint venture or other legal entity.
3.15 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as set forth in the DISCLOSURE SCHEDULE, there is no
Litigation that is pending or, to the Company's knowledge, threatened against
the Company. To the Company's knowledge, there has been no Default under any
Laws applicable to the Company, including Laws relating to pollution or
protection of the environment, except for any Defaults that would not have a
Material Adverse Effect, and the Company has not received any notices from any
governmental entity regarding any alleged Defaults under any Laws. There has
been no Default with respect to any Court Order applicable to the Company.
(b) Without limiting the generality of Section 3.15(a), to the Company's
knowledge, there has not been any Environmental Condition (i) at the premises at
which the Company Business has been conducted, (ii) at any property owned,
leased or operated at any time by the Company, any Person controlled by the
Company or any predecessor of any of them, or (iii) at any property at which
wastes have been deposited or disposed by or at the behest or direction of any
of the foregoing, nor has the Company received written notice of any such
Environmental Condition. "Environmental Condition" means any condition or
circumstance, including the presence of Hazardous Substances, whether created by
the Company or any third party, at or relating to any such property or premises
that (i) requires abatement or correction under an Environmental Law, (ii) gives
rise to any civil or criminal liability on the part of the Company under an
Environmental Law, or (iii) has created a public or private nuisance.
(c) The Company has delivered to the Buyer complete copies of any written
reports, studies or assessments in the possession or control of the Company that
relate to any Environmental Condition and to the Company Business or any Company
Assets.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) the Company has obtained and is in full compliance with all
Governmental Permits, all of which are listed in the DISCLOSURE SCHEDULE along
with their respective expiration dates, that are required for the complete
operation of the Company Business as currently operated, (ii) all of such
Governmental Permits are currently valid and in full force and (iii) the Company
has filed such timely and complete renewal applications as may be required with
respect to its Governmental Permits. To the Company's knowledge, no revocation,
cancellation or withdrawal thereof has been threatened.
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<PAGE>
3.16 Contracts.
---------
(a) The DISCLOSURE SCHEDULE lists all Contracts of the following types to
which the Company is a party or by which it is bound, except for Minor
Contracts:
(i) Contracts with any present or former stockholder, director,
officer, employee, partner or consultant of the Company or any
Affiliate thereof.
(ii) Contracts for the future purchase of, or payment for, supplies
or products, or for the lease of any Asset from or the
performance of services by a third party, in excess of $25,000
in any individual case;
(iii) Contracts to sell or supply products or to perform services
that involve an amount in excess of $25,000 in any individual
case;
(iv) Contracts to lease to or to operate for any other party any
asset that involve an amount in excess of $25,000 in any
individual case;
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts
for the borrowing or lending of money (including loans to or
from officers, directors, partners, stockholders or Affiliates
of the Company or any members of their immediate families),
agreements or arrangements for a line of credit or for a
guarantee of, or other undertaking in connection with, the
indebtedness of any other Person;
(vi) Any Contracts under which any Encumbrances exist; and
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the
ordinary course of business.
(b) The Contracts listed in the DISCLOSURE SCHEDULE and the Contracts
excluded from the DISCLOSURE SCHEDULE based on the term or amount thereof are
referred to herein as the "Company Contracts." The Company is not in Default
under any Company Contracts (including any Company Real Estate Leases and
Company Non-Real Estate Leases), which Default could result in a Liability on
the part of the Company in excess of $25,000 in any individual case, and the
aggregate Liabilities
-16-
<PAGE>
that could result from all such Defaults do not exceed $50,000. The Company has
not received any communication from, or given any communication to, any other
party indicating that the Company or such other party, as the case may be, is in
Default under any Company Contract where such Default could have a Material
Adverse Effect. To the knowledge of the Company, none of the other parties in
any such Company Contract is in Default thereunder.
3.17 Insurance. The DISCLOSURE SCHEDULE lists all policies or binders of
---------
insurance held by or on behalf of the Company, specifying with respect to each
policy the insurer, the amount of the coverage, the type of insurance, the risks
insured, the expiration date, the policy number and any pending claims
thereunder. There is no Default with respect to any such policy or binder, nor
has there been any failure to give any notice or present any claim under any
such policy or binder in a timely fashion or in the manner or detail required by
the policy or binder, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect. There is no
notice of nonrenewal or cancellation with respect to, or disallowance of any
claim under, any such policy or binder that has been received by the Company,
except for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect.
3.18 Intellectual Property.
---------------------
(a) The Company does not currently use nor has it previously used in the
development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed in the DISCLOSURE
SCHEDULE. The Company owns or has the lawful right to use all material
Intellectual Property that has been used in the operation of the Company
Business, in the ordinary course or otherwise. All of the Intellectual Property
listed in the DISCLOSURE SCHEDULE is owned by the Company, free and clear of any
Encumbrances, or used pursuant to an agreement that is described in the
DISCLOSURE SCHEDULE. The Company has not infringed upon or unlawfully or
wrongfully used any Intellectual Property rights owned or claimed by another
Person. The Company is not in Default, nor has it received any notice of any
claim of infringement or any other claim or proceeding, with respect to any such
Intellectual Property. Except for any rights under written licenses or other
written Contracts, no current or former employee of the Company and no other
Person owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, and including any right to royalties or other
compensation, in any of the Intellectual Property.
(b) All officers of the Company and all employees and consultants of the
Company who are involved in the design, review, evaluation or development of
Intellectual Property have executed a nondisclosure and assignment of inventions
agreement (a "Confidentiality Agreement"). Furthermore, the persons listed on
the DISCLOSURE SCHEDULE have executed non-competition agreements in a form
acceptable to the Company. To the Company's knowledge, (i) none of the
Confidential Information has been used, divulged or appropriated (A) for the
benefit of any Person other than the Company or (B) otherwise to the detriment
of the Company, (ii) except as specified on the DISCLOSURE SCHEDULE, none of
such employees or consultants of the Company is subject to any contractual or
legal restrictions that might interfere with the use of his best efforts to
promote the interests of the Company, (iii) no employee or consultant of the
Company has used any other Person's trade secrets or other information that is
confidential in the course of his or her work with
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<PAGE>
respect to the Company Business, and (iv) no employee or consultant of the
Company is, or is currently expected to be, in Default under any term of any
employment contract, agreement or arrangement relating to the Intellectual
Property, or any Confidentiality Agreement or any other Contract or any
restrictive covenant relating to the Intellectual Property, or the development
or exploitation thereof.
3.19 Employees and Contractors. The Company is not (a) a party to,
-------------------------
involved in or, to the Company's knowledge, threatened by, any labor dispute or
unfair labor practice charge, or (b) currently negotiating any collective
bargaining agreement. The Company has not experienced during the last three
years any work stoppage. The Company has delivered to the Buyer a complete and
correct list of the names and salaries, bonus and other cash compensation of all
employees (including officers) of the Company. The DISCLOSURE SCHEDULE lists all
independent contractors engaged by the Company in the past three years
("Contractors"). None of the Contractors listed on the DISCLOSURE SCHEDULE are,
or at the time of engagement with the Company were, "employees" of the Company
for purposes of GAAP, ERISA or the Code.
3.20 ERISA.
-----
(a) The DISCLOSURE SCHEDULE contains a complete list of all Benefit Plans
sponsored or maintained by the Company or under which the Company is obligated.
The Company has delivered to the Buyer (i) accurate and complete copies of all
such Benefit Plan documents and all other material documents relating thereto,
including (if applicable) all summary plan descriptions, summary annual reports
and insurance contracts, (ii) accurate and complete detailed summaries of all
unwritten Benefit Plans, (iii) accurate and complete copies of the most recent
financial statements and actuarial reports with respect to all such Benefit
Plans for which financial statements or actuarial reports are required or have
been prepared and (iv) accurate and complete copies of all annual reports for
all such Benefit Plans (for which annual reports are required) prepared within
the last three years. Each such Benefit Plan providing benefits that are funded
through a policy of insurance is indicated by the word "insured" placed by the
listing of the Benefit Plan in the DISCLOSURE SCHEDULE.
(b) All such Benefit Plans conform (and at all times have conformed) in
all material respects to, and are being administered and operated (and have at
all time been administered and operated) in material compliance with, the
requirements of ERISA, the Code and all other applicable Laws. All returns,
reports and disclosure statements required to be made under ERISA and the Code
with respect to all such Benefit Plans have been timely filed or delivered.
There have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the Benefit
Plans, that could subject the Company to any material penalty or tax imposed
under the Code or ERISA.
(c) Except as is set forth in the DISCLOSURE SCHEDULE, any such Benefit
Plan that is intended to be qualified under Section 401(a) of the Code and
exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such determination that has been obtained remains
in effect and has not been revoked, and with respect to any application that is
pending, the Company has no
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<PAGE>
reason to suspect that such application for determination will be denied.
Nothing has occurred since the date of any such determination that is reasonably
likely to affect adversely such qualification or exemption, or result in the
imposition of excise taxes or income taxes on unrelated business income under
the Code or ERISA with respect to any such Benefit Plan.
(d) The Company does not sponsor a defined benefit plan subject to Title
IV of ERISA, nor does it have a current or contingent obligation to contribute
to any multiemployer plan (as defined in Section 3(37) of ERISA). The Company
does not have any liability with respect to any employee benefit plan (as
defined in Section 3(3) of ERISA) other than with respect to such Benefit Plans.
(e) There are no pending or, to the knowledge of the Company, threatened
claims by or on behalf of any such Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any such Benefit Plans, alleging any
breach of fiduciary duty on the part of the Company or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation of
such plans), nor is there, to the knowledge of the Company, any basis for such
claim. The Benefit Plans are not the subject of any pending (or to the knowledge
of the Company, any threatened) investigation or audit by the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation
("PBGC").
(f) The Company has timely made all required contributions under such
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any such Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan")
and except as specified in the DISCLOSURE SCHEDULE, (i) each Welfare Plan for
which contributions are claimed by the Company as deductions under any provision
of the Code is in material compliance with all applicable requirements
pertaining to such deduction, (ii) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a Welfare Plan, there
is no disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the Code,
(iii) any Benefit Plan that is a group health plan (within the meaning of
Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied, with all of the applicable material requirements of Section 4980B of
the Code, ERISA, Title XXII of the Public Health Service Act and the Social
Security Act, and (iv) all Welfare Plans may be amended or terminated at any
time on or after the Closing Date. Except as specified in the DISCLOSURE
SCHEDULE, no Benefit Plan provides any health, life or other welfare coverage to
employees of the Company beyond termination of their employment with the Company
by reason of retirement or otherwise, other than coverage as may be required
under Section 4980B of the Code or Part 6 of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality.
(h) All of the Company's Benefit Plans have been terminated.
3.21 Corporate Records. The minute books of the Company contain
-----------------
complete, correct and current copies of their respective Charter Documents and
bylaws and of all minutes of meetings,
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<PAGE>
resolutions and other proceedings of its Board of Directors and stockholders.
The stock record books of the Company are complete, correct and current.
3.22 Inventory. The inventory reflected on the Company Balance Sheet is
---------
saleable at a sales price no less than that reflected on the Company Balance
Sheet.
3.23 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement since the Balance Sheet Date, the Company has conducted the Company
Business in the ordinary course and there has not been with respect to the
Company Business:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any distribution or payment declared or made in respect of its
capital stock by way of dividends, purchase or redemption of shares or
otherwise;
(c) any increase in the compensation payable or to become payable
to any director, officer, employee or agent, except for increases for non-
officer employees made in the ordinary course of business, nor any other
change in any employment or consulting arrangement;
(d) any sale, assignment or transfer of Assets, or any additions to
or transactions involving any Assets, other than those made in the ordinary
course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held; or
(f) any payments to any Affiliate of the Company, except as
specified in the DISCLOSURE SCHEDULE.
3.24 Previous Sales; Warranties. The Company has not breached any express
--------------------------
or implied warranties in connection with the sale or distribution of goods or
the performance of services, except for breaches that, individually and in the
aggregate, would not have a Material Adverse Effect.
3.25 Customers and Suppliers. The Company has used its reasonable
-----------------------
business efforts to maintain and currently maintains, good working relationships
with all of its customers. The DISCLOSURE SCHEDULE contains a list of the names
of each of the ten customers that, in the aggregate, for the three years ending
December 31, 1994, 1995 and 1996, were the largest dollar volume customers of
products or services, or both, sold by the Company. Except as specified in the
DISCLOSURE SCHEDULE, none of such customers has given the Company notice
terminating, canceling or threatening to terminate or cancel any Contract or
relationship with the Company. The DISCLOSURE SCHEDULE also contains a list of
the names of each of the ten suppliers that, in the
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aggregate, for the three years ending December 31, 1994, 1995 and 1996, were the
largest dollar volume suppliers of products or services, or both, purchased by
the Company. Except as specified in the DISCLOSURE SCHEDULE, none of such
suppliers has given the Company notice terminating, cancelling or threatening to
terminate or cancel any Contract or relationship with the Company.
3.26 Finder's Fees. Except as set forth on the DISCLOSURE SCHEDULE, no
-------------
Person retained by the Company is or will be entitled to any commission or
finder's or similar fee in connection with the Transactions.
3.27 Additional Information. The DISCLOSURE SCHEDULE accurately lists the
----------------------
following:
(a) the names of all officers and directors of the Company;
(b) the names and addresses of every bank or other financial
institution in which the Company maintains an account (whether checking,
saving or otherwise), lock box or safe deposit box, and the account numbers
and names of Persons having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of the Company;
(d) the names of any Persons holding powers of attorney from the
Company and a summary statement of the terms thereof; and
(e) all names under which the Company has conducted any part of its
Business or which it has otherwise used at any time during the past five
years.
3.28 Accuracy of Information. No representation or warranty by the
-----------------------
Company in any Transaction Document, and no information contained therein or
otherwise delivered by or on behalf of the Company in connection with the
Transactions, including the Company Financial Statements, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which such statements were made.
4. Representations and Warranties of the Buyer.
-------------------------------------------
The Buyer hereby represents and warrants to the Company as follows:
4.1 Corporate Status. The Buyer and the Acquisition Company are
----------------
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions in which they were incorporated and are qualified to
do business as foreign corporations in any jurisdiction where they are required
to be so qualified except where the failure to so qualify would not have a
Material
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Adverse Effect. The Charter Documents and bylaws of the Buyer that have been
delivered to the Company as of the date hereof are effective under applicable
Laws and are current, correct and complete.
4.2 Authorization. Each of the Buyer Parties has the requisite power and
-------------
authority to own its Assets and to carry on its Business. Each of the Buyer
Parties has the requisite power and authority to execute and deliver the
Transaction Documents to which it is a party and to perform the Transactions
performed or to be performed by it. Such execution, delivery and performance by
each Buyer Party have been duly authorized by all necessary corporate action,
including approval by the Buyer as the sole stockholder of the Acquisition
Company. Each Transaction Document executed and delivered by any Buyer Party has
been duly executed and delivered by such Party and constitutes a valid and
binding obligation of such Party, enforceable against such Buyer Party in
accordance with its terms.
4.3 Consents and Approvals. Except for the actions related to the
----------------------
registration and qualification of the Buyer Common Shares issuable in connection
with the Merger as contemplated by Section 6.2 and the listing of such Buyer
Common Shares on the Nasdaq National Market, neither the execution and delivery
by any Buyer Party of the Transaction Documents to which it is a party, nor the
performance of the Transactions performed or to be performed by any Buyer Party,
require any filing, consent or approval, constitute a Default or cause any
payment obligation to arise under (a) any Law or Court Order to which any Buyer
Party is subject, (b) the Charter Documents or bylaws of any Buyer Party or (c)
any Contract, Governmental Permit or other document to which any Buyer Party is
a party or by which the properties or other assets of any Buyer Party may be
subject.
4.4 Capitalization and Stock Ownership. The total authorized capital
----------------------------------
stock of the Buyer consists of (a) 50,000,000 Buyer Common Shares, of which
approximately 11,253,000 shares are issued and outstanding on the date hereof,
and (b) 5,000,000 shares of Preferred Stock, no par value per share, of which no
shares are issued and outstanding on the date hereof. Except as described in the
Buyer Disclosure Documents there are no existing options, warrants, calls,
commitments or other rights of any character (including conversion or preemptive
rights) relating to the acquisition of any issued or unissued capital stock or
other securities of the Buyer. All of the Buyer Common Shares issuable in
connection with the Merger will be, when issued in accordance with the terms
thereof, duly and validly authorized and issued, fully paid and non-assessable.
4.5 Financial Statements. The Buyer has delivered to the Company correct
--------------------
and complete copies of consolidated financial statements consisting of a
consolidated balance sheet of the Buyer as of December 31, 1994, 1995 and 1996
and the related statements of income for the fiscal years then ended, all of
which were audited by KPMG Peat Marwick LLP, independent public accountants. All
such unaudited and audited financial statements are referred to herein
collectively as the "Buyer Financial Statements." The Buyer Financial Statements
are consistent in all material respects with the books and records of the Buyer,
have been prepared in accordance with GAAP consistently applied, and present
fairly the financial position and assets and liabilities of the Buyer as of the
dates thereof, and the results of its operations for the periods then ended,
subject to normal
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recurring year-end adjustments and the absence of notes in the case of unaudited
Buyer Financial Statements. The balance sheet of the Buyer as of December 31,
1996 that is included in the Buyer Financial Statements is referred to herein as
the "Buyer Balance Sheet."
4.6 Buyer Disclosure Documents. The Buyer has filed all required forms,
--------------------------
reports, statements, schedules and other documents with the SEC since the date
when it became subject to the reporting requirements under the 1934 Act
(collectively, the "Buyer Disclosure Documents"). The Buyer has furnished to the
Company the Buyer's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and its Quarterly Reports on Form 10-Q for the periods ending
March 31, 1996, June 30, 1996 and September 30, 1996, all of which are part of
the Buyer Disclosure Documents. Each of such Buyer Disclosure Documents, at the
time it was filed, complied in all material respects with all applicable
requirements of the 1933 Act and the 1934 Act, and with the forms, rules and
regulations of the SEC promulgated thereunder, and did not contain at the time
filed any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
4.7 Liabilities. The Buyer does not have any Liabilities, except (a) as
-----------
described in the Buyer Disclosure Documents, (b) as contemplated by the Buyer
Balance Sheet (except as heretofore paid or discharged), (c) Liabilities
incurred in the ordinary course since the Balance Sheet Date that, individually
or in the aggregate, are not material to the Buyer's Business, or (d)
Liabilities under any Contracts included in the Buyer's Assets that were not
required under GAAP to have been specifically disclosed or reserved for on the
Buyer's Balance Sheet.
4.8 No Acquisition Company Assets. Liabilities or Business. Except for
------------------------------------------------------
any rights and Liabilities that the Acquisition Company may have with respect to
this Agreement, the Acquisition Company does not have any Assets or Liabilities,
nor has the Acquisition Company conducted any Business other in connection with
the Transactions.
4.9 Finder's Fees. Except as set forth on the DISCLOSURE SCHEDULE, no
-------------
Person retained by the Buyer is or will be entitled to any commission or
finder's or similar fee in connection with the Transactions.
4.10 Tax Representations.
--------------------
(a) At all times prior to the Effective Time, Buyer has been in
Control of the Acquisition Company. As used in this Agreement, "Control" shall
have the meaning found in Section 368(c) of the Code.
(b) Buyer has no current plan or intention to cause Acquisition
Company to issue additional shares of its stock or to take any other action that
would result in Buyer losing Control of the Acquisition Company.
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(c) Except as provided for in the Escrow Agreement, Buyer has no
current plan or intention to reacquire any of the Buyer Common Shares issued
pursuant to the Transactions.
(d) Buyer has no current plan or intention to liquidate the
Acquisition Company, merge the Acquisition Company with or into another
corporation other than the Company, sell or otherwise dispose of the stock of
Acquisition Company or cause Acquisition Company to sell or otherwise dispose of
any of its assets or of any assets acquired through the Merger, except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by the Acquisition Company as described in Section
368(a)(2)(C) of the Code.
(e) Neither the Buyer nor the Acquisition Company is an investment
company within the meaning of 368(a)(2)(F)(iii) and (iv) of the Code.
(f) Neither the Buyer nor the Acquisition Company is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(g) At the Effective Time, and at all times thereafter, unless
repurchased by the Buyer pursuant to the Escrow Agreement, the Escrow Shares
will appear as issued and outstanding on the Buyer's balance sheet and will be
duly and validly issued and outstanding.
(h) Buyer currently intends to cause the Acquisition Company to
continue the historic business of the Company or to use a significant portion of
the Company's historic business assets in its business.
4.11 Accuracy of Information. No representation or warranty by the Buyer
-----------------------
in any Transaction Document, and no information contained therein or otherwise
delivered by or on behalf of the Buyer to the Company in connection with the
Transactions, including the Buyer Financial Statements or the Buyer Disclosure
Documents, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which such statements
were made.
5. Post-Closing Covenants.
----------------------
5.1 Current Employment Arrangements. The Buyer, after consultation with
-------------------------------
the Company, will develop a program to address general employee retention and
motivation. The Buyer will offer to continue to employ such persons determined
by the Buyer in its sole discretion.
5.2 Employment Benefit Plans. The Buyer will provide the continuing
-------------------------
employees of the Company the opportunity to participate in the Buyer's employee
benefit plans on terms and conditions comparable to Buyer's employees similarly
situated. In addition, employees of the Company shall receive credit with
regard to such benefit plans for time served with the Company.
5.3 Agreement Not to Compete. Each MicroClock Founder agrees that he
------------------------
will not, during his employment with the Company or the Surviving Company or any
successor or Affiliate
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<PAGE>
thereof, and for a period of at least three years from the date of this
Agreement, without the prior written consent of the Buyer, directly or
indirectly, engage in, participate in, have any interest on behalf of himself or
other in, or permit his name to be used with, any corporation or other entity or
enterprise which competes with the business of the Buyer or any of its
Affiliates in the geographical areas where the Buyer or any of its Affiliates
conducts such business, whether as an employee, officer, director, agent,
consultant, investor, security holder, creditor, guarantor, partner, joint
venturer, beneficiary under a trust or otherwise. The foregoing shall not,
however, be construed to prohibit the ownership of not more than 5% of any class
of securities of any corporation having a class of securities registered
pursuant to the Securities Exchange Act of 1934 as amended, provided that such
ownership represents solely a passive investment and that employee does not in
any way manage, control, perform services for or otherwise take any active role
therein.
5.4 Failure to Receive California Approval. Each party hereto agrees that
---------------------------------------
in the event that the State of California refuses to approve the Transactions,
at the Buyer's request, all of the Company Stockholders will return any and all
Merger Consideration paid pursuant hereto to the Buyer. Furthermore, in the
event of such return of the Merger Consideration, all Transactions contemplated
hereby and by any of the Transaction Documents shall for all intents and
purposes be viewed as null and void.
6. Conditions Precedent to the Buyer Parties' Obligations.
------------------------------------------------------
All obligations of the Buyer and the Acquisition Company to be performed on
the Closing Date shall be subject to the satisfaction (or waiver by the Buyer or
the Acquisition Company), prior thereto, of the following conditions:
6.1 Representations True at Closing. The representations and warranties
-------------------------------
of the Company set forth in this Agreement shall be true and correct in all
material respects, on and as of the Effective Time except for such inaccuracies
or breaches of warranty as would not, individually or in the aggregate, have a
Material Adverse Effect.
6.2 Litigation Affecting Closing. No Court Order shall have been issued
----------------------------
or entered that prohibits consummation of the Merger.
6.3 Regulatory Compliance and Approvals. All governmental consents and
-----------------------------------
approvals legally required for the consummation of the Merger and the
Transactions shall have been obtained and be in effect at the Effective Time on
terms and conditions that would not have a Material Adverse Effect on the
Surviving Corporation.
6.4 Certificates. The Company shall have delivered a certificate of an
------------
executive officer of the Company to the effect that the conditions set forth in
Section 6.1 have been satisfied.
6.5 Opinion of Counsel to the Company. Tomlinson, Zisko, Morosoli & Maser,
---------------------------------
counsel to the Company, shall have delivered to the Buyer their opinion, dated
the Closing Date, with respect to those matters reasonably requested by the
Buyer.
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<PAGE>
6.6 Stockholder Approval. This Agreement and the Transactions shall have
--------------------
been approved and adopted by the requisite vote of the stockholders of the
Company pursuant to the CGCL and DGCL and none of such stockholders shall have
perfected their dissenter rights under the CGCL and DGCL prior to the Closing
Date.
6.7 Directors. All directors of the Company shall have tendered their
---------
resignations as directors, effective as of the Closing, and the Persons
designated by the Buyer shall have been elected to the Board of Directors of the
Company.
6.8 No Regulatory Action. No action shall have been taken, and no
--------------------
statute, rule or law shall have been enacted, by any state, federal or foreign
government or governmental agency which would prevent the consummation of the
Merger.
6.9 Transaction Agreements. The Company and the shareholders of the
----------------------
Company shall have executed each of the Escrow Agreement, Registration Rights
Agreement and the Employment Agreements, as appropriate.
6.1 Dividends. All dividends and distributions with respect to the
----------
Company Preferred Stock have been paid, including without limitation, $40,471.20
due and payable to the holders of Series A Preferred Stock and $46,740.02 due
and payable to the holders of Series B Preferred Stock.
7. Conditions Precedent to the Company's Obligations.
-------------------------------------------------
All obligations of the Company to be performed on the Closing Date shall be
subject to the satisfaction (or waiver by the Company), prior thereto, of each
of the following conditions:
7.1 Representations True at Closing. The representations and warranties
-------------------------------
of the Buyer Parties set forth in this Agreement shall be true and correct in
all material respects, on and as of the Effective Time except for such
inaccuracies or breaches of warranty as to which the Company had actual
knowledge on or prior to the date hereof.
7.2 Litigation Affecting Closing. No Court Order shall have been issued
----------------------------
or entered that would be violated by the completion of the Transactions.
7.3 Regulatory Compliance and Approvals. All governmental consents and
-----------------------------------
approvals legally required for the consummation of the Merger and the
Transactions shall have been obtained and be in effect at the Effective Time on
terms and conditions that would not have a Material Adverse Effect on the
Surviving Corporation.
7.4 Certificates. The Buyer shall have delivered a certificate of an
------------
executive officer of the Buyer to the effect that the conditions set in Section
7.1 have been satisfied.
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<PAGE>
7.5 Opinion of Counsel to the Buyer Parties. Randall J. Gort, Director of
---------------------------------------
Corporate and Legal Affairs of the Buyer shall have delivered to the Company his
opinion, dated the Closing Date, with respect to those matters reasonably
requested by the Company.
7.6 Stockholder Approval. This Agreement and the Transactions shall have
--------------------
been approved and adopted by the requisite vote of the stockholders of the
Company pursuant to the CGCL and DGCL.
7.7 No Regulatory Action. No action shall have been taken, and no
--------------------
statute, rule or law shall have been enacted, by any state, federal or foreign
government or governmental agency that would prevent the consummation of the
Merger.
7.8 Transaction Agreements. The Buyer shall have executed the Escrow
----------------------
Agreement, the Registration Rights Agreement and the Employment Agreements.
8. Indemnification.
---------------
8.1 By the Company Stockholders. From and after the Closing Date, to the
---------------------------
extent provided in this Section 8, each of the Company Stockholders shall,
jointly and severally, indemnify and hold harmless the Buyer, the Surviving
Company, and each of its successors and assigns, and each of its officers,
directors, employees, stockholders, agents, affiliates and any Person who
controls the Buyer or the Surviving Company within the meaning of the Securities
Act or the Exchange Act (each, a "Buyer Indemnified Party") from and against any
liabilities, claims, demands, judgments, losses, costs, damages or expenses
whatsoever (including attorneys', consultants' and other professional fees and
disbursements of every kind, nature and description incurred by an Indemnified
Party (as hereinafter defined) in connection therewith) (collectively,
"Damages") that such Buyer Indemnified Party may sustain, suffer or incur and
that result from, arise out of or relate to:
(a) any breach of any representation or warranty of the Company or a
Company Stockholder set forth in this Agreement or any certificate or other
writing delivered by the Company or a Company Stockholder in connection
herewith;
(b) any nonfulfillment of any covenant or agreement on the part of a
Company Stockholder or, prior to the Effective Time, the Company, in this
Agreement; or
(c) any liability or obligation which relates to, or which involves a
claim, liability or obligation which arises out of or is based upon, any
Environmental Law to the extent that such liability or obligation relates
to or arises out of, in whole or in part, any activity occurring, condition
existing, omission to act or other matter existing prior to the Closing
Date; and
(d) any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and other expenses
(including without limitation
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<PAGE>
reasonable attorneys' fees and expenses) incident to any of the foregoing
or to the enforcement of this Section 8.1.
8.2 By the Buyer. From and after the Closing Date, to the extent provided
------------
in this Section 8, the Buyer shall indemnify and hold harmless the Company
Stockholders, their successors and assigns (each, a "Seller Indemnified Party")
from and against any Damages that such Seller Indemnified Party may sustain,
suffer or incur and that result from, arise out of or relate to any breach of
any representation, warranty, covenant or agreement of the Buyer contained in
the Transaction Documents and any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including without limitation reasonable attorneys' fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 8.2.
8.3 Limitations on Indemnification. Except as to a claim for Damages for
------------------------------
a breach of representation contained in Section 3.4, no Indemnified Party shall
be entitled to indemnification for breaches of representations and warranties
under this Section 8 unless and until the aggregate amount of all such claims
for Damages exceeds $50,000 (the "Indemnification Threshold"), and only to the
extent such claims for Damages exceeds the Indemnification Threshold.
Furthermore, no Indemnified Party shall be entitled to indemnification under
this Section 8 to the extent that such indemnification exceeds $7.4 million in
the aggregate, except with regard to a breach of the representations contained
in Sections 3.1, 3.2, 3.4, 3.13, 3.15, 3.20, 4.1, 4.2, 4.4 and 4.6 for which the
aggregate limitation for claims for Damages shall be $14.8 million.
8.4 Procedure for Claims.
--------------------
(a) A Buyer Indemnified Party or a Seller Indemnified Party (each, an
"Indemnified Party") that desires to seek indemnification under any part of this
Section 8 shall give written notice (a "Claim Notice") to each party responsible
or alleged to be responsible for indemnification hereunder (an "Indemnitor").
Such notice shall briefly explain the nature of the claim and shall specify the
amount thereof. If the matter to which a claim relates shall not have been
resolved as of the date of the Claim Notice, the Indemnified Party shall
estimate the amount of the claim in the Claim Notice, but also specify therein
that the claim has not yet been liquidated (an "Unliquidated Claim"). If an
Indemnified Party gives a Claim Notice for an Unliquidated Claim, the
Indemnified Party shall also give a second Claim Notice (the "Liquidated Claim
Notice") within 60 days after the matter giving rise to the claim becomes
finally resolved, and the Second Claim Notice shall specify the amount of the
claim. Each Indemnitor to which a Claim Notice is given shall respond to any
Indemnified Party that has given a Claim Notice (a "Claim Response") within 20
days (the "Response Period") after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is given. Any
Claim Notice or Claim Response shall be given in accordance with the notice
requirements hereunder, and any Claim Response shall specify whether or not the
Indemnitor giving the Claim Response disputes the claim described in the Claim
Notice. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the claim described in
the related Claim Notice. If any Indemnitor elects
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<PAGE>
not to dispute a claim described in a Claim Notice, whether by failing to give a
timely Claim Response or otherwise, then the amount of such claim shall be
conclusively deemed to be an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party hereunder, such Indemnitor shall pay to such Indemnified Party within 30
days after the last day of the Claim Response Period the amount to which such
Indemnified Party shall be entitled. A Buyer Indemnified Party shall first
request payment of the related Damages under the Escrow Agreement, but only to
the extent that Escrow Shares are then being held by the Escrow Agent and are
not subject to other claims for indemnification, and thereafter the Buyer
Indemnified Party shall seek indemnification directly from the Company
Stockholders who shall be required first to tender Buyer Common Shares until
such shares are exhausted and thereafter cash in satisfaction of any claim for
indemnification by a Buyer Indemnified Party. All Escrow Shares and Buyer
Common Shares shall be valued at $15.10 per share for purposes of satisfying a
claim for indemnification under this Section 8 without regard to their then
current fair market value at the time any such claim is made. Subject to the
foregoing, if there shall be a dispute as to the amount or manner of
indemnification under this Section 8, the Indemnified Party may pursue whatever
legal remedies may be available for recovery of the Damages claimed from any
Indemnitor. If any Indemnified Party fails to receive all or part of any
indemnification obligation when due, then such Indemnified Party shall also be
entitled to receive from the applicable Indemnitor or, if applicable, the Escrow
Agent, interest on the unpaid amount for each day during which the obligation
remains unpaid at an annual rate equal to the Prime Rate, and the Prime Rate in
effect on the first business day of each calendar quarter shall apply to the
amount of the unpaid obligation during such calendar quarter. A Buyer
Indemnified Party shall in any case seek recovery pursuant to this Section 8
first from the Buyer Common Shares issued pursuant hereto until all Buyer Common
Shares have been tendered and only thereafter from cash.
8.5 Third Party Claims. An Indemnified Party that desires to seek
------------------
indemnification under any part of this Section 8 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor
may, or if so requested by such Indemnified Party, any Indemnitor shall,
participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld), that (a) fails to include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of any such Action or (b) grants the claimant or plaintiff
any injunctive relief against the Indemnified Party. Any failure to give prompt
notice under this Section 8.5 shall not bar an Indemnified Party's right to
claim indemnification under this Section 8, except to the extent that an
Indemnitor shall have been harmed by such failure.
8.6 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties given or made by the Company, a Company Stockholder and the Buyer in
this Agreement or in any
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<PAGE>
certificate or other writing furnished in connection herewith shall survive the
Closing for a period of eighteen months except (i) with regard to Sections 3.13,
3.15 and 3.20, which will survive for the period of the applicable statute of
limitations, (ii) with regard to Section 3.18, which will survive for three
years, and (iii) with regard to Sections 3.1, 3.2, 3.4, 4.1, 4.2 and 4.4, which
will survive indefinitely. Each party shall be entitled to rely upon the
representations and warranties of the other party or parties set forth herein
regardless of any investigation or audit conducted before or after the Closing
Date or the decision of any party to complete the Closing.
8.7 Exclusive Remedy. Indemnification under this Section 8 shall be the
----------------
sole and exclusive remedy for breaches of representations and warranties
contained in this Agreement.
9. General.
-------
9.1 Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Delaware.
9.2 Further Assurances. The parties hereto shall execute and deliver any
------------------
and all documents and take such other actions as may be necessary to complete
the Transactions.
9.3 Binding Effect. This Agreement shall be binding upon the parties
--------------
hereto and their respective successors and assigns; provided, however, that this
Agreement and all rights hereunder may not be assigned by any party hereto
without the written consent of the other parties. Nothing in this Agreement,
expressed or implied, is intended to confer upon any Person other than the Buyer
Parties and the Company Parties any rights or remedies of any nature whatsoever.
9.4 Waiver of Conditions. Any party hereto may waive any condition
--------------------
provided in this Agreement for its benefit.
9.5 Exhibits. All of the Exhibits attached to this Agreement and the
--------
Disclosure Schedule are hereby incorporated herein and made a part hereof.
9.6 Expenses. The Buyer will pay or cause to be paid all of the Company's
--------
reasonable and customary legal and investment banking costs and expenses
incurred in connection with this Agreement and the Transactions, provided,
however, that such aggregate amount shall not exceed $500,000. The Buyer and
the Acquisition Company will pay their own respective expenses, if any, incurred
in connection with this Agreement and the Transactions.
9.7 Entire Agreement. This Agreement and the other Transaction Documents
----------------
contain the entire agreement among the parties hereto, and there are no
agreements, representations or warranties which are not set forth in such
documents. All prior negotiations, agreements and understandings are superseded
hereby. This Agreement may not be amended or revised except by a writing signed
by all parties hereto.
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<PAGE>
9.8 Notices. Any notice, authorization, request or demand required or
-------
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given on the earlier of the date when received at, or the fifth day
after the date when sent by registered or certified mail to, the respective
addresses or telecopy numbers specified for the parties below.
TO THE BUYER OR THE ACQUISITION COMPANY:
Randall J. Gort
Director of Corporate and Legal Affairs
2435 Blvd. Of the Generals
Valley Forge, PA 19482
Fax: 610-630-5602
TO THE COMPANY:
Christopher Bland
1654 Everett Street
San Jose, CA 95126
Fax:
Barry Olsen
1136 Idaho Street
San Jose, CA 95126
With a copy to:
William E. Zisko
Tomlinson, Zisko, Morosoli & Maser
Page Mill Road
Palo Alto, CA 94306
Fax: 415-324-1808
9.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be binding as of the date first written above.
Each such copy shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
9.1 Amendment. This Agreement may be amended by the Boards of Directors
---------
of the parties hereto at any time prior to the filing of the Certificate of
Merger, and any such amendment shall be by a written instrument signed by the
parties hereto; provided, however, that this Agreement may only be amended
without approval of the stockholders of the Company and the Acquisition Company
to the extent permitted by applicable law.
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<PAGE>
9.1 Interpretation.
--------------
Unless the context of this Agreement clearly requires otherwise, (a) "or"
has the inclusive meaning frequently identified with the phrase "and/or," (b)
"including" has the inclusive meaning frequently identified with the phrase "but
not limited to" and (c) references to one gender include all genders. The
section and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of this Agreement
or the interpretation thereof in any respect. Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. Each
accounting term used herein that is not specifically defined herein shall have
the meaning given to it under GAAP.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: [SIGNATURE ILLEGIBLE]
-------------------------------
ICS ACQUISITION COMPANY
By: [SIGNATURE ILLEGIBLE]
-------------------------------
MICROCLOCK, INC.
By:_______________________________
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/s/ Christopher Bland
-------------------------------
Christopher Bland
/s/ Barry Olsen
-------------------------------
Barry Olsen
