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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
Date of Report (Date of earliest event reported)
April 29, 1999
INTEGRATED PACKAGING ASSEMBLY CORPORATION
________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware
________________________________________________________________________
(State or other jurisdiction of incorporation)
0-27712 77-0309372
___________________ ___________________________________
(Commission File No.) (IRS Employer Identification Number)
2221 Old Oakland Road
San Jose, California 95131
______________________________________________
(Address of principal executive offices)
(408) 321-3600
________________________________________________
(Registrant's telephone number, including area code)
-1-
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Item 1. Changes in Control of Registrant.
--------------------------------
On April 29, 1999, Orient Semiconductor Electronics, Limited ("OSE")
purchased 4,000,000 shares of the Series A Convertible Preferred Stock (the
"Series A Preferred") of Integrated Packaging Assembly Corporation (the
"Registrant") for a cash purchase price of $6,800,000. OSE acquired the shares
of Series A Preferred from the Registrant pursuant to a Preferred Stock
Purchase Agreement dated April 29, 1999 (the "Purchase Agreement"). Each share
of Series A Preferred is initially convertible into 13.7487705 shares of the
Registrant's Common Stock. Each share of Series A Preferred has voting rights
equal to the number of shares of Common Stock into which each such share is
convertible. As contemplated by the Purchase Agreement and related documents,
upon the closing of the transaction, the Registrant's Board of Directors
consisted of three representatives of OSE, one outside independent director,
and one management director. Representing OSE are Calvin Lee, President of
OSE, Edward S. Duh, Vice President of OSE, and Edmond Tseng, President of
OSE, Inc. (USA). The independent outside director is Don W. Brooks, CO-CEO,
UMC Group (USA). Pursuant to the Company's Certificate of Designation of
Series A Convertible Preferred Stock, the holders of Series A Preferred shall
be entitled to elect three (3) members of the Company's Board of Directors;
the holders of Common Stock shall be entitled to elect one (1) member of the
Board of Directors; and the holders of Common Stock and Series A Preferred,
voting together as a single class on an as-is-converted basis, shall be
entitled to elect the remaining members of the Board of Directors. The
management director is Patrick Verderico, the Registrant's Chief Executive
Officer and President. The source of the consideration used by OSE to acquire
the shares of Series A Preferred was general working capital. As a result of
the transaction, OSE beneficially owns 100% of the Registrant's Series A
Preferred which is convertible into approximately 55.0 million shares of the
Registrant's Common Stock. The shares of Series A Preferred purchased by OSE
constitute approximately 79.4% of the outstanding voting power of the
Registrant and 75% of the Registrant's capital stock on a fully diluted basis.
In connection with the transaction, the Registrant's secured creditors have
restructured the Registrant's debt, including some debt forgiveness and
extended payment terms.
Item 7. Exhibits.
--------
(c) Exhibits.
4.1 Stock Purchase Agreement dated April 29, 1999 by and between OSE
and the Registrant.
4.2 Right of First Refusal Agreement dated April 29, 1999 by and
between OSE and the Registrant.
4.3 Certificate of Designation of Series A Convertible Preferred
Stock.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Integrated Packaging Assembly Corporation
Dated: May 7, 1999 By: /s/ PATRICK VERDERICO
-----------------------
Patrick Verderico,
Chief Executive Officer
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EXHIBIT 4.1
STOCK PURCHASE AGREEMENT
between
Orient Semiconductor Electronics, Limited
and
Integrated Packaging Assembly Corporation
Dated April 29, 1999
<TABLE>
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<S> <C> <C>
ARTICLE 1 Definitions....................................................... 1
1.1 "Applicable Contract"............................................. 1
1.2 "Breach".......................................................... 1
1.3 "Buyer"........................................................... 2
1.4 "Closing"......................................................... 2
1.5 "Closing Date".................................................... 2
1.6 "Company"......................................................... 2
1.7 "Consent"......................................................... 2
1.8 "Contemplated Transactions"....................................... 2
1.9 "Contract"........................................................ 2
1.10 "Damages"......................................................... 2
1.11 "Encumbrance"..................................................... 2
</TABLE>
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<TABLE>
<S> <C> <C>
1.12 "Environment"..................................................... 2
1.13 "Environmental, Health, and Safety Liabilities"................... 2
1.14 "Environmental Law"............................................... 3
1.15 "ERISA"........................................................... 3
1.16 "Exchange Act".................................................... 3
1.17 "Facilities"...................................................... 4
1.18 "GAAP"............................................................ 4
1.19 "Governmental Authorization"...................................... 4
1.20 "Governmental Body"............................................... 4
1.21 "Hazardous Activity".............................................. 4
1.22 "Hazardous Materials"............................................. 4
1.23 "Intellectual Property Assets".................................... 4
1.24 "IRC"............................................................. 4
1.25 "IRS"............................................................. 4
1.26 "Legal Requirement"............................................... 5
1.27 "Occupational Safety and Health Law".............................. 5
1.28 "Order"........................................................... 5
1.29 "Ordinary Course of Business"..................................... 5
1.30 "Person".......................................................... 5
1.31 "Plan"............................................................ 5
1.32 "Proceeding"...................................................... 5
1.33 "Related Person".................................................. 5
1.34 "Release"......................................................... 6
1.35 "Representative".................................................. 6
1.36 "Securities Act".................................................. 6
1.38 "Series A Preferred Shares"....................................... 6
1.39 "Subsidiary"...................................................... 6
1.40 "Tax"............................................................. 6
1.41 "Tax Return"...................................................... 6
1.42 "Threat of Release"............................................... 6
ARTICLE 2 Sale And Transfer Of Series A Preferred Shares; Closing........... 6
2.1 Series A Preferred Shares......................................... 6
</TABLE>
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<TABLE>
<S> <C> <C>
2.2 Purchase Price.................................................... 7
2.3 Closing........................................................... 7
2.4 Pre-Closing Obligations........................................... 7
2.5 Closing Obligations............................................... 7
ARTICLE 3 Representations And Warranties Of The Company..................... 8
3.1 Organization and Good Standing.................................... 8
3.2 Authority; No Conflict............................................ 8
3.3 Capitalization.................................................... 9
3.4 SEC Filings; Financial Statements................................. 11
3.5 Books and Records................................................. 11
3.6 Title to Properties; Encumbrances................................. 12
3.7 Condition and Sufficiency of Assets............................... 12
3.8 Accounts Receivable............................................... 12
3.9 Inventory......................................................... 13
3.10 No Undisclosed Liabilities........................................ 13
3.11 Taxes............................................................. 13
3.12 No Material Adverse Change........................................ 14
3.13 Employee Benefits................................................. 14
3.14 Compliance With Legal Requirements; Governmental Authorizations... 20
3.15 Legal Proceedings; Orders......................................... 21
3.16 Absence Of Certain Changes And Events............................. 22
3.17 Contracts; No Defaults............................................ 23
3.18 Insurance......................................................... 25
3.19 Environmental Matters............................................. 26
3.20 Employees......................................................... 27
3.21 Labor Relations; Compliance....................................... 28
3.22 Intellectual Property............................................. 28
3.23 Certain Payments.................................................. 31
3.24 Disclosure........................................................ 31
3.25 Relationships With Related Persons................................ 32
3.26 Brokers or Finders................................................ 32
ARTICLE 4 Representations And Warranties Of Buyer........................... 32
</TABLE>
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<TABLE>
<S> <C> <C>
4.1 Investment Purpose................................................ 32
4.2 Reliance on Exemptions............................................ 32
4.3 Information....................................................... 32
4.4 Transfer or Resale................................................ 33
4.5 Legend............................................................ 33
4.6 Authorization; Enforcement........................................ 33
4.7 Brokers or Finders................................................ 33
4.8 Accredited Investor............................................... 34
ARTICLE 5 Indemnification; Remedies......................................... 34
5.1 Survival; Right to Indemnification Not Affected By Knowledge...... 34
5.2 Indemnification and Payment of Damages by The Company............. 34
5.3 [Reserved.]....................................................... 35
5.4 Limitations on Amount; Time Limitations........................... 35
5.5 Procedure for Indemnification -- Third Party Claims............... 35
5.6 Procedure For Indemnification -- Other Claims..................... 36
5.7 Indemnification of Officers and Directors......................... 36
ARTICLE 6 General Provisions................................................ 37
6.1 Expenses.......................................................... 37
6.2 Notices........................................................... 37
6.3 Further Assurances................................................ 38
6.4 Waiver............................................................ 38
6.5 Entire Agreement and Modification................................. 39
6.6 Company Disclosure Schedule....................................... 39
6.7 Assignments, Successors, and No Third-Party Rights................ 39
6.8 Severability...................................................... 39
6.9 Section Headings, Construction.................................... 40
6.10 Survival.......................................................... 40
6.11 Time of Essence................................................... 40
6.12 Governing Law..................................................... 40
6.13 Counterparts...................................................... 40
</TABLE>
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STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (the "Agreement"), dated as of April 29, 1999, by
and among Integrated Packaging Assembly Corporation, a Delaware corporation,
with headquarters located at 2221 Old Oakland Road, San Jose, California 95131
(the "Company"), and Orient Semiconductor Electronics, Limited, with
headquarters located 16 East 3 RD. N.E.P.Z. Kaohsiung 81120, Taiwan, ROC (the
"Buyer").
Whereas:
A. The Company has authorized the following new series of its Preferred
Stock, $0.001 par value (the "Preferred Stock"): the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, $0.001 par value (the
"Common Stock") (as converted, the "Conversion Shares"), in accordance with the
terms of the Company's Certificate of Designations, Preferences and Rights of
the Series A Preferred Shares, substantially in the form attached hereto as
Exhibit A (the "Certificate of Designation").
B. The Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, Four Million (4,000,000) shares of Series A Preferred Shares.
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Right of First Refusal
Agreement substantially in the form attached hereto as Exhibit B (the "Right of
First Refusal Agreement") pursuant to which the Company has agreed to provide
Buyer and its other stockholders with certain rights of first refusal.
Now Therefore, the Company and the Buyer hereby agree as follows:
ARTICLE 1
Definitions.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
1.1 "Applicable Contract" -- any Contract (a) under which the Company has
or may acquire any rights, (b) under which the Company has or may become subject
to any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
1.2 "Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was
1.
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inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
1.3 "Buyer" -- as defined in the first paragraph of this Agreement.
1.4 "Closing" -- as defined in Section 2.3.
1.5 "Closing Date" -- the date and time as of which the Closing actually
takes place.
1.6 "Company" -- as defined in the first paragraph of this Agreement.
1.7 "Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
1.8 "Contemplated Transactions" -- all of the transactions contemplated by
this Agreement.
1.9 "Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
1.10 "Damages" -- as defined in Section 5.2.
1.11 "Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
1.12 "Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
1.13 "Environmental, Health, and Safety Liabilities" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by
2.
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applicable Environmental Law or Occupational Safety and Health Law (whether or
not such Cleanup has been required or requested by any Governmental Body or any
other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
1.14 "Environmental Law" -- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done to
public assets.
1.15 "ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
1.16 "Exchange Act" -- Securities and Exchange Act of 1934 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
3.
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1.17 "Facilities" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
1.18 "GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
1.19 "Governmental Authorization" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.20 "Governmental Body" -- any:
(a) federal, state, local, municipal, foreign, or other government;
(b) governmental or quasi-governmental authority (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);
(c) multi-national organization or body; or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power.
1.21 "Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
1.22 "Hazardous Materials" -- any waste or other substance that is listed,
defined, designated, or classified as hazardous, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any Environmental Law, including
any admixture or solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-
containing materials.
1.23 "Intellectual Property Assets" -- as defined in Section 3.22.
1.24 "IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
1.25 "IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
4.
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1.26 "Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
1.27 "Occupational Safety and Health Law" -- any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
1.28 "Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
1.29 "Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
1.30 "Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.31 "Plan" -- as defined in Section 3.13.
1.32 "Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.33 "Related Person" With respect to a specified Person:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director or officer of such specified
Person; and
(d) any immediate family member of any individual described in clause (a),
(b) or (c).
"Material Interest" means beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
5.
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1.34 "Release" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
1.35 "Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
1.36 "Securities Act" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
1.37 "SEC" -- Securities and Exchange Commission.
1.38 "Series A Preferred Shares" -- as defined in the Recitals of this
Agreement.
1.39 "Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
1.40 "Tax" -- any tax (including any income tax, capital gains tax, value-
added tax, sales tax, property tax, gift tax, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
1.41 "Tax Return" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
1.42 "Threat of Release" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
ARTICLE 2
Sale And Transfer Of Series A Preferred Shares; Closing.
2.1 Series A Preferred Shares. Subject to the terms and conditions of this
Agreement, at the Closing, the Company will sell and transfer the Series A
Preferred Shares to Buyer, and Buyer will purchase the Series A Preferred Shares
from the Company.
6.
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2.2 Purchase Price. The aggregate purchase price (the "Purchase Price") for
the Series A Preferred Shares will be U.S.$6,800,000.
2.3 Closing. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Cooley Godward LLP at Five Palo Alto
Square, 3000 El Camino Real, Palo Alto, CA 94306, at 4:30 p.m. (local time) on
April 29, 1999.
2.4 Pre-Closing Obligations: Prior to the Closing, the Company will have:
(a) reduced the outstanding debt of the Company such that $3,326,000 of
outstanding debt will have been forgiven on or prior to the Closing;
(b) filed the Certificate of Designation with the Secretary of State of
the State of Delaware; and
(c) amended that certain Registration Rights Agreement, dated as of
March 24, 1993, by and among the Company and certain investors in the Company,
as amended to date, to read as set forth on Exhibit C hereto.
2.5 Closing Obligations. At the Closing:
(a) The Company will deliver to Buyer:
(i) a duly executed certificate representing the Series A
Preferred Shares;
(ii) the Right of First Refusal Agreement duly executed by an
authorized representative of the Company;
(iii) duly executed resignation letters of the directors of the
Company listed on Exhibit D hereto providing for the resignation of such
directors from the Company's board of directors effective as of the Closing;
(iv) a certificate executed by the Secretary of the Company
attaching thereto copies of the Certificate of Designation and the Company's
Certificate of Incorporation, as amended to date, each certified by the
Secretary of State of the State of Delaware, the Company's Bylaws and
resolutions of the Company's Board of Directors approving the Contemplated
Transactions (including the reconstitution of the Company's Board effective upon
the Closing as set forth on Exhibit E); and
(v) evidence of the forgiveness of $3,326,000 in outstanding debt
of the Company, the agreement of the plaintiffs to dismiss certain pending Legal
Proceedings against the Company relating to any outstanding debt and the
restructuring of any remaining debt obligations of the Company, all in a form
satisfactory to Buyer.
7.
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(b) Buyer will deliver to the Company:
(i) the Purchase Price by bank cashier's or certified check
payable to the order of the Company or by wire transfer to an account specified
by the Company; and
(ii) the Right of First Refusal Agreement duly executed by an
authorized representative of Buyer.
(c) Buyer will have received an opinion of Wilson Sonsini Goodrich &
Rosati, a professional corporation, counsel of the Company, dated as of the
Closing Date, substantially to the effect of Exhibit F.
ARTICLE 3
Representations And Warranties Of The Company.
Except as set forth in the disclosure schedule delivered to Buyer on the
date of this Agreement and signed by the President of the Company (the "Company
Disclosure Schedule"), the Company represents and warrants to Buyer as follows:
3.1 Organization and Good Standing.
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. As of the
date of this Agreement, Part 3.1 of the Company Disclosure Schedule sets forth a
list of all of the Company's Subsidiaries. The Company and each of the
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. As of the date of this
Agreement, other than the Subsidiaries, neither the Company nor any of the
Subsidiaries owns or holds, directly or indirectly, any debt or equity
securities of, or has any other interest in, any corporation, partnership, joint
venture or other entity, and neither the Company nor any of the Subsidiaries has
entered into any agreement to acquire any such interest.
(b) The Company has delivered to Buyer copies of its Certificate of
Incorporation and Bylaws, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement and the Right of First Refusal Agreement
constitute the legal, valid, and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Company has the absolute and unrestricted right, power,
authority, and capacity
8.
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to execute and deliver this Agreement and the Right of First Refusal Agreement
and to perform the obligations under this Agreement and the Right of First
Refusal Agreement.
(b) Except as set forth in Part 3.2 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company, or any of the assets
owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause the Company to become subject to, or to become liable
for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Company Disclosure Schedule, the
Company is not or will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of: 75,000,000 shares of Company Common Stock of which, as
of the date hereof, 14,243,905 shares are issued and outstanding; and 5,000,000
shares of preferred stock, $0.001 par value, of which, as of the date hereof, no
shares were issued and outstanding. All the
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issued and outstanding shares of Company Common Stock are validly issued, fully
paid and nonassessable and free of preemptive rights and were issued in
compliance with state and federal securities laws. Immediately prior to the
Closing, the Company has outstanding options to purchase a total of 1,661,672
shares of Company Common Stock (the "Company Options") pursuant to the Company's
stock option plans and agreements, and outstanding warrants to purchase a total
of 2,331,461 shares of Company Common Stock (the "Company Warrants"). The
Company Disclosure Schedule sets forth, immediately prior to the Closing, with
respect to the Company Options, the name of each optionee, the number of shares
of Company Common Stock subject to each Company Option and the date of grant and
exercise price of each Company Option. The Company Disclosure Schedule sets
forth, immediately prior to the Closing, each option plan and agreement under
which the Company Options have been granted, and the Company has delivered to
Buyer complete and accurate copies of all such plans. The Company Disclosure
Schedule sets forth, immediately prior to the Closing, with respect to the
Company Warrants the number of shares of Common Stock issuable upon exercise,
the exercise price per share and the expiration date of each Company Warrant.
Except as set forth above, immediately prior to the Closing, (i) there are no
shares of capital stock of the Company authorized, issued or outstanding, (ii)
there are no outstanding subscriptions, options, warrants, stock appreciation
right plans, calls, rights, convertible securities, stockholder rights plans (or
similar plans commonly referred to as "poison pills") or other agreements or
commitments of any character relating to issued or unissued capital stock or
other securities of the Company or any of its subsidiaries, or obligating the
Company or any other party to issue, transfer or sell any shares of the capital
stock or other securities of the Company or any of its subsidiaries, and (iii)
there are no other outstanding securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of the capital stock or other
securities of the Company or any of its subsidiaries or any successor
corporation or controlling person of such successor corporation.
(b) The Series A Preferred Shares are duly authorized and, upon issuance
in accordance with the terms hereof, shall be (i) validly issued, fully paid and
non-assessable, (ii) free from all taxes, liens and charges with respect to the
issue thereof and (iii) entitled to the rights and preferences set forth in the
Certificate of Designation. The Conversion Shares issuable upon conversion of
the Series A Preferred Shares will have been duly authorized and reserved for
issuance and upon conversion or exercise in accordance with the Certificate of
Designations will be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. Upon the
closing of the Contemplated Transactions, the Series A Preferred Shares will be
convertible into that number of shares of Common Stock equal to seventy five
percent (75%) of the outstanding shares of Common Stock (including shares of
Common Stock issuable upon exercise or conversion of all outstanding options,
warrants and other securities exercisable for or convertible into shares of
Common Stock).
(c) All of the outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable and are free and clear of any
liens, claims or encumbrances.
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3.4 SEC Filings; Financial Statements.
(a) The Company has delivered to Buyer (or Buyer has otherwise
obtained) a complete and accurate copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the SEC on or
after February 28, 1996 (the "Company SEC Reports"), which are all the forms,
reports and documents required to be filed by the Company with the SEC on or
after February 28, 1996. The Company SEC Reports (i) complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, at and as of the times they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) and (ii) did not at and as of the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of the sets of financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports and the
set of the Company's unaudited interim financial statements as of and for the
period ended April 4, 1999 including the Company's unaudited consolidated
balance sheet as of April 4, 1999 (the "April 4, 1999 Balance Sheet") that are
attached to the Company Disclosure Schedule (collectively, the "Past Financial
Statements") was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly presents the consolidated financial position of the Company
and the Subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
(i) the quarterly unaudited interim financial statements included in the Past
Financial Statements were or are subject to normal year-end audit adjustments
which were not or are not expected to be material in amount and (ii) the
unaudited interim financial statements as of and for the period ended April 4,
1999 included in the Past Financial Statements are subject to normal year-end
audit adjustments and do not contain footnotes.
(c) The Company has previously furnished to Buyer a complete and
accurate copy of any amendments or modifications that have not yet been filed
with the SEC to agreements, documents or other instruments that have been filed
by the Company with the SEC pursuant to the Securities Act or the Exchange Act.
3.5 Books and Records. The books of account, minute books, and other
records of the Company, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act, as
amended, including the maintenance of an adequate system of internal controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of such books and records will be in the possession
of the Company.
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3.6 Title to Properties; Encumbrances. Part 3.6 of the Company Disclosure
Schedule contains a complete and accurate list of all real property, leaseholds,
or other interests therein owned by the Company. The Company owns (with good and
marketable title in the case of real property, subject only to the matters
permitted by the following sentence) all the material properties and assets
(whether real, personal, or mixed and whether tangible or intangible) that they
purport to own located in the facilities owned or operated by the Company or
reflected as owned in the books and records of the Company, including all of the
properties and assets reflected in the April 4, 1999 Balance Sheet and the Past
Financial Statements (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Company Disclosure Schedule
and personal property sold since the date of the April 4, 1999 Balance Sheet, as
the case may be, in the Ordinary Course of Business), and all of the properties
and assets purchased or otherwise acquired by the Company since the date of the
April 4, 1999 Balance Sheet (except for personal property acquired and sold
since the date of the April 4, 1999 Balance Sheet in the Ordinary Course of
Business) , which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 3.6 of the
Company Disclosure Schedule. All material properties and assets reflected in the
April 4, 1999 Balance Sheet and the Past Financial Statements are free and clear
of all Encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the April 4, 1999 Balance
Sheet as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the April 4, 1999 Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
for current taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or materially impairs the use of the property
subject thereto, or materially impairs the operations of the Company, and (ii)
zoning laws and other land use restrictions that do not materially impair the
present or anticipated use of the property subject thereto.
3.7 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of the Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not expected by the Company to be material in cost. The
building, plants, structures, and equipment of the Company are sufficient for
the continued conduct of the Company's businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 Accounts Receivable. All accounts receivable of the Company that are
reflected on the April 4, 1999 Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will
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be as of the Closing Date current and collectible net of the respective reserves
shown on the April 4, 1999 Balance Sheet or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the April 4, 1999 Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). There is no contest, claim, or right of set-off, other than
returns in the Ordinary Course of Business, under any Contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Company Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of the date of the April 4, 1999
Balance Sheet, which list sets forth the aging of such Accounts Receivable.
3.9 Inventory. All inventory of the Company, whether or not reflected in
the Past Financial Statements or the April 4, 1999 Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Past Financial
Statements or the April 4, 1999 Balance Sheet or on the accounting records of
the Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of the
Company Disclosure Schedule, the Company has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for liabilities or obligations reflected or reserved
against in the Past Financial Statements or the April 4, 1999 Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof which are not, either individually or in the aggregate,
material in amount.
3.11 Taxes.
(a) The Company has filed or caused to be filed (on a timely basis
since December 31, 1995) all Tax Returns that are or were required to be filed
by or with respect to any of them, either separately or as a member of a group
of corporations, pursuant to applicable Legal Requirements. The Company has
delivered or made available to Buyer copies of all such Tax Returns filed since
December 31, 1995. The Company has paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by the Company, except such
Taxes, if any, as are listed in Part 3.11 of the Company Disclosure Schedule and
are being contested in good faith and as to which adequate reserves (determined
in accordance with GAAP) have been provided in the Past Financial Statements and
the April 4, 1999 Balance Sheet.
(b) Part 3.11 of the Company Disclosure Schedule contains a complete
and accurate list of all audits of all the Company's Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Company
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Disclosure Schedule, are being contested in good faith by appropriate
proceedings. Part 3.11 of the Company Disclosure Schedule describes all
adjustments to the United States federal income Tax Returns filed by the Company
or any group of corporations including the Company for all taxable years since
December 31, 1995, and the resulting deficiencies proposed by the IRS. Except as
described in Part 3.11 of the Company Disclosure Schedule, the Company has not
given or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which the
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
books of the Company are adequate (determined in accordance with GAAP) and are
at least equal to the Company's liability for Taxes. There exists no proposed
tax assessment against the Company except as disclosed in the April 4, 1999
Balance Sheet or in Part 3.11 of the Company Disclosure Schedule. No consent to
the application of Section 341(f)(2) of the IRC has been filed with respect to
any property or assets held, acquired, or to be acquired by the Company. All
Taxes that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete in all material respects.
There is no tax sharing agreement that will require any payment by the Company
after the date of this Agreement.
3.12 No Material Adverse Change. Since the date of the April 4, 1999
Balance Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of the Company, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by the Company or an ERISA Affiliate of the Company.
"Company Plan" means all Plans of which the Company or an ERISA Affiliate
of the Company is or was a Plan Sponsor, or to which the Company or an ERISA
Affiliate of the Company otherwise contributes or has contributed, or in which
the Company or an ERISA Affiliate of the Company otherwise participates or has
participated. All references to Plans are to Company Plans unless the context
requires otherwise.
"Company VEBA" means a VEBA whose members include employees of the Company
or any ERISA Affiliate of the Company.
"ERISA Affiliate" means, with respect to the Company, any other person
that, together with the Company, would be treated as a single employer under IRC
(S) 414.
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"Multi-Employer Plan" has the meaning given in ERISA (S) 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices to provide material benefits, other than salary, as
compensation for services rendered, to present or former directors, employees,
or agents, other than obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC (S) 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pension Plan" has the meaning given in ERISA (S) 3(2)(A).
"Plan" has the meaning given in ERISA (S) 3(3).
"Plan Sponsor" has the meaning given in ERISA (S) 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC (S) 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC (S)
501(c)(9).
"Welfare Plan" has the meaning given in ERISA (S) 3(1).
(b) Part 3.13(i) of the Company Disclosure Schedule contains a
complete and accurate list of all Company Plans, Company Other Benefit
Obligations, and Company VEBAs, and identifies as such all Company Plans that
are (A) defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans,
or (D) Multi-Employer Plans.
(i) Part 3.13(ii) of the Company Disclosure Schedule contains a
complete and accurate list of (A) all ERISA Affiliates of the Company, and (B)
all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(ii) Part 3.13(iii) of the Company Disclosure Schedule sets
forth, for each Multi-Employer Plan, as of its last valuation date, the amount
of potential withdrawal liability of the Company and the Company's other ERISA
Affiliates, calculated according to information made available pursuant to ERISA
(S) 4221(e).
(iii) Part 3.13(iv) of the Company Disclosure Schedule sets forth
a calculation of the liability of the Company for post-retirement benefits other
than pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the Company is
required by this Statement to disclose such information.
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(iv) Part 3.13(v) of the Company Disclosure Schedule sets forth
the financial cost of all obligations owed under any Company Plan or Company
Other Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) The Company has delivered or made available to Buyer:
(i) all documents that set forth the terms of each Company Plan,
Company Other Benefit Obligation, or Company VEBA and of any related trust,
including (A) all plan descriptions and summary plan descriptions of Company
Plans which the Company is required to prepare, file, and distribute, and (B)
all summaries and descriptions furnished to participants and beneficiaries
regarding Company Plans, Company Other Benefit Obligations, and Company VEBAs
for which a plan description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have made or obligations incurred (including both pension and
welfare benefits) by the Company and the ERISA Affiliates of the Company, and
all collective bargaining agreements pursuant to which contributions are being
made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
to any Company Plan, Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years preceding the
date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under ERISA
(S) 601 et seq. and IRC (S) 4980B;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all schedules thereto and the
opinions of independent accountants;
(xi) all notices that were given by the Company or any ERISA
Affiliate of the Company or any Company Plan to the IRS, the PBGC, or any
participant or
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beneficiary, pursuant to statute, within the four years preceding the date of
this Agreement, including notices that are expressly mentioned elsewhere in this
Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to the Company, any ERISA Affiliate of the Company, or any
Company Plan within the four years preceding the date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the most recent
determination letter for each Plan of the Company that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed for
each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Company Disclosure
Schedule:
(i) The Company has performed all of its material obligations
under all Company Plans, Company Other Benefit Obligations, and Company VEBAs.
The Company has made appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, VEBAs, and Obligations
that have accrued but are not due.
(ii) No statement, either written or oral, has been made by the
Company to any Person with regard to any Plan or Other Benefit Obligation that
was not in accordance with the Plan or Other Benefit Obligation and that could
have a material adverse economic consequence to the Company or to Buyer.
(iii) The Company, with respect to all Company Plans, Company
Other Benefits Obligations, and Company VEBAs, is, and each Company Plan,
Company Other Benefit Obligation, and Company VEBA is, in material compliance
with ERISA, the IRC, and other applicable Laws including the provisions of such
Laws expressly mentioned in this Section 3.13, and with any applicable
collective bargaining agreement.
(1) No transaction prohibited by ERISA (S) 406 and no
"prohibited transaction" under IRC (S) 4975(c) have occurred with respect to any
Company Plan.
(2) The Company has no liability to the IRS with respect to
any Plan, including any liability imposed by Chapter 43 of the IRC.
(3) The Company has no liability to the PBGC with respect
to any Plan or has any liability under ERISA (S) 502 or (S) 4071.
(4) All filings required by ERISA and the IRC as to each
Plan have been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
(5) All contributions and payments made or accrued with
respect to all Company Plans, Company Other Benefit Obligations, and Company
VEBAs are deductible under IRC (S) 162 or (S) 404. No amount, or any asset of
any Company Plan or Company VEBA, is subject to tax as unrelated business
taxable income.
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(iv) Each Company Plan can be terminated within thirty days, without
payment of any additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan.
(v) Since December 31, 1995, there has been no establishment or amendment
of any Company Plan, Company VEBA, or Company Other Benefit Obligation.
(vi) No event has occurred or circumstance exists that could result in a
material increase in premium costs of Company Plans and Company Other Benefit
Obligations that are insured, or a material increase in benefit costs of such
Plans and Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company
Plan, Company Other Benefit Obligation, or Company VEBA is pending or, to the
Company's knowledge, is threatened.
(viii) No Company Plan is a stock bonus, pension, or profit-sharing plan
within the meaning of IRC (S) 401(a).
(ix) Each Qualified Plan of the Company is qualified in form and operation
under IRC (S) 401(a); each trust for each such Plan is exempt from federal
income tax under IRC (S) 501(a). Each Company VEBA is exempt from federal income
tax. No event has occurred or circumstance exists that will or could give rise
to disqualification or loss of tax-exempt status of any such Plan or trust.
(x) The Company and each ERISA Affiliate of the Company has met the minimum
funding standard, and has made all contributions required, under ERISA (S) 302
and IRC (S) 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Company has paid all amounts due to the PBGC pursuant to ERISA
(S) 4007.
(xiii) Neither the Company nor any ERISA Affiliate of the Company has
ceased operations at any facility or has withdrawn from any Title IV Plan in a
manner that would subject such any entity or the Company to liability under
ERISA (S) 4062(e), (S) 4063, or (S) 4064.
(xiv) Neither the Company or any ERISA Affiliate of the Company has filed a
notice of intent to terminate any Plan or has adopted any amendment to treat a
Plan as terminated. The PBGC has not instituted proceedings to treat any Company
Plan as terminated. No event has occurred or circumstance exists that may
constitute grounds under ERISA (S) 4042 for the termination of, or the
appointment of a trustee to administer, any Company Plan.
(xv) No amendment has been made, or is reasonably expected to be made, to
any Plan that has required or could require the provision of security under
ERISA (S) 307
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or IRC (S) 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not waived, exists with
respect to any Company Plan; no event has occurred or circumstance exists that
may result in an accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xvii) The actuarial report for each Pension Plan of the Company and each
ERISA Affiliate of the Company fairly presents the financial condition and the
results of operations of each such Plan in accordance with GAAP.
(xviii) Since the last valuation date for each Pension Plan of the Company
and each ERISA Affiliate of the Company, no event has occurred or circumstance
exists that would increase the amount of benefits under any such Plan or that
would cause the excess of Plan assets over benefit liabilities (as defined in
ERISA (S) 4001) to decrease, or the amount by which benefit liabilities exceed
assets to increase.
(xix) No reportable event (as defined in ERISA (S) 4043 and in regulations
issued thereunder) has occurred.
(xx) The Company has no knowledge of any facts or circumstances that may
give rise to any liability of the Company or Buyer to the PBGC under Title IV of
ERISA.
(xxi) Neither the Company nor any ERISA Affiliate of the Company has ever
established, maintained, or contributed to or otherwise participated in, or had
an obligation to maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan.
(xxii) Neither the Company nor any ERISA Affiliate of the Company has
withdrawn from any Multi-Employer Plan with respect to which there is any
outstanding liability as of the date of this Agreement. No event has occurred or
circumstance exists that presents a risk of the occurrence of any withdrawal
from, or the participation, termination, reorganization, or insolvency of, any
Multi-Employer Plan that could result in any liability of either the Company or
Buyer to a Multi-Employer Plan.
(xxiii) Neither the Company nor any ERISA Affiliate of the Company has
received notice from any Multi-Employer Plan that it is in reorganization or is
insolvent, that increased contributions may be required to avoid a reduction in
plan benefits or the imposition of any excise tax, or that such Plan intends to
terminate or has terminated.
(xxiv) No Multi-Employer Plan to which the Company or any ERISA Affiliate
of the Company contributes or has contributed is a party to any pending merger
or asset or liability transfer or is subject to any proceeding brought by the
PBGC.
(xxv) Except to the extent required under ERISA (S) 601 et seq. and IRC (S)
4980B, the Company does not provide health or welfare benefits for any retired
or former employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other termination of
service.
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(xxvi) The Company has the right to modify and terminate benefits
to retirees (other than pensions) with respect to both retired and active
employees.
(xxvii) The Company has complied with the provisions of ERISA (S)
601 et seq. and IRC (S) 4980B.
(xxviii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under IRC (S) 280G or (S) 4999; nor will the
Company be required to "gross up" or otherwise compensate any such person
because of the imposition of any excise tax on a payment to such person.
(xxix) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
3.14 Compliance With Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Company Disclosure
Schedule:
(i) the Company is in compliance with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received, at any time since December
31, 1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.14 of the Company Disclosure Schedule contains a complete
and accurate list of each Governmental Authorization that is held by the Company
or that otherwise relates to the business of, or to any of the assets owned or
used by, the Company and that is material to the Company or its operations. Each
Governmental Authorization of the Company is valid and in full force and effect.
Except as set forth in Part 3.14 of the Company Disclosure Schedule:
(i) the Company is in compliance with all of the terms and
requirements of each Governmental Authorization of the Company;
(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or
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a failure to comply with any term or requirement of any Governmental
Authorization of the Company, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization of the Company;
(iii) the Company has not received, at any time since December
31, 1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Part 3.14
of the Company Disclosure Schedule have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Company Disclosure
Schedule collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Company Disclosure
Schedule, there is no pending Proceeding:
(i) that has been commenced by or against the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the knowledge of the Company, (1) no such Proceeding has been threatened, and
(2) no event has occurred or circumstance exists that could reasonably be
expected to give rise to or serve as a basis for the commencement of any such
Proceeding. The Company has delivered or made available to Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 3.15 of the Company Disclosure Schedule.
(b) Except as set forth in Part 3.15 of the Company Disclosure
Schedule:
(i) there is no Order to which the Companies, or any of the
assets owned or used by the Company, is subject; and
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(ii) to the knowledge of the Company, no officer, director,
agent, or employee of the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Company Disclosure
Schedule:
(i) the Company is in compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since April 30,
1997, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 Absence Of Certain Changes And Events. Except as set forth in Part
3.16 of the Company Disclosure Schedule, since the date of the April 4, 1999
Balance Sheet, the Company has conducted its business only in the Ordinary
Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company;
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(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to the Company of at least $25,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any Encumbrance on any material asset or
property of the Company, including the sale, lease, or other disposition of any
of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $25,000;
(i) material change in the accounting methods used by the Company; or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Company Disclosure Schedule contains a
complete and accurate list, and the Company has delivered or made available to
Buyer true and complete copies, of:
(i) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of the
Company in excess of $25,000;
(ii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $25,000);
(iii) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property
(other than agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets);
(iv) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(v) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(vi) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or any Affiliate of
the Company or limit
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the freedom of the Company or any Affiliate of the Company to engage in any line
of business or to compete with any Person;
(vii) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(viii) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(ix) each Applicable Contract for capital expenditures in excess
of $25,000;
(x) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business; and
(xi) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Company Disclosure
Schedule, to the knowledge of the Company, no officer, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Company Disclosure
Schedule, each Contract described in Part 3.17(a) of the Company Disclosure
Schedule is in full force and effect and is valid and enforceable in accordance
with its terms.
(d) Except as set forth in Part 3.17(d) of the Company Disclosure
Schedule:
(i) the Company is in compliance with all applicable terms and
requirements of each Contract under which the Company has or had any obligation
or liability or by which the Company or any of the assets owned or used by the
Company is or was bound;
(ii) to the knowledge of the Company, each other Person that has
or had any obligation or liability under any Contract under which the Company
has or had any rights is, and at all times has been, in compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give any other Person or, to the knowledge of the
Company, the Company the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; and
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(iv) the Company has not given to nor received from any other
Person, at any time any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
(e) There are no currently ongoing renegotiations of, or attempts to
renegotiate, any material amounts paid or payable to the Company under current
or completed Contracts with any Person and no such Person has made written
demand to the Company for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into without
the commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.18 Insurance.
(a) Part 3.18(a) of the Company Disclosure Schedules lists, and the
Company has delivered or made available to Buyer, true and complete copies of,
all policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is covered.
(b) Part 3.18(b) of the Company Disclosure Schedule sets forth, by
year, for the current policy year and each of the three (3) preceding policy
years a statement describing each claim under an insurance policy for an amount
in excess of $25,000, which sets forth:(A) the name of the claimant;(B) a
description of the policy by insurer, type of insurance, and period of coverage;
and(C) the amount and a brief description of the claim.
(c) Except as set forth on Part 3.18(d) of the Company Disclosure
Schedule:
(i) All policies to which the Company is a party or that provide
coverage to either the Company or any director or officer of the Company: (A)
are valid, outstanding, and enforceable; (B) taken together, provide adequate
insurance coverage for the assets and the operations of the Company for all
risks to which the Company is normally exposed; (C) are sufficient for
compliance with all Legal Requirements and Contracts to which the Company is a
party or by which any of them is bound; and (D) will continue in full force and
effect following the consummation of the Contemplated Transactions.
(ii) the Company has not received any notice of cancellation or
any other indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not willing or
able to perform its obligations thereunder.
(iii) the Company has paid all premiums due, and has otherwise
performed all of its obligations, under each policy to which the Company is a
party or that provides coverage to the Company or director thereof.
(iv) the Company has given notice to the insurer of all claims
that may be insured thereby.
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3.19 Environmental Matters. Except as set forth in part 3.19 of the Company
Disclosure Schedule:
(a) The Company is, and at all times has been, in compliance with, and
has not been and is not in violation of or liable under, any Environmental Law.
The Company has no basis to expect, nor has any other Person for whose conduct
it is or may be held to be responsible received, any actual or threatened order,
notice, or other communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or operator of
any Facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the Company
or any other Person for whose conduct it is or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest.
(c) The Company has no knowledge of any basis to expect, nor has any
other Person for whose conduct it is or may be held responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Company had an interest, or with respect
to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the Company
or any other Person for whose conduct it is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) Neither the Company nor any other Person for whose conduct it is
or may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(e) To the Company's knowledge, there are no Hazardous Materials
present on or in the Environment at the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any
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other part of the Facilities or such adjoining property, or incorporated into
any structure therein or thereon. Neither the Company nor any other Person for
whose conduct it is or may be held responsible, or to the knowledge of the
Company, any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company has
or had an interest except in compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the knowledge the Company, Threat
of Release, of any Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Facilities,
or from or by any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest, or to the knowledge of the Company
any geologically or hydrologically adjoining property, whether by the Company or
any other Person.
(g) The Company has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Company or any other Person for whose conduct it is or may be held responsible,
with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Company Disclosure Schedule contains a complete
and accurate list of the following information for each employee of the Company,
including each employee on leave of absence or layoff status: name; job title;
current compensation paid or payable; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
(b) To the Company's knowledge, no employee of the Company is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee of the Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with the Company by any
such employee. To the Company's knowledge, none of Patrick Verderico, Ernest G.
Barrieau II, Gerald K. Fehr or Alfred Larrenaga intends to terminate his
employment with the Company solely by reason of the closing of the transaction
contemplated by this Agreement.
(c) Part 3.20 of the Company Disclosure Schedule also contains a
complete and accurate list of the following information for each retired
employee of the Company, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension
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benefit, pension option election, retiree medical insurance coverage, retiree
life insurance coverage, and other benefits.
3.21 Labor Relations; Compliance. The Company has not been or is a party to
any collective bargaining or other labor Contract. There has not been, there is
not presently pending or existing, and to the Company's knowledge there is not
threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To the Company's knowledge, no event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute. The
Company has complied with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing. The Company is not liable for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.22 Intellectual Property.
(a) Intellectual Property Assets -- The term "Intellectual Property
Assets" includes:
(i) the name Integrated Packaging Assembly Corporation or IPAC,
all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications being used by the Company
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable by the Company (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works being used by the Company (collectively, "Copyrights");
(iv) all rights in mask works being used by the Company
(collectively, "Rights in Mask Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets") owned, used, or
licensed by the Company as licensee or licensor.
(b) Agreements -- Part 3.22(b) of the Company Disclosure Schedule
contains a complete and accurate list of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $2,000 under which the Company is the licensee. There are no
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outstanding and, to the Company's knowledge, no threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are all those necessary for
the operation of the Company's business as it is currently conducted. The
Company is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Encumbrances, and has the
right to use without payment to a third party all of the Intellectual Property
Assets.
(ii) Except as set forth in Part 3.22(c) of the Company
Disclosure Schedule, all former and current employees, consultants and
contractors of the Company executed written Contracts with the Company that
assign to the Company all rights to any inventions, improvements, discoveries,
or information relating to the business of the Company and that contain
obligations relating to the non-appropriation and non-disclosure of any of the
Intellectual Property Assets. No employee of the Company has entered into any
Contract that restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than the Company.
(d) Patents.
(i) Part 3.22(d) of the Company Disclosure Schedule contains a
complete and accurate list of all Patents. The Company is the owner of all
right, title, and interest in and to each of the Patents, free and clear of all
Encumbrances.
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Company's knowledge,
there is no potentially interfering patent or patent application of any third
party.
(iv) No Patent is infringed or, to the Company's knowledge, has
been challenged or threatened in any way. To the Company's knowledge, none of
the products manufactured and sold, nor any process or know-how used, by the
Company infringes or is alleged to infringe any patent or other proprietary
right of any other Person.
(v) To the Company's knowledge, all products made, used, or sold
under the Patents have been marked with the proper patent notice.
(e) Trademarks.
(i) Part 3.22(e) of Company Disclosure Schedule contains a
complete and accurate list and summary description of all Marks. The Company is
the owner of all right,
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title, and interest in and to each of the Marks, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Company's knowledge, no such action is
threatened with the respect to any of the Marks.
(iv) To the Company's knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Mark is infringed or, to the Company's knowledge, has been
challenged or threatened in any way. None of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark, or service mark
of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(f) Copyrights.
(i) Part 3.22(f) of the Company Disclosure Schedule contains a
complete and accurate list and summary description of all Copyrights. The
Company is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all Encumbrances.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the date of Closing.
(iii) No Copyright is infringed or, to the Company's knowledge,
has been challenged or threatened in any way. None of the subject matter of any
of the Copyrights infringes or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(g) Trade Secrets.
(i) With respect to each Trade Secret, the documentation relating
to such Trade Secret is current, accurate, and sufficient in detail and content
to identify and explain it and to allow its full and proper use without reliance
on the knowledge or memory of any individual.
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(ii) The Company has taken all reasonable precautions to protect
the secrecy, confidentiality, and value of its Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and, to the Company's knowledge,
have not been used, divulged, or appropriated either for the benefit of any
Person or to the detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or, to the Company's knowledge, threatened
in any way.
(h) All software (and related Intellectual Property Assets) that is
sold, licensed or transferred by the Company to any Person, as a separate
product or as part of or imbedded in any other product of the Company ("Software
Products"), is designed to be used prior to, during and after the year 2000
("Year 2000"), and is Year 2000 Compliant (as defined below). The Company has
taken adequate steps to ensure that all software (and related Intellectual
Property Assets) used in its operations are Year 2000 Compliant (as defined
below). For purposes of this Agreement, "Year 2000 Compliant" shall mean that
the Software Products can, individually, and in combination and in conjunction
with all other systems, products or processes with which they are required or
designed to interface, continue to be used normally and to operate successfully
(both in functionality and performance in all material respects) over the
transition into the twenty-first century when used in accordance with the
documentation relating to the Software Products, including being able to,
before, on and after January 1, 2000 substantially conform to the following: (i)
use logic pertaining to dates which allow users to identify and/or use the
century portion of any date fields without special processing; and (ii) respond
to all date elements and date input so as to resolve any ambiguity as to century
in a disclosed, defined and pre-determined manner and provide date information
in ways which are unambiguous as to century, either by permitting or requiring
the century to be specified or where the data element is represented without a
century, the correct century is unambiguous for all manipulations involving that
element.
3.23 Certain Payments. Since December 31, 1995, no director, officer,
agent, or employee of the Company, or to the Company's knowledge any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Related Person of the Company,
or (iv) in violation of any Legal Requirement, (b) established or maintained any
fund or asset that has not been properly recorded in the financial statements of
the Company and that is required to be disclosed therein under GAAP.
3.24 Disclosure. No representation or warranty of the Company in this
Agreement and no statement in the Company Disclosure Schedule, taken as a whole,
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
31.
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3.25 Relationships With Related Persons. No Related Person of the Company
has any material interest in any property (whether real, personal, or mixed and
whether tangible or intangible) used in the Company's business. No Related
Person of the Company has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
material business dealings or a material financial interest in any transaction
with the Company, or (ii) engaged in competition with the Company with respect
to any line of the products or services of the Company (a "Competing Business")
in any market presently served by the Company except for less than one percent
of the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market. Except as
set forth in Part 3.25 of the Company Disclosure Schedule, no Related Person of
the Company is a party to any Contract with, or has any claim or right against,
the Company.
3.26 Brokers or Finders. Except as described in Part 3.26 the Company
Disclosure Schedule, the Company and its officers or agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Buyer harmless from any such payment
alleged to be due by or through the Company as a result of the action of the
Company or its officers or agents.
ARTICLE 4
Representations And Warranties Of Buyer.
Buyer represents and warrants to the Company as follows:
4.1 Investment Purpose. Buyer (i) is acquiring the Series A Preferred
Shares and (ii) upon conversion of the Series A Preferred Shares, will acquire
the Conversion Shares then issuable, for its own account for investment only,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof.
4.2 Reliance on Exemptions. Buyer understands that the Series A Preferred
Shares and the Conversion Shares are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
Buyer to acquire the Series A Preferred Shares and the Conversion Shares.
4.3 Information. Buyer and its advisors have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Series A Preferred Shares and
the Conversion Shares which have been requested by Buyer. Buyer and its advisors
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by Buyer or its
advisors, if any, or its representatives shall modify, amend or affect Buyer's
right to rely on the Company's representations and warranties contained in
Article 3 above.
32.
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4.4 Transfer or Resale. Buyer understands that (i) the Series A Preferred
Shares and the Conversion Shares have not been and are not being registered
under the Securities Act or any state securities laws, and may not be sold,
assigned or transferred unless (A) subsequently registered thereunder, (B) Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) Buyer provides the Company with reasonable assurance
that such securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the Securities Act (or a successor rule thereto); (ii) any
sale of such securities made in reliance on Rule 144 promulgated under the
Securities Act (or a successor rule thereto) ("Rule 144") may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.
4.5 Legend. Buyer understands that the certificates or other instruments
representing the Series A Preferred Shares and, until such time as the sale of
the Conversion Shares have been registered under the Securities Act, the stock
certificates representing the Conversion Shares, shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT.
4.6 Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Buyer and is a valid and binding
agreement of such Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
4.7 Brokers or Finders. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify
33.
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and hold the Company harmless from any such payment alleged to be due by or
through Buyer as a result of the action of Buyer or its officers or agents.
4.8 Accredited Investor. Buyer is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
ARTICLE 5
INDEMNIFICATION; REMEDIES.
5.1 Survival; Right to Indemnification Not Affected By Knowledge. Subject
to Section 5.4 hereof, all representations, warranties, covenants, and
obligations in this Agreement, the Company Disclosure Schedule and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
5.2 Indemnification and Payment of Damages by The Company. The Company will
indemnify and hold harmless Buyer and its respective Representatives,
stockholders, and Related Persons (collectively, the "Indemnified Persons") for,
and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or warranty made by the Company
in this Agreement, the Company Disclosure Schedule, or any other certificate or
document delivered by the Company pursuant to this Agreement;
(b) any Breach by the Company of any covenant or obligation of the
Company in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Company (or any Person
acting on their behalf) in connection with any of the Contemplated Transactions;
or
(d) any claim by any Person or any Proceeding instituted against the
Company, its Representatives, stockholders or Related Persons or any Indemnified
Person in connection with the consummation of any of the Contemplated
Transactions.
34.
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(e) any damages payable by the Company as a result of the claim set
forth in the letter from Philips Semiconductors dated April 27, 1999 and
disclosed in Parts 3.15 and 3.16 of the Disclosure Schedule.
The remedies provided in this Section 5.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
The Company acknowledges and agrees that, if the Company suffers, incurs or
otherwise becomes subject to any Damages as a result of or in connection with
any inaccuracy in or Breach of any representation, warranty, covenant or
obligation by the Company, then Buyer shall also be deemed, by virtue of its
ownership of the stock of the Company, to have incurred Damages as a result of
and in connection with such inaccuracy or Breach.
5.3 [Reserved.]
5.4 Limitations on Amount; Time Limitations.
(a) The Company will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or clause (b) of
Section 5.2 until the total of all Damages with respect to such matters exceeds
$102,000, and then the Company will be liable for the entire amount of such
Damages (starting from the first dollar of such Damages). However, this Section
5.4 will not apply to any fraud or intentional Breach by the Company of any
covenant or obligation, and the Company will be liable for all Damages with
respect to such Breaches.
(b) The Company will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11, 3.13, 3.19 and 3.22(h), unless on or before
April 29, 2000 Buyer notifies the Company of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known to Buyer. A
claim with respect to Section 3.22(h) may be made at any time on or before April
29, 2001; and a claim with respect to Section 3.3, 3.11, 3.13 or 3.19, or a
claim for indemnification or reimbursement not based upon any representation or
warranty or covenant or obligation to be performed and complied with prior to
the Closing Date, may be made at any time.
5.5 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an Indemnified Person under Section 5.2
or (to the extent provided in the last sentence of Section 5.3) Section 5.3 of
notice of the commencement of any Proceeding against it, such Indemnified Person
will, if a claim is to be made against the Company under such Section, give
notice to the Company of the commencement of such claim, but the failure to
notify the Company will not relieve the Company of any liability that it may
have to any Indemnified Person, except to the extent that the Company
demonstrates that the defense of such action is prejudiced by the Indemnifying
Person's failure to give such notice.
(b) If any Proceeding referred to in Section 5.5(a) is brought against
an Indemnified Person and it gives notice to the Company of the commencement
of such
35.
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Proceeding, the Company will be entitled to participate in such Proceeding and,
to the extent that it wishes (unless (i) the Company is also a party to such
Proceeding and the Indemnified Person determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnified Person fails to
provide reasonable assurance to the Indemnified Person of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the Indemnified Person and, after notice from the Company to the Indemnified
Person of its election to assume the defense of such Proceeding, the Company
will not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 5 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the Indemnified Person in connection with the defense
of such Proceeding, other than reasonable costs of investigation. If the Company
assumes the defense of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the Company without the Indemnified Person's
consent unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the Indemnified Person, and (B) the sole
relief provided is monetary damages that are paid in full by the Company; and
(iii) the Indemnified Person will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to the Company of the commencement of any Proceeding and the Company
does not, within ten days after the Indemnified Person's notice is given, give
notice to the Indemnified Person of its election to assume the defense of such
Proceeding, the Company will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the Indemnified Person.
Any settlement or payment by the Company of any claim for indemnification
hereunder shall be approved by a majority of the Company's directors who are not
designated by the holder or holders of the Series A Preferred Shares pursuant to
Section C.2.c.i.A of the Certificate of Designation.
(c) Notwithstanding the foregoing, if an Indemnified Person determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Company, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).
5.6 Procedure For Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
5.7 Indemnification of Officers and Directors.
(a) All rights to indemnification existing in favor of the directors
and officers of the Company for acts and omissions occurring prior to the
Closing, as provided in the Company's Certificate of Incorporation or Bylaws (as
in effect as of the date of this Agreement)
36.
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and as provided in any indemnification agreements between the Company and said
officers and directors (as in effect at the Closing), shall survive the Closing
and shall be the obligation of and observed by the Company for a period of not
less than six (6) years from and after the Closing.
(b) From the Closing until the third anniversary of the Closing Date,
the Company shall maintain in effect, for the benefit of the current directors
and officers of the Company with respect to acts or omissions occurring prior to
the Closing, the existing policy of directors' and officers' liability insurance
maintained by the Company as of the date of this Agreement (the "Existing
Policy"); provided, however, that (i) the Company may substitute for the
Existing Policy a policy or policies of comparable coverage, and (ii) the
Company shall not be required to pay an annual premium for the Existing Policy
(or for any substitute policies) in excess of 125% of the amount of the last
annual premium paid by the Company prior to the date of this Agreement for the
Existing Policy (the "Past Premium Amount"). In the event any future annual
premium for the Existing Policy (or any substitute policies) exceeds the Past
Premium Amount by more than 125%, the Company shall be entitled to reduce the
amount of coverage of the Existing Policy (or any substitute policies) to the
amount of coverage that can be obtained for a premium equal to 125% of the Past
Premium Amount.
(c) This Section 5.7 shall survive the Closing, is intended to be for
the benefit of, and enforceable by, each person entitled to indemnification as
contemplated hereby and each such person's or entity's heirs and
representatives, and shall be binding on all successors and assigns of the
Company.
ARTICLE 6
GENERAL PROVISIONS.
6.1 Expenses. Each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the Contemplated Transactions, including all fees and
expenses of its Representatives.
6.2 Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to the Company:
Integrated Packaging Assembly Corporation
2221 Old Oakland Road
San Jose, California 95131
Telephone: (408) 321-3600
Facsimile: (408) 321-0311
Attention: President
37.
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With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
Attention: J. Robert Suffoletta, Jr.
If to Buyer:
Orient Semiconductor Electronics, Limited
16 East 3 RD. N.E.P.Z.
Kaohsiung 81120
Taiwan, ROC
Telephone: 886-7-3613131
Facsimile: 886-7-3632319
With a copy to:
Cooley Godward LLP
3000 El Camino Real
Five Palo Alto Square
Palo Alto, California 94306
Telephone: (650) 843-5000
Facsimile: (650) 843-5048
Attention: Patrick Pohlen, Esq.
Each party shall provide ten (10) days' prior written notice to the other
party of any change in address or facsimile number.
6.3 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
6.4 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of
38.
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such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement; provided, however, that, with respect
to the Company, no such waiver or renunciation shall be effective unless
approved by a majority of the Company's directors who are not designated by the
holder or holders of the Series A Preferred Shares pursuant to Section C.2.c.i.A
of the Certificate of Designation.
6.5 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment;
provided, however, that, with respect to the Company, no such amendment shall be
effective unless approved by a majority of the Company's directors who are not
designated by the holder or holders of the Series A Preferred Shares pursuant to
Section C.2.c.i.A of the Certificate of Designation.
6.6 Company Disclosure Schedule.
(a) The disclosures in the Company Disclosure Schedule, and those in
any supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to any
other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Company Disclosure Schedule (other than
an exception expressly set forth as such in the Company Disclosure Schedule with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
6.7 Assignments, Successors, and No Third-Party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other party, which will not be unreasonably withheld, except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Except as contemplated by Section 5.7 hereof, nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
6.8 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
39.
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6.9 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
6.10 Survival. Subject to Section 5.4 hereof, the representations and
warranties of the Company and Buyer contained in Articles 3 and 4 shall survive
the Closing.
6.11 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence. 6.12 Governing Law.
This Agreement will be governed by the laws of the State of California without
regard to conflicts of laws principles.
6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
40.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first written above.
Buyer: The Company:
ORIENT SEMICONDUCTOR INTEGRATED PACKAGING
ELECTRONICS, LIMITED ASSEMBLY CORPORATION
By: /s/ CALVIN LEE By: /s/ PATRICK VERDERICO
---------------- -----------------------
Name: CALVIN LEE Name: PATRICK VERDERICO
------------- --------------------
Its: PRESIDENT Its: CEO
------------ --------------------
41.
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EXHIBIT 4.2
RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT (the "Agreement") is made and entered
into as of this 29th day of April, 1999, by and between INTEGRATED PACKAGING
ASSEMBLY CORPORATION, a Delaware corporation (the "Company"), and ORIENT
SEMICONDUCTOR ELECTRONICS, LIMITED ("Buyer").
RECITALS
WHEREAS, Buyer is purchasing Four Million (4,000,000) shares of the
Company's Series A Preferred Stock (the "Series A Preferred") pursuant to that
certain Stock Purchase Agreement, of even date herewith, by and between the
Company and Buyer (the "Purchase Agreement"); and
WHEREAS, the Company and Buyer were induced to sell and purchase the Series
A Preferred pursuant to the Purchase Agreement in part by the Company's and
Buyer's agreement to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
2. BUYER'S RIGHT OF FIRST REFUSAL.
2.1 Subsequent Offerings. Buyer shall have a right of first refusal to
purchase its pro rata share of all Equity Securities (as defined below) that the
Company may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 1.5 hereof.
Buyer's pro rata share is equal to the ratio of (a) the number of shares of the
Company's common stock (including all shares of common stock issued or issuable
upon conversion of the Series A Preferred) which Buyer is deemed to be a holder
immediately prior to the issuance of such Equity Securities to (b) the total
number of shares of the Company's outstanding common stock (including all shares
of common stock issued or issuable upon conversion of the Series A Preferred or
upon the exercise of any outstanding warrants or options or upon the conversion
of any other outstanding securities convertible into shares of common stock)
immediately prior to the issuance of the Equity Securities. The term "Equity
Securities" shall mean (i) any common stock, preferred stock or other security
of the Company, (ii) any security convertible, with or without consideration,
into any common stock, preferred stock or other security (including any option
to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any common stock, preferred stock
or other security or (iv) any such warrant or right.
2.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give Buyer written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Buyer shall have thirty (30) days from the giving
of such notice to agree to purchase its pro rata share of the Equity Securities
for the price and upon the terms and conditions specified in the notice by
giving written notice to the Company and stating therein the quantity of Equity
Securities to be purchased. Notwithstanding
1.
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the foregoing, in the event that the Common Holders (as defined below) shall
have a right to purchase their pro rata shares of such Equity Securities
pursuant to Section 2 below, Buyer shall participate as a Common Holder in such
issuance of Equity Securities in accordance with the procedures set forth in, or
taken pursuant to, Section 2.
2.3 Termination and Waiver of Rights of First Refusal. The rights of first
refusal established by this Section 1 shall terminate immediately prior to the
closing of a Change in Control (as defined below).
2.4 Transfer of Rights of First Refusal. The rights of first refusal of Buyer
under this Section 1 may be transferred with any shares of Series A Preferred or
common stock issued upon conversion thereof.
2.5 Excluded Securities. The rights of first refusal in favor of Buyer
established by this Section 1 and the rights of first refusal in favor of the
Common Holders established by Section 2 shall have no application to any of the
following Equity Securities:
(a) shares of common stock (and/or options, warrants or other common
stock purchase rights issued pursuant to such options, warrants or other rights)
issued or to be issued to employees, officers or directors of, or consultants or
advisors to the Company or any subsidiary of the Company, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Company's Board of Directors, including the representative or representatives on
the Board designated by Buyer;
(b) any Equity Securities issued pursuant to any rights, agreements,
options or warrants outstanding as of the date of this Agreement; and Equity
Securities issued pursuant to any such rights, agreements, options or warrants
granted after the date of this Agreement; provided that the rights of first
refusal established by this Section 1 and Section 2 (if still in effect) applied
with respect to the initial sale or grant by the Company of such rights,
agreements, options or warrants;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination; any Equity Securities issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(e) shares of common stock issued upon conversion of the Series A
Preferred;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement or debt financing from a bank or other financial institution; and
(g) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (i) joint
ventures, manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that such strategic
transactions and the issuance of Equity Securities therein have been approved by
the
2.
<PAGE>
Company's Board of Directors, including the representative or representatives on
the Board designated by Buyer.
3. COMMON HOLDERS' RIGHTS OF FIRST REFUSAL.
3.1 Subsequent Offerings. Each holder of record of the Company's common
stock ("Common Holder") shall have a right of first refusal to purchase its pro
rata share of all Equity Securities that the Company may, from time to time,
propose to sell and issue after the date of this Agreement, other than the
Equity Securities excluded by Section 1.5 hereof. Each Common Holder's pro rata
share is equal to the ratio of (a) the number of shares of the Company's common
stock of which such Common Holder is deemed to be a holder on the record date
established by the Company's Board of Directors in respect of the proposed
issuance of such Equity Securities (the "Record Date") to (b) the total number
of shares of the Company's outstanding common stock (including all shares of
common stock issued or issuable upon conversion of the Series A Preferred or
upon the exercise of any outstanding warrants or options or upon the conversion
of any other outstanding securities convertible into shares of common stock) on
the Record Date.
3.2 Exercise of Rights. If the Company proposes to issue Equity
Securities prior to the termination of this Section 2, the Company shall take
all such actions as are required under the Company's charter documents and
applicable law (including U.S. federal and state securities laws) to permit each
Common Holder to participate, up to such Common Holder's pro rata share, in such
issuance of Equity Securities by exercising the rights of first refusal set
forth in this Section 2. Such actions may include, without limitation, the
following:
(a) Providing any notices required by the Company's charter documents or
other agreements;
(b) Amending the Company's Certificate of Incorporation to authorize the
additional Equity Securities to be issued to the Common Holders;
(c) Preparing and filing with the Securities and Exchange Commission a
registration statement covering the Equity Securities to be offered
and sold to the Common Holders; and
(d) Upon the effectiveness of such registration statement, distributing
to the Common Holders a prospectus and related subscription documents
included in such registration statement.
Notwithstanding anything else contained herein to the contrary, the Common
Holders shall have no right to participate in any manner in the determination
of: (i) the terms of the Equity Securities to be issued pursuant to this Section
2, including price, (ii) the time period during which the Common Holders' rights
to purchase Equity Securities pursuant to this Section 2 shall be exercisable,
(iii) the transferability of such rights, (iv) the nature of any
oversubscription rights, (v) the manner of distribution of such rights, or (vi)
or any other terms pertaining to the offer and sale of Equity Securities to the
Common Holders pursuant to this Section 2.
3.3 Termination and Waiver of Rights of First Refusal. The rights of
first refusal established by this Section 2 shall terminate upon the earlier of
(i) October 29, 1999 or (ii) a Change
3.
<PAGE>
in Control. The Common Holders' rights of first refusal shall be transferable
with, and shall not be separable from, the shares of common stock held by such
Common Holders.
4. MISCELLANEOUS.
(a) Conditions to Exercise of Rights. Exercise of the Buyer's and Common
Holders' rights under this Agreement shall be subject to and conditioned
upon compliance with applicable laws.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
(c) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the Company, (ii) as to Buyer, only by the Buyer, and
(iii) as to the Common Holders, only by the holders of a majority in interest of
the Common Holders (excluding Buyer). Any amendment or waiver effected in
accordance with clauses (i), (ii), and (iii) of this Section 3(c) shall be
binding upon Buyer, its successors and assigns, the Company and the Common
Holders.
(d) Assignment of Rights. This Agreement constitutes the entire agreement
among the parties relative to the specific subject matter hereof. Any previous
agreement among the parties relative to the specific subject matter hereof is
superseded by this Agreement. This Agreement and the rights and obligations of
the parties hereunder shall inure to the benefit of, and be binding upon, their
respective successors, assigns and legal representatives.
(e) Term. Other than Section 2 (which shall terminate as set forth in
Section 2.3.), this Agreement shall continue in full force and effect from the
date hereof through the earlier of the following dates, on which date it shall
terminate in its entirety:
(i) the date of any consolidation or merger of the Company with or
into any other company or other entity or person or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization (or affiliates of such
stockholders) own less than 50% of the Company's voting power immediately after
such consolidation, merger or reorganization, or any transaction or series of
related transactions to which the Company is a party in which in excess of fifty
percent (50%) of the Company's voting power is transferred to parties other than
affiliates of the stockholders of the Company owning in excess of fifty percent
(50%) of the Company's voting power immediately prior to such transaction or
series of transactions;
the date of any sale, lease or other disposition of all or
substantially all of the assets of the Company to parties other than affiliates
of stockholders of the Company owning in excess of fifty percent (50%) of the
Company's voting power immediately prior to such transaction or series of
related transactions (together with the events described in Section 3(e)(i)
above, a "Change in Control"); or
4.
<PAGE>
(ii) the date as of which the parties hereto terminate this
Agreement by written consent of Buyer and the Company and the Common Holders
(unless Section 2 hereof shall have terminated as set forth in Section 2.3
hereof in which case the consent of the Common Holders shall not be required to
terminate this Agreement).
(f) No Third Party Rights. Nothing expressed or referred to in this
Agreement will be construed to give any person or entity other than the parties
to this Agreement and the Common Holders any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and the Common
Holders and their successors and assigns.
(g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature page hereof or
in the case of the Common Holders at the address set forth in the records of the
Company's transfer agent or at such other address as such party may designate by
ten (10) days advance written notice to the Company and the Buyer.
(h) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(i) Entire Agreement. This Agreement, along with the Purchase Agreement
and each of the Exhibits thereto, constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and thereof
and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
(j) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
The foregoing RIGHT OF FIRST REFUSAL AGREEMENT is hereby executed as of the
date first above written.
COMPANY: BUYER:
INTEGRATED PACKAGING ORIENT SEMICONDUCTOR
ASSEMBLY CORPORATION ELECTRONICS, LIMITED
By: /s/ PATRICK VERDERICO By: /s/ CALVIN LEE
____________________________ ______________________________
Title: CEO Title: President
____________________________ ______________________________
RIGHT OF FIRST REFUSAL AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT 4.3
INTEGRATED PACKAGING ASSEMBLY CORPORATION
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
__________________________
INTEGRATED PACKAGING ASSEMBLY CORPORATION, a Delaware corporation (the
"Company"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the Company
by the Certificate of Incorporation of the Company, the Board of Directors of
the Company, at a meeting duly called and held on April 27, 1999, adopted a
resolution providing for the creation of a series of the Company's Preferred
Stock, $.001 par value, which series is designated "Series A Convertible
Preferred Stock," which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of Directors of
the Company by the Certificate of Incorporation the Board of Directors does
hereby provide for the creation of a series of the Preferred Stock, $.001 par
value, of the Company, and to the extent that the voting powers and the
designations, preferences and relative, participating, optional or other special
rights thereof and the qualifications, limitations or restrictions of such
rights have not been set forth in the Certificate of Incorporation of the
Company, does hereby fix the same as follows:
SERIES A CONVERTIBLE PREFERRED STOCK
1. DESIGNATION. The shares of such series shall be designated as "Series A
Convertible Preferred Stock" (the "Series A Preferred").
2. AMOUNT. The number of shares constituting such series of Series A Preferred
shall be Four Million (4,000,000).
3. RANK. The Series A Preferred shall rank (i) senior to the Common Stock, par
value $.001 per share (the "Common Stock"), of the Company, now or hereafter
issued, as to payment of dividends and distribution of assets upon liquidation,
dissolution, or winding up of the Company, whether voluntary or involuntary, and
(ii) on a parity with any additional series of preferred stock of any class
which the Board of Directors or the stockholders may from time to time
authorize, both as to payment of dividends and as to distributions of assets
upon liquidation, dissolution, or winding up of the Company, whether voluntary
or involuntary.
<PAGE>
4. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred are as follows:
(a) Dividends and Distributions.
(i) The holders of shares of Series A Preferred shall be entitled to
receive, when, as, and if declared by the Board of Directors of the Company (the
"Board of Directors" or the "Board") out of funds legally available for such
purpose, dividends at the rate of $0.136 per annum per share, and no more, which
shall be fully cumulative, shall accrue without interest (except as otherwise
provided herein as to dividends in arrears) from the date of original issuance
of such shares and shall be payable semi-annually on July 1 and January 1 of
each year commencing July 1, 1999 (except that if any such date is a Saturday,
Sunday, or legal holiday, then such dividend shall be payable on the next
succeeding day that is not a Saturday, Sunday, or legal holiday) to holders of
record as they appear on the stock books of the Company on such record dates,
which shall be not more than 20 nor less than 10 days preceding the payment
dates for such dividends, as shall be fixed by the Board (each, a "Record
Date"). Dividends on the Series A Preferred shall be paid in cash or, subject to
the limitations in Section 1(b) hereof, shares of Common Stock of the
Corporation or any combination of cash and shares of Common Stock, at the option
of the holders of Series A Preferred as hereinafter provided. The amount of the
dividends payable per share of Series A Preferred for each semi-annual dividend
period shall be computed by dividing the annual dividend amount by two. The
amount of dividends payable for the initial dividend period and any period
shorter than a full semi-annual dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months. Dividends not paid on a payment date,
whether or not such dividends have been declared, will bear interest at the rate
of 8% per annum until paid. No dividends or other distributions, other than
dividends payable solely in shares of Common Stock or other capital stock of the
Company ranking junior as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, to the Series A Preferred (collectively, the "Junior
Stock"), shall be paid or set apart for payment on any shares of Junior Stock,
and no purchase, redemption, or other acquisition shall be made by the Company
of any shares of Junior Stock unless and until all accrued and unpaid dividends
on the Series A Preferred and interest on dividends in arrears at the rate
specified herein shall have been paid or declared and set apart for payment
(except for acquisitions of Common Stock by the Company pursuant to agreements
which permit the Company to repurchase such shares upon termination of services
to the Company or in exercise of the Company's right of first refusal upon a
proposed transfer).
If at any time any dividend on any capital stock of the Company ranking
senior as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, where voluntary or
involuntary, to the Series A Preferred (the "Senior Stock") shall be in default,
in whole or in part, no dividend shall be paid or declared and set apart for
payment on the Series A Preferred unless and until all accrued and unpaid
dividends with respect to the Senior Stock, including the full dividends for the
then current dividend period, shall have been paid or declared and set apart
for payment, without interest. No full dividends shall be paid or declared and
set apart for payment on any class or series or the Company's capital stock
ranking, as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding
2.
<PAGE>
up of the Corporation, where voluntary or involuntary, on a parity with the
Series A Preferred (the "Parity Stock") for any period unless all accrued but
unpaid dividends (and interest on dividends in arrears at the rate specified
herein) have been, or contemporaneously are, paid or declared and set apart for
such payment for such payment on the Series A Preferred. No full dividends shall
be paid or declared and set apart for payment on the Series A Preferred for any
period unless all accrued but unpaid dividends have been, or contemporaneously
are, paid or declared and set apart for payment on the Parity Stock for all
dividend periods terminating on or prior to the date of payment of such full
dividends. When dividends are not paid in full upon the Series A Preferred and
the Parity Stock, all dividends paid or declared and set apart for payment upon
shares of Series A Preferred (and interest on dividends in arrears at the rate
specified herein) and the Parity Stock shall be paid or declared and set apart
for payment pro rata, so that the amount of dividends paid or declared and set
apart for payment per share on the Series A Preferred and the Parity Stock shall
in all cases bear to each other the same ratio that accrued and unpaid dividends
per share on the shares of Series A Preferred and the Parity Stock bear to each
other.
(ii) If the holders of at least a majority of the outstanding
shares of Series A Preferred elect in the exercise of their sole discretion to
receive shares of Common Stock in payment of dividends on the Series A
Preferred, the Company shall issue and dispatch, or cause to be issued and
dispatched, to each holder of such shares a certificate representing the number
of whole shares of Common Stock arrived at by dividing the per share Computed
Price of such shares of Common Stock into the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series A Preferred held by such holder which are being paid in shares of Common
Stock were being paid in cash. No fractional shares of Common Stock shall be
issued in payment of dividends. In lieu thereof, the Company may issue a number
of shares of Common Stock to each holder which reflects a rounding to the
nearest whole number of shares of Common Stock or may pay cash. The holders of
Series A Preferred may not exercise their right to issue shares of Common Stock
in payment of dividends on Series A Preferred if the number of shares of Common
Stock at the time authorized, unissued and unreserved for all purposes, or held
in the Company's treasury, is insufficient to pay the portion of such dividends
to be paid in shares of Common Stock.
Shares of Common Stock issued in payment of dividends on Series A Preferred
pursuant to this Section shall be, and for all purposes shall be deemed to be,
validly issued, fully paid and nonassessable shares of Common Stock of the
Company; the issuance and delivery thereof is hereby authorized; and the
dispatch thereof will be, and for all purposes shall be deemed to be, payment in
full of the cumulative dividends to which holders are entitled on the applicable
dividend payment date.
"Computed Price" of one share of Common Stock on any date means the average
of the closing prices of the Common Stock on the five trading days ending one
trading day prior to the applicable Record Date.
(iii) So long as any shares of Series A Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased,
3.
<PAGE>
redeemed, or otherwise acquired for value by the Company (except for
acquisitions of Common Stock by the Company pursuant to agreements which permit
the Company to repurchase such shares upon termination of services to the
Company or in exercise of the Company's right of first refusal upon a proposed
transfer) until all dividends (set forth in Section 1a and 1b above) on the
Series A Preferred shall have been paid or declared and set apart. In the event
dividends are paid on any share of Common Stock, an additional dividend shall be
paid with respect to all outstanding shares of Series A Preferred in an amount
equal per share (on an as-if-converted to Common Stock basis) to the amount paid
or set aside for each share of Common Stock. The provisions of this Section 1c
shall not, however, apply to (i) a dividend payable in Common Stock, (ii) the
acquisition of shares of any Junior Stock in exchange for shares of any other
Junior Stock, or (iii) any repurchase of any outstanding securities of the
Company that is unanimously approved by the Company's Board of Directors.
(b) Voting Rights.
(i) General Rights. Except as otherwise provided herein or as
required by law, the Series A Preferred shall be voted equally with the shares
of the Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, in either case upon the
following basis: each holder of shares of Series A Preferred shall be entitled
to such number of votes as shall be equal to the whole number of shares of
Common Stock into which such holder's aggregate number of shares of Series A
Preferred are convertible (pursuant to Section 4 hereof) immediately after the
close of business on the record date fixed for such meeting or the effective
date of any action by written consent.
(ii) Separate Vote of Series A Preferred. For so long as at least
2,000,000 (as adjusted for stock splits, combinations and similar events) shares
of Series A Preferred remain outstanding, in addition to any other vote or
consent required herein or by law, the vote or written consent of the holders of
at least a majority of the outstanding Series A Preferred shall be necessary for
effecting or validating the following actions:
(1) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or the Bylaws of the Company
(including any filing of a Certificate of Designation), that alters or changes
the voting powers, preferences, or other special rights or privileges, or
restrictions of the Series A Preferred;
(2) Any increase or decrease (other than by redemption
or conversion) in the authorized number of shares of Common Stock or Preferred
Stock;
(3) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series A Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
(4) Any redemption, repurchase, payment of dividends or
other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the
4.
<PAGE>
Company pursuant to agreements which permit the Company to repurchase such
shares upon termination of services to the Company or in exercise of the
Company's right of first refusal upon a proposed transfer);
(5) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3c);
(6) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock
(other than pursuant to Section D.1 above);
(7) Any voluntary dissolution or liquidation of the
Company; or
(8) Any increase or decrease in the authorized number
of members of the Company's Board of Directors.
(iii) Election of Board of Directors.
(1) For so long as at least 2,000,000 (as adjusted for
stock splits, combinations and similar events) shares of Series A Preferred
remain outstanding, (A) the holders of Series A Preferred, voting as a separate
class, shall be entitled to elect three (3) members of the Company's Board of
Directors at each meeting of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors; (B) the holders
of Common Stock, voting as a separate class, shall be entitled to elect one (1)
member of the Board of Directors at each meeting of the Company's stockholders
for the election of directors, and to remove from office such director and to
fill any vacancy caused by the resignation, death or removal of such director;
and (C) the holders of Common Stock and Series A Preferred, voting together as a
single class on an as-is-converted basis, shall be entitled to elect the
remaining members of the Board of Directors at each meeting or pursuant to each
consent of the Company's stockholders for the election of directors, and to
remove from office such directors and to fill any vacancy caused by the
resignation, death or removal of such director.
(2) If less than 2,000,000 (as adjusted for stock splits,
combinations and similar events) shares of Series A Preferred remain
outstanding, (A) the holders of Common Stock, voting as a separate class, shall
be entitled to elect one (1) member of the Board of Directors at each meeting of
the Company's stockholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation, death or
removal of such director; and (B) the holders of Common Stock and Series A
Preferred, voting together as a single class on an as-is converted basis, shall
be entitled to elect the remaining members of the Board of Directors at each
meeting or pursuant to each consent of the Company's stockholders for the
election of directors, and to remove from office such directors and to fill any
vacancy caused by the resignation, death or removal of such directors.
5.
<PAGE>
(c) Liquidation Rights.
(i) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series A
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series A Preferred equal to $ 1.70 (the "Original Issue
Price") plus all declared and unpaid dividends on the Series A Preferred Stock
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) for each share of Series A Preferred
held by them.
(ii) After the payment of the full liquidation preference of
the Series A Preferred as set forth in Section 3a above, the remaining assets of
the Company legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock.
(iii) The following events shall be considered a liquidation
under this Section:
(1) any consolidation or merger of the Company with
or into any other company or other entity or person or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization (or affiliates of such
stockholders) own less than 50% of the Company's voting power immediately after
such consolidation, merger or reorganization, or any transaction or series of
related transactions to which the Company is a party in which in excess of fifty
percent (50%) of the Company's voting power is transferred to parties other than
affiliates of the stockholders of the Company owning in excess of fifty percent
(50%) of the Company's voting power immediately prior to such transaction or
series of transactions (an "Acquisition"); or
(2) a sale, lease or other disposition of all or
substantially all of the assets of the Company to parties other than affiliates
of stockholders of the Company owning in excess of fifty percent (50%) of the
Company's voting power immediately prior to such transaction or series of
related transactions (an "Asset Transfer").
(iv) If, upon any liquidation, distribution, or winding up,
the assets of the Company shall be insufficient to make payment in full to all
holders of Series A Preferred of the liquidation preference set forth in Section
3a, then such assets shall be distributed among the holders of Series A
Preferred at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
(v) In any of such events, if the consideration received by
this Company is other than cash, its value will be deemed its fair market value
as determined in good faith by the Board of Directors. Any securities shall be
valued as follows:
(1) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
6.
<PAGE>
a. If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
b. If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
c. If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Board of Directors (excluding the directors serving on the Board pursuant to
Section 2.c.i.A.) and the holders of at least a majority of the voting power of
all then outstanding shares of Series A Preferred.
(2) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as mutually determined by the Board of Directors
(excluding the directors serving on the Board pursuant to Section 2.c.i.A.) and
the holders of at least a majority of the voting power of all then outstanding
shares of such Series A Preferred.
(d) Conversion Rights.
The holders of the Series A Preferred shall have the following
rights with respect to the conversion of the Series A Preferred into shares of
Common Stock (the "Conversion Rights"):
(i) Optional Conversion. Subject to and in compliance with
the provisions of this Section 4a, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate" then in effect
(determined as provided in Section 4b) by the number of shares of Series A
Preferred being converted.
(ii) Series A Preferred Conversion Rate. The conversion rate
in effect at any time for conversion of the Series A Preferred (the "Series A
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Original Issue Price of the Series A Preferred by the "Series A Preferred
Conversion Price," calculated as provided in Section 4c.
(iii) Series A Preferred Conversion Price. The conversion
price for the Series A Preferred shall initially be $0.12364742 (the "Series A
Preferred Conversion Price"), such that each share of Series A Preferred shall
initially be convertible into 13.74877050 shares of Common Stock. Such initial
Series A Preferred Conversion Price shall be adjusted from time to
7.
<PAGE>
time in accordance with this Section 4. All references to the Series A Preferred
Conversion Price herein shall mean the Series A Preferred Conversion Price as so
adjusted.
(iv) Mechanics of Conversion. Each holder of Series A Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series A Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series A
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver, or cause to be issued and delivered, to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay, or cause to be paid, in cash or, to the extent
sufficient funds are not then legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board of Directors as of
the date of such conversion), any declared and unpaid dividends on the shares of
Series A Preferred being converted. Such conversion shall be deemed to have been
made at the close of business on the date of such surrender of the certificates
representing the shares of Series A Preferred to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(v) Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date that the first share of
Series A Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series A Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series A
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4e shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(vi) Adjustment for Common Stock Dividends and Distributions. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series A Preferred Conversion Price that is then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Series A Preferred Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Preferred Conversion Price shall be
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adjusted pursuant to this Section 4f to reflect the amount of the actual payment
of such dividend or distribution.
(vii) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series A Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 3c or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4), in
any such event each holder of Series A Preferred shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series A Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(viii) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than an Acquisition or
Asset Transfer as defined in Section 3c or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4) as a part of such capital reorganization, provision
shall be made so that the holders of the Series A Preferred shall thereafter be
entitled to receive upon conversion of the Series A Preferred the number of
shares of stock or other securities or property of the Company to which a holder
of the number of shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, subject to adjustment in respect
of such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of Series A Preferred after the
capital reorganization to the end that the provisions of this Section 4
(including adjustment of the Series A Preferred Conversion Price then in effect
and the number of shares issuable upon conversion of the Series A Preferred)
shall be applicable after that event and be as nearly equivalent as practicable.
(ix) Notices of Record Date. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3c) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other company, or any Asset Transfer (as defined in Section
3c), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series A Preferred at
least twenty (20) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that
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is to be fixed as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(x) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series A Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series A Preferred by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(xi) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series A Preferred. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A Preferred,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(xii) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company or the Company's transfer agent.
(xiii) Payment of Taxes. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.
(xiv) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series A Preferred as required under Section 2b, the
Company shall not amend its Restated Certificate of Incorporation or participate
in any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or take any other voluntary action, for the purpose
of avoiding or seeking to avoid the observance or performance of any of the
terms to be
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observed or performed hereunder by the Company, but shall at all times in good
faith assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred against dilution or other impairment.
(e) No Reissuance Of Series A Preferred.
No share or shares of Series A Preferred acquired by the Company
by reason of redemption, purchase, conversion or otherwise shall be reissued.
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IN WITNESS WHEREOF, Integrated Packaging Assembly Corporation has caused
this certificate to be signed by the President and the Secretary in San Jose,
California this 29th day of April 1999.
INTEGRATED PACKAGING ASSEMBLY CORPORATION
By: /s/ PATRICK VERDERICO
____________________________________
Patrick Verderico, President
Attest:
By: /s/ J. ROBERT SUFFOLETTA
________________________________
J. Robert Suffoletta, Secretary
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