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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (Date of earliest event reported) JULY 6, 1998
C.P. CLARE CORPORATION
(Exact name of Registrant as specified in charter)
MASSACHUSETTS 0-26092 04-2561471
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
78 CHERRY HILL DRIVE, BEVERLY, MASSACHUSETTS 01915
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (978) 524-6700
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ITEM 5: OTHER EVENTS
On July 6, 1998, C.P. Clare Corporation (the "Company;) acquired Micronix
Integrated Systems, Inc. ("Micronix"). The acquisition was structured as a
merger (the "Merger") of a wholly-owned subsidiary of the Company with and into
Micronix pursuant to an Agreement and Plan of Merger dated as of July 6, 1998.
As consideration for the Merger, the stockholders of Micronix received
$15.8 million in cash.
In connection with the acquisition, the Company entered into employment
agreements and granted stock options to certain key employees who will remain
employed by the surviving entity, Clare Micronix Integrated Systems, Inc. These
key employees include Dennis Cocco, who will serve as President, and David
Adams, who will serve as Executive Vice President.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
C.P. CLARE CORPORATION
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(Registrant)
Dated: July 16, 1998 By: /s/ Thomas B. Sager
__________________________________________
Thomas B. Sager
Vice President and Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2.5 Agreement and Plan of Merger by and among C.P. Clare
Corporation, Clare Micronix Integrated Systems, Inc.,
Micronix Integrated Systems, Inc., Dennis Cocco and the
Principal Stockholders of the Company (as such term is
defined therein) dated as of July 6, 1998.
10.71 Employment Agreement between the Company and
Dennis Cocco dated July 6, 1998.
10.72 Non-Competition Agreement between the Company and
Dennis Cocco dated July 6, 1998.
10.73 C.P. Clare Non-Qualified Stock Option Plan, pursuant to
which options were granted to Dennis Cocco, dated
July 6, 1998.
10.74 Employment Agreement between the Company and
Dave Adams dated July 6, 1998.
10.75 Non-Competition Agreement between the Company and
Dave Adams dated July 6, 1998.
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EXHIBIT 2.5
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
CP Clare Corporation
as Buyer
Clare Micronix Integrated Systems, Inc.
as Buyer Sub
Micronix Integrated Systems, Inc.
as Company
Dennis Cocco, individually
and
the Principal Stockholders of the Company
July 6, 1998
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AGREEMENT AND PLAN OF MERGER
INDEX
Page
SECTION 1. MERGER..............................................................1
1.1 The Merger..........................................................1
1.2 Signing of Agreement................................................1
1.3 Effective Time; Closing.............................................2
1.4 Articles of Incorporation...........................................2
1.5 By-laws.............................................................2
1.6 Directors and Officers..............................................2
1.7 Effect on Securities of the Company.................................2
1.8 Effect on Securities of Buyer Sub...................................3
1.9 Manner of Payment...................................................3
1.10 Issuance of Options.................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
MANAGEMENT .........................................................4
2.1 Making of Representations and Warranties............................4
2.2 Organization and Qualifications of the Company......................4
2.3 Capital Stock of the Company; Beneficial Ownership..................5
2.4 Subsidiaries........................................................5
2.5 Authority of the Company............................................5
2.6 Real and Personal Property..........................................6
2.7 Financial Statements................................................8
2.8 Taxes...............................................................9
2.9 Collectibility of Accounts Receivable..............................10
2.10 Inventories........................................................10
2.11 Absence of Certain Changes.........................................10
2.12 Ordinary Course....................................................12
2.13 Banking Relations..................................................12
2.14 Intellectual Property..............................................12
2.15 Contracts..........................................................14
2.16 Litigation.........................................................15
2.17 Compliance with Laws...............................................15
2.18 Insurance..........................................................15
2.19 Warranty or Other Claims...........................................15
2.20 Powers of Attorney.................................................16
2.21 Finder's Fee.......................................................16
2.22 Permits; Burdensome Judgments, etc.................................16
2.23 Corporate Records; Copies of Documents.............................16
2.24 Transactions with Interested Persons...............................16
2.25 Employee Benefit Programs..........................................16
2.26 Environmental Matters..............................................18
2.27 List of Directors and Officers.....................................20
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2.28 Disclosure.........................................................20
2.29 Non-Foreign Status.................................................20
2.30 Backlog............................................................20
2.31 Employees; Labor Matters...........................................20
2.32 Customers, Distributors and Suppliers..............................21
2.33 Transfer of Shares.................................................21
2.34 Stock Repurchase...................................................21
SECTION 3. INTENTIONALLY OMITTED..............................................21
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER............................21
4.1 Making of Representations and Warranties...........................21
4.2 Organization of Buyer and Buyer Sub................................22
4.3 Authority of Buyer and Buyer Sub...................................22
4.4 Litigation.........................................................22
4.5 Finder's Fee.......................................................23
4.6 Option Shares......................................................23
SECTION 5. CONDITIONS.........................................................23
5.1 Conditions to the Obligations of Buyer and Buyer Sub...............23
5.2 Conditions to Obligations of the Company, the Principal
Stockholders and Dennis Cocco.....................................26
SECTION 6. TERMINATION OF AGREEMENT...........................................27
6.1 Termination........................................................27
6.2 Failure to Merge...................................................27
6.3 Effect of Termination..............................................27
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO AGREEMENT DATE
AND CLOSING........................................................27
7.1 Conduct of Business................................................27
7.2 Survival of Representations and Warranties.........................27
7.3 Repayment of Promissory Notes......................................28
7.4 Benefits to Company Employees......................................28
7.5 Tax Returns........................................................28
7.6 Further Assurances.................................................29
SECTION 8. INDEMNIFICATION....................................................29
8.1 Indemnification by the Cocco Entities..............................29
8.2 Limitations on Indemnification by the Cocco Entities...............29
8.3 Indemnification by Buyer...........................................30
8.4 Limitation on Indemnification by Buyer.............................30
8.5 Indemnification by Dave Adams......................................31
8.6 Notice; Defense of Claims..........................................31
8.7 Satisfaction of Cocco Entities Indemnification Obligations.........32
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SECTION 9. MISCELLANEOUS....................,,................................32
9.1 Fees and Expenses..................................................32
9.2 Governing Law......................................................33
9.3 Notices............................................................33
9.4 Entire Agreement...................................................34
9.5 Assignability; Binding Effect......................................34
9.6 Captions and Gender................................................35
9.7 Execution in Counterparts..........................................35
9.8 Amendments.........................................................35
9.9 Publicity and Disclosures..........................................35
9.10 Consent to Jurisdiction............................................35
9.11 Specific Performance...............................................35
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") entered into as of July 6,
1998 by and among CP Clare Corporation, a Massachusetts corporation ("Buyer"),
Clare Micronix Integrated Systems, Inc., a California corporation and a
wholly-owned subsidiary of Buyer ("Buyer Sub"), Micronix Integrated Systems,
Inc. a California corporation (the "Company"), Dennis Cocco and Jill Cocco, as
trustees of the Cocco Family Trust (the "Cocco Trust"), Cocco Investments, LLC,
a Nevada limited liability company (the "Cocco LLC"), and Dave Adams (each a
stockholder of the Company and, collectively, herein referred to as the
"Principal Stockholders" and individually as a "Principal Stockholder"; the
Principal Stockholders and said other stockholders of the Company being herein
collectively referred to as the "Stockholders" and individually as a
"Stockholder"). The Cocco Trust, the Cocco LLC and Jill Cocco and Dennis Cocco,
individually, are, collectively with any entity (other than the Saint Anne
School) to which the Cocco Trust has, since June 1, 1998, transferred shares of
the Company, hereinafter referred to as the "Cocco Entities."
W I T N E S S E T H
WHEREAS, the outstanding capital stock of the Company consists of
14,549,138 shares of the Company's Common Stock, no par value per share (said
shares being referred to herein as the "Company Shares"); and
WHEREAS, Buyer wishes to acquire the Company by means of a reverse merger
of Buyer Sub with and into the Company.
NOW, THEREFORE, in order to consummate said transaction and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECT65535ON 1. MERGER.
1.1 THE MERGER. On the Merger Effective Date and at the Effective Time (as
such terms are defined in Section 1.3), Buyer Sub shall be merged with and into
the Company in accordance with this Agreement and the separate existence of
Buyer Sub shall thereupon cease (the "Merger"). The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and the name of the Surviving Corporation shall be
"Clare Micronix Integrated Systems, Inc." The Merger shall have the effects
specified in Section 1107 of the California General Corporation Law ("CGCL").
1.2 SIGNING OF AGREEMENT. The execution of this Agreement, and all other
documents contemplated by this Agreement, shall occur at the offices of Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109 at 10:00 a.m. on
the date hereof (the "Agreement Date").
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1.3 EFFECTIVE TIME; CLOSING. The parties hereto shall cause an Agreement
of Merger (in the form attached hereto as EXHIBIT K), with all necessary
certificates, satisfying the requirements of Section 1101 of the CGCL to be
properly executed, verified and delivered for filing in accordance with Section
1103 of the CGCL on the Agreement Date. The Merger shall become effective on the
date (the "Merger Effective Date") such Agreement of Merger is filed with the
Secretary of State of California in accordance with Section 1103 of the CGCL.
The time at which the Merger becomes effective on the Merger Effective Date is
hereinafter referred to as the "Effective Time." The closing of the Merger
(herein called the "Closing") shall occur on the date the parties receive
notification from the Secretary of State of California that such Agreement of
Merger has been accepted for recording or filing. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date." In the event the Merger
Effective Date is earlier than the Closing Date, the Merger Consideration shall
be deemed to have been paid and the options to be issued pursuant to Section
1.10 shall be deemed to have been issued on the Merger Effective Date.
1.4 ARTICLES OF INCORPORATION. From and after the Effective Time, the
Articles of Incorporation of Buyer Sub, as in effect immediately prior to the
Effective Time and as attached hereto as EXHIBIT A, shall be and become the
Articles of Incorporation of the Surviving Corporation, and shall thereafter
continue in effect until amended as provided therein and in accordance with
California law.
1.5 BY-LAWS. The By-laws of Buyer Sub, as in effect immediately prior to
the Effective Time and as attached hereto as EXHIBIT B, shall be the By-laws of
the Surviving Corporation, and shall thereafter continue in effect until amended
as provided therein and in accordance with California law.
1.6 DIRECTORS AND OFFICERS. The directors and officers of Buyer Sub
holding office on the Merger Effective Date shall, from and after the Merger
Effective Date, be the directors and officers of the Surviving Corporation,
until their respective successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation or By-laws.
1.7 EFFECT ON SECURITIES OF THE COMPANY.
(a) At the Effective Time, each Company Share outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the Company, Buyer Sub or the holders of any of the
securities of either entity, be converted into the right to receive a cash
payment on the Closing Date equal to the quotient obtained by dividing fifteen
million eight hundred thousand dollars ($15,800,000) by the number of Company
Shares (the "Merger Consideration") which number of Company Shares and the
holders thereof shall be certified to Buyer by the Company and the Management
(as such term is defined in Section 2.1) as of the Agreement Date and as of the
Merger Effective Date. The Stockholders of the Company, and the portion of the
Merger Consideration to be received by each, are set forth on EXHIBIT C attached
hereto.
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(b) At the Effective Time, as a result of the Merger and without any
action on the part of the holder thereof, the Company Shares outstanding
immediately prior to the Effective Time shall cease to be outstanding, shall be
canceled and retired and shall cease to exist and each holder of a certificate
representing the Company Shares shall thereafter cease to have any rights with
respect to such Company Shares except the right to receive, without interest,
the Merger Consideration.
(c) Notwithstanding paragraph (a) or (b) above, no holder of Company
Shares who shall have validly exercised his or her right to dissent from the
Merger with respect to any Company Shares (such person, a "Dissenter"), as
provided by California law, shall receive any portion of the Merger
Consideration with respect to such Company Shares. Each Dissenter shall receive
the amount awarded or otherwise payable to such Dissenter in accordance with
California law.
(d) Each outstanding option to purchase shares of the Company's
Common Stock shall be either exercised for shares of the Company's Common Stock
(and such shares are included in the Company Shares) or be canceled prior to the
Agreement Date. The provisions in any plan, program or arrangement providing for
the issuance or grant of any interest in respect of the Company Shares shall be
canceled as of the Effective Time.
1.8 EFFECT ON SECURITIES OF BUYER SUB. At the Effective Time, each share
of Buyer Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of Buyer Sub
or the holder of such shares, be converted into one fully paid and nonassessable
share of Common Stock of the Surviving Corporation.
1.9 MANNER OF PAYMENT. On the Closing Date, Buyer shall pay or cause to be
paid to each Stockholder, by wire transfer of immediately available funds or by
a check issued by Buyer, the portion of the Merger Consideration set forth
opposite such Stockholder's name on EXHIBIT C attached hereto.
1.10 ISSUANCE OF OPTIONS. As of the Merger Effective Date, Buyer will award
to the employees of the Company options to purchase an aggregate of 500,000
shares of Buyer's common stock, par value $.01 per share. Such options shall be
delivered by Buyer on the Closing Date and shall be allocated among such
employees as set forth in EXHIBIT D hereto. The options shall qualify as
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and shall be issued under the CP Clare
Corporation 1995 Stock Option and Incentive Plan (the "Plan"); PROVIDED,
HOWEVER, that if any such employee cannot lawfully receive incentive stock
options to purchase such employee's full allotment of Buyer's common stock, such
employee shall receive incentive stock options under the Plan only to the extent
permitted by law and all other options awarded to such employee shall be
non-qualified options (which term shall mean any option which does not qualify
as an incentive stock option under the Code) and shall be approved in advance by
Buyer's Board of Directors. Such non-qualified options shall incorporate the
terms and
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conditions of the Plan and shall otherwise be in a form mutually agreed to by
Buyer and such employee. All options granted pursuant to this Section 1.10 shall
have a 10 year term, shall vest cumulatively in equal yearly installments over a
5 year period and be priced at the fair market value of Buyer's common stock,
par value $.01 per share, on the date of grant. Any employee of the Company who
receives options pursuant to this Section 1.10 shall execute, prior to the
Agreement Date, a release of all claims against the Company and the Principal
Stockholders in a form reasonably acceptable to Buyer.
SECT65535ON 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE MANAGEMENT.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
Buyer and Buyer Sub to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of Dennis Cocco and Dave Adams (Dennis
Cocco and Dave Adams being herein referred to as the "Management") jointly and
severally hereby make to Buyer and Buyer Sub the representations and warranties
contained in this Section 2 effective as of the Agreement Date and as of the
Merger Effective Date; PROVIDED, HOWEVER, that (i) Management shall not have any
right of indemnity or contribution from the Company with respect to any breach
of representation or warranty hereunder and (ii) the Stockholder warranties in
Section 2.3(b) are only made severally by each Principal Stockholder with
respect to the shares owned by such Principal Stockholder and by the Company
with respect to the shares owned by any other Stockholder. Statements made to
the knowledge of the Management refers to matters of which the Management should
have been aware in connection with the discharge of their duties in the
management of the Company.
2.2 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of California with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of the Company's Articles of Incorporation
as amended to date, certified by the California Secretary of State, and of the
Company's by-laws, as amended to date, certified by the Company's Secretary, and
heretofore delivered or made available to Buyer's counsel, are complete and
correct, and no amendments thereto are pending except for amendments
contemplated by this Agreement. The Company is not in violation of any term of
its Articles of Incorporation or By-laws. All actions of the Board of Directors
of the Company have been duly and validly taken or duly and validly ratified.
The Company is not required to be licensed or qualified to conduct its business
or own its property in any other jurisdiction except such jurisdictions where
failure to so qualify would not have a material adverse effect on the Company.
2.3 CAPITAL STOCK OF THE COMPANY; BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of the Company consists of
100,000,000
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shares of Common Stock, no par value per share, of which 14,549,138
shares are duly and validly issued, outstanding, fully paid and non-assessable
and of which 85,450,862 shares are authorized but unissued. None of the
Company's capital stock has been issued in violation of any federal or state
law. Except as set forth in the SCHEDULE 2.3(a) attached hereto, there are no
voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the Company Shares to which the
Company or, to the knowledge of the Management, any of the Stockholders is a
party.
(b) Each of the Stockholders owns beneficially and of record the
Company Shares set forth opposite such Stockholder's name on EXHIBIT C hereto
free and clear of any liens, restrictions or encumbrances. The Company Shares
set forth on EXHIBIT C constitute all of the issued and outstanding securities
of the Company.
(c) Except as disclosed on SCHEDULE 2.3(c) hereof, there are no
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Company.
(d) The Stock Confirmation, Stock Purchase and Mutual General Release
Agreements entered into by and among the Company, Dennis Cocco and each
Stockholder and such Stockholder's spouse were duly executed and constitute the
valid and binding obligation of the Company, each in accordance with its terms.
2.4 SUBSIDIARIES. The Company's subsidiaries and investments in any other
corporation or business organization are listed in SCHEDULE 2.4 (collectively,
the "Subsidiaries" or individually, a "Subsidiary"). There are no material
liabilities of the Company in connection with any Subsidiaries.
2.5 AUTHORITY OF THE COMPANY. The Company has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Company pursuant to this Agreement and to
carry out the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action of the
Company and no other action on the part of the Company or the Stockholders is
required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms. The execution, delivery and
performance by the Company of this Agreement and each such agreement, document
and instrument:
(i) does not and will not violate any provision of the Articles
of Incorporation or by-laws of the Company;
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(ii) except as set forth in SCHEDULE 2.5, does not and will not
violate any laws of the United States, or any state or other jurisdiction
applicable to the Company or require the Company to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made, except for
filings to be made and identified in this Agreement or where such violation
or the failure to obtain such approval, consent or waiver or make such
filing will not have a material adverse effect on the Company; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which the property
of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the Company's assets or the Company Shares, except
as specifically identified on SCHEDULE 2.5 or where such breach, default,
acceleration, right of termination, creation or imposition will not have a
material adverse effect on the Company.
2.6 REAL AND PERSONAL PROPERTY.
(a) REAL PROPERTY. The Company does not own any real property. All
of the real property leased by the Company is identified on SCHEDULE 2.6(a)
(herein referred to as the "Leased Real Property").
(i) TITLE. The Company has good, clear, record and marketable
title to enforceable leasehold interests in the Leased Real Property, in
each case free and clear of all easements, covenants, restrictions, leases,
mortgages, liens, assessments, claims, rights, judgments, encroachments or
other matters affecting title (collectively, "Encumbrances"), other than:
(x) easements, covenants, restrictions and similar encumbrances
that do not and could not materially interfere with the use
of the real property as currently used and improved, and
(y) minor encroachments that do not and could not materially
adversely affect the value or use of the real property as
currently used and improved and that could be removed
without material cost
((x) and (y) are collectively referred to as "Permitted Encumbrances"),
subject only to the right of reversion of the Lessor, except as set forth
in SCHEDULE 2.6(a).
(ii) STATUS OF LEASES. All leases of Leased Real Property are
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identified on SCHEDULE 2.6(a), and true and complete copies thereof have
been delivered or made available to Buyer. Except as set forth on SCHEDULE
2.6(a), each of said leases has been duly authorized and executed by the
Company and is in full force and effect. The Company is not in default
under any of said leases, nor has any event occurred which, with notice or
the passage of time, or both, would give rise to such a default. To the
knowledge of the Management, the other party to each of said leases is not
in default under any of said leases and there is no event which, with
notice or the passage of time, or both, would give rise to such a default.
(iii)CONDITION OF LEASED REAL PROPERTY. Except as set forth in
SCHEDULE 2.6(a), to the knowledge of the Management, (a) there are no
material defects in the physical condition of any buildings or improvements
constituting part of the Leased Real Property and (b) all such buildings
and improvements are in good operating condition and repair, have been well
maintained. To the knowledge of the Management, none of the Leased Real
Property is located in an area designated by any governmental authority as
being within a flood plain or subject to special flood or other hazards.
Access to the Leased Real Property is by a public way or public street.
(iv) COMPLIANCE WITH THE LAW. The Company has not received any
notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect
to any Leased Real Property that has not been heretofore corrected and, to
the knowledge of the Management, no such violation exists which could have
an adverse affect on the operation or value of any Leased Real Property.
All improvements located on or constituting part of the Leased Real
Property and their use and operation by the Company to the knowledge of the
Management, were and are now in compliance in all respects with all
applicable laws, ordinances, regulations, licenses, permits and
authorizations, except as set forth in SCHEDULE 2.6(a). The Company has not
received any notice of any real estate tax deficiency or assessment or,
except as set forth on SCHEDULE 2.6(a), is aware of any proposed
deficiency, claim or assessment with respect to any of the Leased Real
Property, or any pending or threatened condemnation thereof.
(b) PERSONAL PROPERTY. Except as specifically disclosed in the Base
Balance Sheet (as hereinafter defined), the Company has good and marketable
title to all of its personal property. SCHEDULE 2.6(b) specifically identifies
any of such personal property or assets that are subject to a capital lease.
None of such personal property or assets is subject to any mortgage, pledge,
lien, conditional sale agreement, security title, encumbrance or other charge
except as specifically disclosed in said Schedule or in the Base Balance Sheet.
The Base Balance Sheet reflects all personal property of the Company, excluding
items written down as obsolete or diminimus items. Except as otherwise specified
in SCHEDULE 2.6(b) hereto, all material leasehold improvements, furnishings,
machinery and equipment of the Company (except for furnishings, machinery and
equipment that are obsolete or have been written off by the Company) are in good
repair, have been well maintained, and substantially comply with all applicable
laws, ordinances and regulations, and such machinery and equipment is in good
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working order other than latent defects which are not reasonably capable of
detection during normal operation of such machinery and equipment.
2.7 FINANCIAL STATEMENTS.
(a) The Company has previously delivered or made available to Buyer
the following financial statements, copies of which are attached hereto as
SCHEDULE 2.7:
(i) Consolidated and consolidating balance sheet of the Company
for its fiscal year ending on June 30, 1997 and a statement of income,
retained earnings and cash flows for the year then ended, of which the
consolidated statement is certified by the President of the Company.
(ii) Consolidated and consolidating balance sheets of the Company
as of September 30, 1997, December 31, 1997 and May 31, 1998 (the
consolidated and consolidating balance sheet as of May 31, 1998 herein
referred to as the "Base Balance Sheet") and statements of income, retained
earnings and cash flows for the period then ended, certified by the
Company's President.
Except as set forth on SCHEDULE 2.7, said financial statements have been
prepared in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby (except that no footnotes to
such financial statements have been prepared), are complete and correct in all
material respects and present fairly in all material respects the financial
condition of the Company at the dates of said statements and the results of its
operations for the periods covered thereby.
(b) Except as set forth on SCHEDULE 2.7, as of the date of the Base
Balance Sheet, the Company had no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, liabilities for taxes due or then accrued or
to become due, or contingent or potential liabilities relating to activities of
the Company or the conduct of its business prior to the date of the Base Balance
Sheet regardless of whether claims in respect thereof had been asserted as of
such date), except liabilities stated or adequately reserved against on the Base
Balance Sheet, or reflected in Schedules furnished to Buyer hereunder as of the
date hereof or immaterial liabilities incurred in the ordinary course of
business of the Company which are not required to be reflected in the Base
Balance Sheet or the notes thereto under generally accepted accounting
principles.
(c) Except as set forth on SCHEDULE 2.7, as of the date hereof, the
Company does not have any material liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or contingent or potential liabilities relating to activities
of the Company or the conduct of its business prior to the date hereof or the
Closing, as the case may
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be, regardless of whether claims in respect thereof had been asserted as of such
date), except liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, (ii) reflected in Schedules furnished to
Buyer hereunder on the date hereof, or (iii) incurred in the ordinary course of
business of the Company consistent with the terms of this Agreement.
2.8 TAXES.
(a) Except as set forth in SCHEDULE 2.8 attached hereto, the Company
has paid or caused to be paid or provided for (including amounts accrued or
reflected on the Base Balance Sheet) all federal, state, local, foreign, and
other taxes, including without limitation, income taxes, estimated taxes,
alternative minimum taxes, excise taxes, sales taxes, use taxes, value-added
taxes, gross receipts taxes, franchise taxes, capital stock taxes, employment
and payroll-related taxes, withholding taxes, stamp taxes, transfer taxes,
windfall profit taxes, environmental taxes and property taxes, whether or not
measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it, including any
increase in an amount owed due to the unavailability of any loss or deduction
claimed by the Company (collectively, "Taxes"), required to be paid or provided
for by it through the date hereof whether disputed or not.
(b) Except as set forth on SCHEDULE 2.8, the Company has in
accordance with applicable law filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof, and all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period. A list of all federal and state income tax returns filed with
respect to the Company for taxable periods ended on or after June 30, 1992 is
set forth in SCHEDULE 2.8 attached hereto, and said Schedule indicates those
returns that have been audited or currently are the subject of an audit. For
each taxable period of the Company ended on or after June 30, 1992, the Company
has delivered or made available to Buyer correct and complete copies of all
federal and state income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company.
(c) Neither the Internal Revenue Service nor any other governmental
authority is now asserting or, to the knowledge of the Management, threatening
to assert against the Company any deficiency or claim for additional Taxes. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file reports and returns that the Company is or may be subject to
taxation by that jurisdiction. There are no security interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Taxes. Except as set forth in SCHEDULE 2.8, the Company has
never entered into a closing agreement pursuant to Section 7121 of the Code.
(d) The Company has not been notified by any tax authority that any
audit of a tax return filed by the Company is contemplated or pending. No
extension of time with respect to any date on which a tax return was or is to be
filed by the Company is in force, and no waiver or agreement by the Company is
in force for the extension of time for the
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assessment or payment of any Taxes.
(e) The Company has never been (or has ever had any liability for
unpaid Taxes because it once was) a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). The Company has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. The Company is not a party to any tax sharing agreement.
(f) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
2.9 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the material accounts
receivable of the Company shown or reflected on the Base Balance Sheet or
existing at the date hereof (less the reserve for bad debts set forth on the
Base Balance Sheet) are or will be at the Closing valid and legally enforceable
claims, fully collectible and subject to no set off or counterclaim. The Company
has no accounts or loans receivable from any person, firm or corporation which
is affiliated with the Company or from any director, officer or employee of the
Company, and all accounts and loans receivable from any such person, firm or
corporation shall be paid in cash prior to or simultaneously with the Closing.
2.10 INVENTORIES. Except as disclosed in SCHEDULE 2.10, the inventories of
the Company shown on the Base Balance Sheet or existing on the date hereof
reflect write-downs to realizable values in the case of items which are below
standard quality or have become obsolete or unsaleable through regular
distribution channels in the ordinary course of the business of the Company. The
values of the inventories stated in the Base Balance Sheet and any subsequent
financial statements of the Company reflect the normal inventory valuation
policies of the Company and were determined at the lower of cost or market in
accordance with generally accepted accounting principles, practices and methods
consistently applied. Purchase commitments for raw materials and parts are not
in excess of the Company's past practice and none are at prices materially in
excess of current market prices. Except as set forth in SCHEDULE 2.10, all
inventory items are located on the Leased Real Property. Except as set forth in
SCHEDULE 2.10, since the date of the Base Balance Sheet, no inventory items have
been sold or disposed of except through sales or dispositions in the ordinary
course of business at profit margins consistent with the experience of the
Company during the nine month period ended March 31, 1998, and all sales
commitments for the products of the Company are at prices not less than
inventory values plus selling expenses and said profit margins.
2.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 2.11
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of the Company, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been materially adverse with respect to the Company;
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<PAGE> 15
(b) Any contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
material debt or claim owing to, or intentional or written waiver of any
material right of, the Company;
(c) Any mortgage, encumbrance or lien placed on any of the properties
of the Company which remains in existence on the date hereof or will remain on
the Closing Date;
(d) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise (including without limitation liabilities for
Taxes due or to become due or contingent or potential liabilities relating to
products or services provided by the Company or the conduct of the business of
the Company since the date of the Base Balance Sheet regardless of whether
claims in respect thereof have been asserted), incurred by the Company other
than obligations and liabilities incurred in the ordinary course of business
consistent with the terms of this Agreement (it being understood that asserted
product or service liability claims shall not be deemed to be incurred in the
ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company, taken as a whole;
(g) Any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock;
(h) Any labor trouble or claim of unfair labor practices involving
the Company; any change in the compensation payable or to become payable by the
Company to any of its officers, employees, agents or independent contractors
other than normal merit increases in accordance with its usual practices; or any
bonus payment or arrangement made to or with any of such officers, employees,
agents or independent contractors;
(i) Any change with respect to the officers or management of the
Company, except as set forth on SCHEDULE 2.11;
(j) Any payment or discharge of a material lien or liability of the
Company which was not shown on the Base Balance Sheet or incurred in the
ordinary course of business thereafter, except as required by the terms of this
Agreement;
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(k) Any obligation or liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to any of its officers, directors, stockholders or employees, except
normal compensation and expense allowances payable to officers or employees;
(l) Any change in accounting methods or practices, credit practices
or collection policies used by the Company;
(m) Any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or otherwise,
for the Company to take any of the actions specified in paragraphs (a) through
(m) above.
2.12 ORDINARY COURSE. Since the date of the Base Balance Sheet, the Company
has conducted its business only in the ordinary course and consistently with its
prior practices, except as described in SCHEDULE 2.12.
2.13 BANKING RELATIONS. All of the arrangements which the Company has with
any banking institution are accurately described in SCHEDULE 2.13 attached
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, direct debit charges, fund transfers, etc.) and the person or
persons authorized in respect thereof.
2.14 INTELLECTUAL PROPERTY.
(a) The Company has no registered patents, copyrights or trademarks
and no applications for such rights are pending. Except as described in SCHEDULE
2.14, the Company has ownership of, or license to use, all copyright, trade
secret, trademark, or other proprietary rights (collectively, "Intellectual
Property") used or to be used in the business of the Company as presently
conducted or contemplated. There are no asserted claims or demands of any other
person pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of the Management,
threatened, which challenge the rights of the Company in respect thereof. Except
as set forth on SCHEDULE 2.14, the Company has the right to use, free and clear
of claims or rights of other persons, all customer lists, designs, manufacturing
or other processes, computer software, systems, data compilations, research
results and other information required for or incident to its products or its
business as presently conducted or contemplated.
(b) All trademarks and copyrights which are owned by or licensed to
the Company or used or to be used by the Company in its business as presently
conducted or contemplated, and all other items of Intellectual Property which
are material to the business or operations of the Company, are listed in
SCHEDULE 2.14.
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(c) All material licenses or other agreements under which the Company
is granted rights in Intellectual Property are listed in SCHEDULE 2.14. All said
licenses or other agreements are in full force and effect, there is no material
default by the Company or, to the knowledge of the Management, by any other
party thereto, and, except as set forth on SCHEDULE 2.14, all of the rights of
the Company thereunder are freely assignable. To the knowledge of the
Management, the licensors under said licenses and other agreements have and had
all requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided or made available to Buyer.
(d) All licenses or other agreements under which the Company has
granted rights to others in Intellectual Property owned or licensed by the
Company are listed in SCHEDULE 2.14. All of said licenses or other agreements
are in full force and effect, there is no material default by the Company or, to
the knowledge of the Management, any other party thereto, and, except as set
forth on SCHEDULE 2.14, all of the rights of Company thereunder are freely
assignable. True and complete copies of all such licenses or other agreements,
and any amendments thereto, have been provided or made available to Buyer.
(e) The Company has required all professional and technical employees
and other employees having access to valuable non-public information of Company,
to execute agreements under which such employees are required to convey to the
Company ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of Company. The Company has not made any such information
available to any person other than employees of Company except pursuant to
written agreements requiring the recipients to maintain the confidentiality of
such information and appropriately restricting the use thereof. The Management
has no knowledge of any infringement by others of any Intellectual Property
rights of the Company.
(f) To the knowledge of the Management, the present and contemplated
business, activities and products of the Company do not infringe upon any
Intellectual Property of any other person. No proceeding charging the Company
with infringement of any adversely held patent, copyrights, trade secret,
trademark or other proprietary right has been filed or, to the knowledge of the
Management, is threatened to be filed. The Company is not making unauthorized
use of any confidential information or trade secrets of any person, including
without limitation, any former employer of any past or present employee of
Company. Except as set forth in SCHEDULE 2.14, neither the Company nor, to the
knowledge of the Management, any of its employees have any agreements or
arrangements with any persons other than the Company related to confidential
information or trade secrets of such persons or restricting any such employee's
ability to engage in business activities relating to the business of the
Company. The activities of its employees on behalf of the Company do not violate
any such agreements or arrangements known to the Company.
2.15 CONTRACTS. Except for contracts, commitments, plans, agreements and
licenses
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described in SCHEDULE 2.15 (true and complete copies of which have been
delivered or made available to Buyer), the Company is not a party to or subject
to:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) any employment contract or contract for services which requires
the payment of more than $50,000 annually or which is not terminable within 30
days by the Company without liability for any penalty or severance payment;
(c) any contract or agreement for the purchase of any commodity,
material or equipment except purchase orders in the ordinary course for less
than $50,000 each;
(d) any other contracts or agreements creating any obligations of the
Company of $50,000 or more with respect to any such contract or agreement not
specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a particular product
from a supplier;
(f) any contract or agreement involving more than $50,000 which by
its terms does not terminate or is not terminable without penalty by the Company
or its successors within one year after the date hereof;
(g) any contract or agreement for the sale or lease of its products
not made in the ordinary course of business;
(h) any contract with any sales agent or distributor of products of
the Company;
(i) any contract containing covenants limiting the freedom of the
Company to compete in any line of business or with any person or entity;
(j) any contract or agreement for the purchase of any fixed asset for
a price in excess of $100,000 whether or not such purchase is in the ordinary
course of business;
(k) any material license agreement (as licensor or licensee);
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money;
(m) any contract or agreement with any officer, employee, director or
stockholder of the Company (other than the Company's standard Confidentiality
and Invention
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Assignment Agreements) or with any persons or organizations controlled by or
affiliated with any of them; or
(n) any contract or subcontract involving the sale of goods or
services to the United States or any foreign government.
Except as set forth in SCHEDULE 2.15, the Company is not in default under
any such contracts, commitments, plans, agreements or licenses described in said
Schedule and the Management has no knowledge of conditions or facts which with
notice or passage of time, or both, would constitute a default; provided,
however, that from time to time the milestones set forth in the development
agreements listed on SCHEDULE 2.15 hereto are not met in the ordinary course but
there are no threatened claims, other than have been disclosed.
2.16 LITIGATION. SCHEDULE 2.16 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company is a party. Except for matters described in SCHEDULE 2.16,
there is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of the Management, threatened against
the Company or its affiliates which may have any material adverse effect on the
properties, assets, prospects, financial condition or business of the Company or
which would prevent or hinder the consummation of the transactions contemplated
by this Agreement. With respect to each matter set forth therein, SCHEDULE 2.16
sets forth a description of the matter, the forum (if any) in which it is being
conducted, the parties thereto and the type and amount of relief sought.
2.17 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.17 hereto, the
Company is in compliance in all material respects with all applicable statutes,
ordinances, orders, judgements, decrees, rules and regulations promulgated by
any federal, state, municipal entity, agency, court or other governmental
authority which apply to the Company or to the conduct of its business, and the
Company has not received notice of a violation or alleged violation of any such
statute, ordinance, order, rule or regulation.
2.18 INSURANCE. The Company is insured to the extent disclosed in SCHEDULE
2.18 attached hereto and all such insurance policies and arrangements are
disclosed in said Schedule. Said insurance policies and arrangements are in full
force and effect, all premiums with respect thereto are currently paid, and the
Company is in compliance in all material respects with the terms thereof.
2.19 WARRANTY OR OTHER CLAIMS. There are no asserted or, to the knowledge
of the Management, threatened product liability, warranty or other similar
claims, or any facts upon which a material claim of such nature could be based,
against the Company for products or services which are defective or fail to meet
any product or service warranties except as disclosed in SCHEDULE 2.19 hereto.
Other than as set forth on SCHEDULE 2.19, no claim has been asserted against the
Company for renegotiation or price redetermination of any business transaction,
and, to the knowledge of the Management, there are no facts upon which any such
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claim could be based.
2.20 POWERS OF ATTORNEY. Except as set forth in SCHEDULE 2.20, neither the
Company, any Principal Stockholder or Dennis Cocco has granted any outstanding
power of attorney.
2.21 FINDER'S FEE. Except for the fee payable by the Company to Sutro &
Company, the Company has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transactions
contemplated by this Agreement.
2.22 PERMITS; BURDENSOME JUDGMENTS, ETC. SCHEDULE 2.22 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for the Company to conduct its business. The Company has
obtained all such Approvals, which are valid and in full force and effect, and
is operating in compliance therewith. Such Approvals include, but are not
limited to, those required under federal, state or local statutes, ordinances,
orders, requirements, rules, regulations, or laws pertaining to environmental
protection, public health and safety, worker health and safety or buildings.
Except as disclosed in SCHEDULE 2.22 or in any other Schedule hereto, the
Company is not subject to or bound by any judgment, decree or order which may
materially and adversely affect its business or prospects, its condition,
financial or otherwise, or any of its assets or properties.
2.23 CORPORATE RECORDS; COPIES OF DOCUMENTS. The corporate record books of
the Company accurately record all corporate action taken by its stockholders and
board of directors and committees. The copies of the corporate records of the
Company, as made available to Buyer for review, are true and complete copies of
the originals of such documents. The Company has made available for inspection
and copying by Buyer and its counsel true and correct copies of all documents
referred to in this Section or in the Schedules delivered to Buyer pursuant to
this Agreement.
2.24 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in SCHEDULE
2.24 hereto, neither the Company, any Stockholder, officer or director of the
Company or, to the knowledge of the Management, any of their respective spouses
or family members, owns directly or indirectly on an individual or joint basis
any material interest in, or serves as an officer or director or in another
similar capacity of, any competitor or supplier of Company, or any organization
which has a material contract or arrangement with the Company.
2.25 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.25 lists every Employee Program (as defined below)
that has been maintained (as defined below) by the Company at any time during
the three-year period ending on the Closing date.
(b) Each Employee Program which has ever been maintained by the
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Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code has received a favorable determination or approval
letter from the Internal Revenue Service ("IRS") regarding its qualification
under such section and has, in fact, been qualified under the applicable section
of the Code from the effective date of such Employee Program through and
including the Closing (or, if earlier, the date that all of such Employee
Program's assets were distributed). To the knowledge of the Management, no event
or omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable Code section.
(c) The Management does not know and has no reason to know, of any
failure of any party to comply in all material respects with any laws applicable
to the Employee Programs that have been maintained by the Company. With respect
to any Employee Program ever maintained by the Company, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
or breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to the Company, Buyer Sub or Buyer. No litigation, arbitration,
or governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program except such proceeding that
would not have a material adverse effect on the Company.
(d) Except as disclosed in SCHEDULE 2.25, neither the Company nor any
Affiliate (as defined below) (i) has ever maintained any Employee Program which
has been subject to title IV of ERISA (including, but not limited to, any
Multiemployer Plan (as defined below)) or (ii) has ever provided health care or
any other non-pension benefits to any employees after their employment is
terminated (other than as required by law) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by the Company
within the three years preceding the Closing, complete and correct copies of the
following documents (if applicable to such Employee Program) have previously
been delivered or made available to Buyer: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably
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necessary for Buyer to perform any of its responsibilities with respect to any
Employee Program subsequent to the Closing (including, without limitation,
health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; and (B) all stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (A)
above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii)An entity is an "Affiliate" of the Company if it would have
ever been considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for purposes
of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
2.26 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 2.26 hereto, (i) the Company has
not ever generated, transported, used, stored, treated, disposed of, or managed
any Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined
below) has ever been or is threatened to be spilled, released, or disposed of by
the Company or, to the knowledge of the Management, by any other party at any
site presently or formerly owned, operated, leased, or used by the Company, or
to the knowledge of the Management, has ever been located in the soil or
groundwater at any such site; (iii) no Hazardous Material has ever been
transported by the Company or, to the knowledge of the Management, by any other
party, from any site
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<PAGE> 23
presently or formerly owned, operated, leased, or used by the Company for
treatment, storage, or disposal at any other place; (iv) the Company does not
presently own, operate, lease, or use, nor has it previously owned, operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) no lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
the Company in connection with the presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 2.26 hereto, (i) the Company has
no liability under, nor has it ever violated, any Environmental Law (as defined
below); (ii) the Company, any property owned, operated, leased, or used by it,
and any facilities and operations thereon, are presently in compliance, in all
material respects, with all applicable Environmental Laws; (iii) the Company has
not ever entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any notice, demand letter or administrative
inquiry with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law.
(c) Except as set forth in SCHEDULE 2.26 hereto, no site operated,
leased, or used by the Company contains any asbestos or asbestos-containing
material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or
any urea formaldehyde foam insulation; PROVIDED, HOWEVER, that the Management
has not made any independent survey (except as set forth in the SECOR report) or
done any testing to determine if such materials were or are present.
(d) The Company has made available to Buyer copies of all material
documents, records, and information in the possession or control of the Company
concerning any environmental or health and safety matter relevant to the
Company, whether generated by the Company or others, including without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this SECTION 2.26, (i) "Hazardous Material" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof
or previously enforced; and (iv) "Company" shall mean and include Company and
all other entities for whose conduct the Company is or may be held responsible
under any Environmental Law.
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2.27 LIST OF DIRECTORS AND OFFICERS. SCHEDULE 2.27 hereto contains a true
and complete list of all current directors and officers of the Company. In
addition, SCHEDULE 2.27 hereto contains a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive compensation from the Company for the fiscal year ending June 30, 1998.
In each case such Schedule includes the current job title and aggregate annual
compensation of each such individual.
2.28 DISCLOSURE. The representations, warranties and statements of the
Company, the Principal Stockholders and the Management contained in this
Agreement and in the certificates, exhibits and schedules delivered by the
Company pursuant to this Agreement to Buyer do not contain any untrue statement
of a material fact, and, when taken together, do not omit to state a material
fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
2.29 NON-FOREIGN STATUS. The Company is not a "foreign person" within the
meaning of Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
2.30 BACKLOG. As of the date indicated in SCHEDULE 2.30, the Company has
reflected in its books and records purchase orders for the sale or lease of
products or services, for which revenues have not been recognized by the
Company, as set forth in SCHEDULE 2.30.
2.31 EMPLOYEES; LABOR MATTERS. The Company employs a total of approximately
52 full-time employees and no part-time employees and generally enjoys good
employer-employee relationships taken as a whole. The Company is not delinquent
in payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed for it to the
date hereof or amounts required to be reimbursed to such employees. Upon
termination of the employment of any of said employees, neither the Company nor
Buyer will by reason of the transactions contemplated under this Agreement or
anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments (except for accrued benefits),
except as set forth in SCHEDULE 2.31. The Company has no policy, practice, plan
or program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in said
Schedule. Except as disclosed in SCHEDULE 2.26, the Company is in compliance in
all material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations which are existing, pending or, to the knowledge of the Management,
threatened against or involving the Company. There is no active campaign for
unionization targeting the employees of the Company. There are no grievances,
complaints or charges that have been filed against the Company under any formal
dispute resolution procedure (including, but not limited to, any proceedings
under any dispute resolution procedure under any collective bargaining
agreement) that might have an adverse effect on the
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Company or the conduct of its business, and there is no arbitration or similar
proceeding pending and no claim therefor has been asserted. No collective
bargaining agreement is in effect or is currently being or is about to be
negotiated by the Company. The Company has not received any actual notice
indicating that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. The
Company is, and at all times since November 6, 1986 has been, in compliance with
the requirements of the Immigration Reform Control Act of 1986.
2.32 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.32(a) sets forth any
customer, sales representative or distributor (whether pursuant to a commission,
royalty or other arrangement) which accounts for more than 5% of the sales of
the Company from July 1, 1997 through June 9, 1998 (collectively, the "Customers
and Distributors"). SCHEDULE 2.32(b) lists all of the suppliers of the Company
to whom the Company has made payments aggregating $100,000 or more from November
1, 1997 through June 9, 1998, to date, showing, with respect to each, the name,
address and dollar volume involved (the "Suppliers"). To the knowledge of the
Management, except as set forth on SCHEDULE 2.32, the relationships of the
Company with its Customers, Distributors and Suppliers are good commercial
working relationships. Except as set forth on SCHEDULE 2.32, no Customer,
Distributor or Supplier has canceled, materially modified, or otherwise
terminated its relationship with the Company, or has during the last twelve
months decreased materially its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company, nor to the
knowledge of the Management, does any Customer, Distributor or Supplier have any
plan or intention to do any of the foregoing.
2.33 TRANSFER OF SHARES. No holder of stock of the Company has at any time
transferred any of such stock to any employee of the Company, which transfer
constituted or could be viewed as compensation for services rendered to the
Company by said employee.
2.34 STOCK REPURCHASE. Except as set forth on SCHEDULE 2.34, the Company
has not redeemed or repurchased any of its capital stock.
SECT65535ON 3. INTENTIONALLY OMITTED.
SECT65535ON 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to
the Company, the Principal Stockholders and Dennis Cocco to enter into this
Agreement and consummate the transactions contemplated hereby, Buyer hereby
makes the representations and warranties to the Company, the Principal
Stockholders and Dennis Cocco contained in this Section 4.
4.2 ORGANIZATION OF BUYER AND BUYER SUB. Buyer is a corporation duly
organized,
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validly existing and in good standing under the laws of Massachusetts
and Buyer Sub is a corporation duly organized, validly existing and in good
standing under the laws of California, and each has full corporate power to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it.
4.3 AUTHORITY OF BUYER AND BUYER SUB. Buyer and Buyer Sub each has full
right, authority and power to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by Buyer and Buyer Sub
pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Buyer and Buyer Sub of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary corporate action of Buyer and Buyer Sub and no other
action on the part of Buyer or Buyer Sub is required in connection therewith.
This Agreement and each other agreement, document and instrument executed and
delivered by Buyer and Buyer Sub pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of Buyer
and Buyer Sub enforceable in accordance with their terms. The execution,
delivery and performance by Buyer and Buyer Sub of this Agreement each such
agreement, document and instrument:
(i) does not and will not violate any provision of the Articles
of Organization (or other charter document) or by-laws of Buyer or Buyer
Sub;
(ii) does not and will not violate any laws of the United States
or of any state or any other jurisdiction applicable to Buyer or Buyer Sub
or require Buyer or Buyer Sub to obtain any approval, consent or waiver of,
or make any filing with, any person or entity (governmental or otherwise)
which has not been obtained or made; and
(iii) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture, loan or credit agreement, or other agreement
mortgage, lease, permit, order, judgment or decree to which Buyer or Buyer
Sub is a party and which is material to the business and financial
condition of Buyer and Buyer Sub and its parent and affiliated
organizations on a consolidated basis.
4.4 LITIGATION. There is no litigation pending or, to its knowledge,
threatened against Buyer or Buyer Sub which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.5 FINDER'S FEE. Except for the fee payable by Buyer to Needham &
Company, neither Buyer nor Buyer Sub has incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
4.6 OPTION SHARES. The shares of Buyer's Common Stock, par value $.01 per
share, to be issued upon the exercise of the options to purchase Buyer's Common
Stock to be
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issued pursuant to Section 1.9 hereof, have been reserved for issuance and when
issued in accordance with their terms will be validly issued, fully paid and
non-assessable.
SECT65535ON 5. CONDITIONS.
5.1 CONDITIONS TO THE OBLIGATIONS OF BUYER AND BUYER SUB. The obligation
of Buyer and Buyer Sub to consummate this Agreement and the transactions
contemplated hereby are subject to the fulfillment, on or prior to the Agreement
Date, of the following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of the Company, the Management and the Principal
Stockholders contained in this Agreement shall be true and correct as of the
Agreement Date and the Merger Effective Date; and the Company, the Management
and each of the Principal Stockholders shall, on or before the Agreement Date,
have performed all of their obligations hereunder which by the terms hereof are
to be performed on or before the Closing.
(b) APPROVAL OF BUYER'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from the Company, the Management and
the Principal Stockholders to evidence compliance with the terms and conditions
hereof as of the Agreement Date and the correctness as of the Agreement Date of
the representations and warranties of the Principal Stockholders, Management and
the Company.
(c) OPINION OF COUNSEL. On the Agreement Date, Buyer shall have
received from The Busch Firm, counsel for the Company and Dennis Cocco, an
opinion as of said date, as to the matters set forth in EXHIBIT E hereto and as
otherwise reasonably satisfactory to Buyer.
(d) NO LITIGATION. There shall have been no determination by Buyer,
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or threat by any person or any federal, state or other governmental
authority of litigation, proceedings or other action against Buyer, the Company
or Stockholders or any material adverse change in the laws or regulations
applicable to the Company.
(e) CONSENTS. Except for filings required pursuant to this Agreement,
the Company, Management or the Principal Stockholders shall have made, prior to
the Agreement Date, all filings with and notifications of governmental
authorities, regulatory agencies and other entities required to be made by the
Company or the Stockholders in connection with the
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execution and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the business of the Company
by Buyer subsequent to the Closing; and the Company, the Management, the
Principal Stockholders and Buyer shall have received, prior to the Agreement
Date, all authorizations, waivers, consents and permits, in form and substance
reasonably satisfactory to Buyer, from all third parties, including, without
limitation, applicable governmental authorities, regulatory agencies, lessors,
lenders and contract parties, required to permit the continuation of the
business of the Company and the consummation of the transactions contemplated by
this Agreement, and to avoid a breach, default, termination, acceleration or
modification of any material indenture, loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(f) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Dennis Cocco shall have executed and delivered to Buyer an
Employment Agreement and a Non-Competition Agreement, to be effective as of the
Merger Effective Date, in substantially the form of EXHIBIT F and EXHIBIT G,
respectively.
(g) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Dave Adams shall have executed and delivered to Buyer an
Employment Agreement and a Non-Competition Agreement, to be effective as of the
Merger Effective Date, in substantially the form of EXHIBIT H and EXHIBIT I,
respectively.
(h) OPTIONS. On or prior to the Agreement Date, the Company shall
provide evidence reasonably satisfactory to Buyer that all options issued and
outstanding under the Stock Option Plan for Key Employees of the Company (the
"Option Plan") have been either accelerated or canceled in accordance with their
terms.
(i) ACQUISITION AUDIT. On or prior to the Agreement Date, Buyer shall
have received a satisfactory report from Arthur Andersen LLP with respect to the
physical inventory of the Company to be performed by the Company and observed by
Arthur Andersen LLP as of the date hereof.
(j) BUSINESS RELATIONS. On or prior to the Agreement Date, Buyer
shall be reasonably satisfied with the personal interviews with the Customers,
Distributors and Suppliers.
(k) TERMINATION OF UCC'S. On or prior to the Agreement Date, all
financing statements (as such term is defined under the California Uniform
Commercial Code) filed against the Company shall have been terminated, except as
to the equipment leases set forth in SCHEDULE 2.6(b).
(l) TERMINATION OF SECURITY AGREEMENTS. On or prior to the Agreement
Date (but subject to the consummation of the Merger) all security agreements
identified on SCHEDULE
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2.6(b) or in the Base Balance Sheet (including, without limitation, (i) the
Security Agreement made as of February 14, 1996 by and between the Company and
The Busch Firm, (ii) the Security Agreement made as of February 5, 1996 by and
between the Company and Michael S. Crossley and (iii) the Security Agreement
made as of February 5, 1996 by and between the Company and Dennis P. Cocco and
Jill Cocco) shall have been terminated.
(m) TERMINATION OF INDEMNIFICATION AGREEMENT. On or prior to the
Agreement Date, (but subject to the consummation of the Merger), the
Indemnification Agreement made as of February 5, 1996 by and between the Company
and Dennis P. Cocco and Jill Cocco shall have been terminated.
(n) TERMINATION OF TAX LIEN. On or prior to the Agreement Date, the
tax lien in favor of the Internal Revenue Service on the assets of the Company
in the amount of approximately $95,000 shall have been released and discharged.
(o) PAYMENT OF PROMISSORY NOTE. The unsecured promissory note issued
on February 1, 1997 by Dennis P. Cocco to the Company in the principal amount of
up to $1,000,000, payable on January 31, 2007, shall have been paid in full
immediately prior to the Closing Date or arrangements reasonably satisfactory to
Buyer shall have been made for payment of such note to be made in connection
with or immediately following the Closing.
(p) STOCKHOLDER APPROVAL. Prior to the Agreement Date, the Company
shall have either (i) duly called a meeting of the Stockholders at which no more
than one stockholder, (which stockholder shall not be any of the Principal
Stockholders, Michael Adams, James Kellis or Mike Crossley), failed to vote in
favor of the Merger (either by voting against the Merger, abstaining or not
attending such meeting) or (ii) obtained the unanimous written consent of the
Stockholders to the Merger.
(q) TAX GOOD STANDING CERTIFICATE. Prior to the
Agreement Date, the Company shall have obtained from the
California Franchise Tax Board a Tax Good Standing Certificate.
(r) RELEASE. Prior to the Agreement Date, any employee of the Company
who receives options to purchase the common stock, par value $.01 per share, of
Buyer pursuant to Section 1.10 shall execute a release of all claims against the
Company and the Principal Stockholders in a form reasonably satisfactory to
Buyer.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY, THE PRINCIPAL STOCKHOLDERS
AND DENNIS COCCO. The obligation of the Company, the Principal Stockholders and
Dennis Cocco to consummate this Agreement and the transactions contemplated
hereby is subject to the fulfillment, on or prior to the Agreement Date, of the
following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Buyer and Buyer Sub contained in this
Agreement shall be true and correct
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as of the Agreement Date and the Merger Effective Date; and Buyer and Buyer Sub
shall, on or before the Agreement Date, have performed all of their obligations
hereunder which by the terms hereof are to be performed on or before the Closing
(b) APPROVAL OF THE COMPANY'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by The Busch Firm as counsel for the
Company and Dennis Cocco, and such counsel shall have received on behalf of the
Company and Dennis Cocco such other certificates, opinions and documents in form
satisfactory to such counsel as the Company may reasonably require from Buyer or
Buyer Sub to evidence compliance with the terms and conditions hereof as of the
Agreement Date and the correctness as of the Agreement Date of the
representations and warranties of Buyer and Buyer Sub.
(c) NO LITIGATION. There shall have been no determination by the
Company, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of material litigation, proceedings or other action
against Buyer, Buyer Sub, the Company, or any Stockholder.
(d) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Buyer shall have executed and delivered to Dennis Cocco an
Employment Agreement and a Non-Competition Agreement, effective as of the Merger
Effective Date, in substantially the form of EXHIBIT F and EXHIBIT G,
respectively.
(e) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or prior to the
Agreement Date, Buyer shall have executed and delivered to Dave Adams an
Employment Agreement and a Non-Competition Agreement, effective as of the Merger
Effective Date, in substantially the form of EXHIBIT H and EXHIBIT I,
respectively.
(f) OPTIONS. Prior to the Agreement Date, the issuance of all options
contemplated by Section 1.10 shall have been approved by Buyer and Buyer shall
have reserved for issuance shares of Buyer's common stock which may be issued
upon the exercise of such options.
(g) OPINION OF COUNSEL. On the Agreement Date, the Company shall have
received from Lori M. Henderson, Vice President and Corporate Counsel of Buyer,
an opinion as of said date, as to the matters set forth in EXHIBIT J hereto and
as otherwise reasonably satisfactory to the Company.
(h) TAX CLEARANCE CERTIFICATE. On the Agreement Date, Buyer Sub
shall have obtained from the California Franchise Tax Board a Tax Clearance
Certificate.
SECT65535ON 6. TERMINATION OF AGREEMENT.
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6.1 TERMINATION. Subject to Section 6.2, this Agreement may be terminated
only by mutual written consent of all of the parties to this Agreement.
6.2 FAILURE TO MERGE. In the event (i) the Secretary of State of
California fails to accept for recording or filing the Agreement of Merger filed
by the parties in connection with the Merger on or prior to July 17, 1998, (ii)
the Secretary of State of California requires substantial changes to such
Agreement of Merger before such Agreement of Merger will be accepted for
recording or filing and (iii) Buyer determines in good faith that such changes
are unreasonable and will require material changes to the terms of this
Agreement and Buyer notifies the Company and the Principal Stockholders of such
determination, then this Agreement shall terminate immediately. The parties will
use commercially reasonable effort to promptly address changes required by the
California Secretary of State, including filing revised agreements of merger and
officers certificates, unless the changes are as described in clause (ii) above.
6.3 EFFECT OF TERMINATION. All obligations of the parties hereunder shall
cease upon any termination pursuant to this Section 6, provided, however, that
(i) the provisions of this Section 6, Section 9.1 and Section 9.9 hereof shall
survive any such termination of this Agreement and (ii) nothing herein shall
relieve any party from any liability for a material error or omission in any of
its representations or warranties contained herein or a material failure to
comply with any of its conditions or agreements contained herein.
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO AGREEMENT DATE AND CLOSING.
7.1 CONDUCT OF BUSINESS. From and after the Agreement Date until the
Closing Date, the Company agrees that it will conduct its business in the
ordinary course and consistent with past practices and that the Board of
Directors of the Company will take no action without the prior approval of
Buyer.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations, warranties, agreements and obligations herein or in any
schedule, exhibit, certificate or financial statement delivered by any party to
the other party incident to the transactions contemplated hereby are material,
shall be deemed to have been relied upon by the other party and shall survive
the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto; PROVIDED, HOWEVER, that
such representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 8
shall expire. The sole remedy for a breach of such representation and warranty
under the Agreement shall be a claim for indemnification pursuant to Section 8.
7.3 REPAYMENT OF PROMISSORY NOTES. Buyer will pay and discharge within 45
days
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following the Closing the following promissory notes: Promissory Notes,
each dated April 1, 1996, payable to the order of Steve Willing in the original
principal amounts of $250,000 and $139,778.
7.4 BENEFITS TO COMPANY EMPLOYEES. Within a reasonable time following the
Closing, employees of the Company shall be entitled to comparable benefits and
remuneration as if such employees were, following the Closing, employed directly
by Buyer on a basis consistent with the title and responsibility of such
employee, taking into account the local markets. In addition, each such employee
shall receive service credit for the time such employee was employed by the
Company prior to the Closing.
7.5 TAX RETURNS.
(a) Following the Closing, Buyer and Dennis Cocco shall have joint
control over the preparation and filing of tax returns for the Surviving
Corporation for all pre-closing periods, which returns shall be filed in good
faith and in a timely manner. Such tax returns shall be prepared by a big four
accounting firm mutually selected by Buyer and Dennis Cocco and any legal
matters or tax disputes arising in connection with such tax returns shall be
handled by a law firm to be mutually selected by Buyer and Dennis Cocco.
(b) Buyer agrees that it shall not make any election with respect to
taxes or amend any previously filed tax return of the Company without first
discussing such election or amendment with Dennis Cocco; PROVIDED, HOWEVER, that
this Section 7.4(b) shall not prohibit the Company from making an election with
respect to taxes or filing any amendment to a previously filed tax return if
such election or amendment is (i) required by the Code and the rules promulgated
thereunder or (ii) at the direction of the Internal Revenue Service in
connection with an audit of Buyer or the Surviving Corporation.
(c) Each Principal Stockholder agrees that he shall not make any
election with respect to taxes or amend any previously filed tax return of such
Principal Stockholder without first discussing such election or amendment with
Buyer if such election or amendment shall adversely affect the tax reporting of
Buyer or the Surviving Corporation; PROVIDED, HOWEVER, that this Section 7.4(c)
shall not prohibit a Principal Stockholder from making an election with respect
to taxes or filing any amendment to a previously filed tax return if such
election or amendment is (i) required by the Code and the rules promulgated
thereunder or (ii) at the direction of the Internal Revenue Service in
connection with an audit of such Principal Stockholder.
7.6 FURTHER ASSURANCES. The parties agree that from time to time they
shall execute and deliver such further documents, and perform such further acts,
as may be necessary to comply with the terms of this Agreement.
SECT65535ON 8. INDEMNIFICATION.
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8.1 INDEMNIFICATION BY THE COCCO ENTITIES. The Cocco Entities jointly and
severally agree subsequent to the Closing to indemnify and hold the Company,
Buyer, Buyer Sub and their respective subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually a
"Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties")
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing, subject to the provisions below) which may be
sustained or suffered by any of them arising out of or based upon any of the
following matters:
(a) fraud, intentional misrepresentation or a deliberate or wilful
breach by the Company, the Management or any Principal Stockholder of any of
their representations or warranties under this Agreement or in any certificate,
schedule or exhibit delivered pursuant hereto (collectively, "Fraud Claims");
(b) any breach of the representations and warranties (other than the
representation and warranty of Dave Adams with respect to the Shares owned by
him in Section 2.3(b)) set forth in Section 2.3(a) and 2.3(b) (collectively,
"Capitalization Claims");
(c) any breach of the representations and warranties set forth in
Section 2.8 hereof (collectively, "Tax Claims");
(d) any breach of the representations and warranties set forth in
Section 2.26 hereof (collectively, "Environmental Claims"); and
(e) other than Fraud Claims, Capitalization Claims, Tax Claims, and
Environmental Claims, any other breach of any representation or warranty of the
Company or the Management under this Agreement or in any certificate, schedule
or exhibit delivered pursuant hereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations or warranties ("General Claims").
8.2 LIMITATIONS ON INDEMNIFICATION BY THE COCCO ENTITIES. Notwithstanding
the foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 8.1 shall be subject to the following provisions:
(a) No indemnification shall be payable to any Buyer Indemnified
Party with respect to Environmental Claims and General Claims, unless the total
of all claims for indemnification pursuant to such claims shall exceed $237,000
in the aggregate (the "Deductible"), and the only amount payable by the Cocco
Entities pursuant to such claims is the amount, if any, over the Deductible;
(b) No indemnification shall be payable to a Buyer Indemnified Party
with
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<PAGE> 34
respect to General Claims made after the date that is eighteen (18) months
following the Closing Date (the "General Claims Indemnification Cut-Off Date");
(c) No indemnification shall be payable to a Buyer Indemnified Party
with respect to Tax Claims or Environmental Claims made after the date that the
statute of limitations applicable to such claim shall have expired;
(d) The aggregate amount to be payable by the Cocco Entities to all
Buyer Indemnified Parties with respect to Environmental Claims and General
Claims shall be limited to $4,500,000 in the aggregate; and
(e) The aggregate amount to be payable by the Cocco Entities to all
Buyer Indemnified Parties with respect to Capitalization Claims and Tax Claims
shall be limited to the aggregate amount received by the Cocco Entities and the
Saint Anne School pursuant to Section 1.2 hereof, less amounts paid pursuant to
Section 8.2(d).
8.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold the
Stockholders (individually a "Stockholder Indemnified Party" and collectively
the "Stockholder Indemnified Parties") harmless from and against any damages,
liabilities, losses and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer hereunder,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting such a breach.
8.4 LIMITATION ON INDEMNIFICATION BY BUYER. Notwithstanding the foregoing,
the right of Stockholder Indemnified Parties to indemnification under
Section 8.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Section 8.3 shall be payable to
the Stockholders, unless the total of all claims for indemnification pursuant to
Section 8.3 shall exceed $100,000 in the aggregate, whereupon the full amount of
such claims shall be recoverable in accordance with the terms hereof;
(b) No indemnification shall be payable to the Stockholders with
respect to claims asserted pursuant to Section 8.3 above after the General
Claims Indemnification Cut-Off Date.
8.5 INDEMNIFICATION BY DAVE ADAMS. David Adams agrees to indemnify and
hold the Buyer Indemnified Parties harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing, subject to
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<PAGE> 35
the provisions below) which may be sustained or suffered by any of them arising
out of or based upon any breach of the representation and warranty with respect
to the shares owned by him set forth in Section 2.3(b). The aggregate amount to
be payable by Dave Adams to all Buyer Indemnified Parties pursuant to this
Section 8.5 shall be limited to the amount received by Dave Adams pursuant to
Section 1.2 hereof.
8.6 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
Following a claim for indemnification (except with respect to a claim asserted
by a third party), the parties agree to submit to mediation with respect to such
claim in Boston, Massachusetts with a mediator chosen by the indemnified party
and reasonably acceptable to the indemnifying party; PROVIDED, HOWEVER, that if
no resolution is reached with respect to such claim within 30 days following the
first mediation meeting, the parties are no longer obligated to pursue such
mediation. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 30 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 45 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
is advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party; and provided further that no settlement with respect to such claim shall
be made without the mutual consent of the indemnified and indemnifying party. If
no such notice of intent to dispute and defend a third party claim or liability
is given by the indemnifying party, or if such good faith and diligent defense
is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably
31
<PAGE> 36
request and shall cooperate with the indemnifying party in such defense, at the
expense of the indemnifying party.
8.7 SATISFACTION OF COCCO ENTITIES INDEMNIFICATION OBLIGATIONS. In order
to satisfy the indemnification obligations of the Cocco Entities, a Buyer
Indemnified Party shall have the right (in addition to collecting directly from
the Cocco Entities) to set-off its indemnification claims against any amounts
due to Dennis Cocco pursuant to the Non-Competition Agreement by and between
Buyer and Mr. Cocco; PROVIDED, HOWEVER, that during the time any such
indemnification claim is pending, any amounts owed by Buyer to Mr. Cocco
pursuant to such Non-Competition Agreement shall be paid to an interest bearing
account with an independent escrow agent, selected by Buyer and reasonably
agreed to by Mr. Cocco, pursuant to an escrow agreement, the terms of which
shall be mutually agreeable, and Buyer shall have the right to apply such funds
to the satisfaction of such indemnification claim only following the final
adjudication of such claim. Any balance remaining in such escrow account
following the final adjudication and payment of such claim shall be paid to Mr.
Cocco.
SECT65535ON 9. MISCELLANEOUS.
9.1 FEES AND EXPENSES.
(a) Subject to Section 9.1(c), each of the parties will bear its own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement, and no expenses of the Company, the
Management or the Principal Stockholders relating in any way to the Merger
hereunder and the transactions contemplated hereby (other than in-house Company
costs, such as travel), including without limitation legal, accounting or other
professional expenses of the Company or Stockholder, shall be charged to or paid
by the Company or Buyer.
(b) Subject to Section 9.1(c), the Stockholders will pay all costs
incurred, whether at or subsequent to the Closing, in connection with the
transfer of the Company Shares to Buyer as contemplated by this Agreement,
including without limitation, all transfer taxes and charges applicable to such
transfer.
(c) Notwithstanding anything else herein to the contrary, at the
Closing Buyer will assume the following fees and expenses payable by the Company
or any of the Stockholders: (i) the fees and expenses of Sutro & Company, not to
exceed $100,000 and (ii) the reasonable fees and expenses of The Busch Firm, not
to exceed $150,000 and not to include the fees and expenses relating to any
personal estate or tax planning services performed by The Busch Firm on behalf
of Dennis Cocco, Jill Cocco or the family or an affiliated entity of either of
them.
9.2 GOVERNING LAW. This Agreement shall be construed under and governed by
the internal laws of the Commonwealth of Massachusetts without regard to its
conflict of laws
32
<PAGE> 37
provisions.
9.3 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, or if sent
by registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO BUYER: CP Clare Corporation
78 Cherry Hill Drive
Beverly, MA 01915-1048
Fax: (508) 524-4913
Attn: Arthur R. Buckland
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax: (617) 523-1231
Attn: Stuart M. Cable
TO COMPANY: c/o Dennis Cocco
4 Little Pond
Laguna Niguel, CA 92677
With a copy to: THE BUSCH FIRM
2532 Dupont Drive
Irvine, CA 92715
Fax: (949) 474-7732
Attn: Timothy R. Busch
TO DENNIS COCCO: Dennis Cocco
4 Little Pond
Laguna Niguel, CA 92677
With a copy to: THE BUSCH FIRM
2532 Dupont Drive
Irvine, CA 92715
Fax: (949) 474-7732
Attn: Timothy R. Busch
TO DAVE ADAMS: Dave Adams
24871 Crown Royale
33
<PAGE> 38
Laguna Niguel, CA 92677
With a copy to: Joseph Carruth, Esq.
Rutan and Tucker LLP
611 Anton Blvd., Ste. 1400
Costa Mesa, CA 92626
Fax: (949) 546-9035
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
9.4 ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
9.5 ASSIGNABILITY; BINDING EFFECT. This Agreement shall only be assignable
by Buyer to a corporation or partnership controlling, controlled by or under
common control with Buyer upon written notice to the Company and the
Stockholders. This Agreement may not be assigned by the Stockholders or the
Company without the prior written consent of Buyer. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
9.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
9.7 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
9.8 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition set forth herein be waived, except by a writing
duly and validly executed by each party hereto, or in the case of a waiver, the
party waiving compliance
9.9 PUBLICITY AND DISCLOSURES. No press releases or public disclosure,
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this
34
<PAGE> 39
Agreement without the prior knowledge and written consent of Buyer and the
Company, other than as required by law. The parties will agree on a form of
press release to be issued following the close of business on the Agreement
Date.
9.10 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts of Massachusetts for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought and agrees that, with
respect to a claim for indemnification against any Principal Stockholder or the
Cocco Entities with respect to a Fraud Claim, Capitalization Claim or Tax Claim,
the federal or state courts of Massachusetts shall be the appropriate venue
(unless, in the case of a third party claim, the parties are unable to change
the venue of such claim to Massachusetts). With respect to all other claims for
indemnification against the Cocco Entities, none of the Cocco Entities shall be
deemed to have waived its right to assert an argument of forum non conveniens,
or similar argument, with respect to such claim.
9.11 SPECIFIC PERFORMANCE. The parties agree that it would be difficult to
measure damages which might result from a breach of this Agreement and that
money damages would be an inadequate remedy for such a breach. Accordingly, if
there is a breach or proposed breach of any provision of this Agreement, the
non-breaching party shall be entitled, in addition to any other remedies which
it may have, to an injunction or other appropriate equitable relief to restrain
such breach without having to show or prove actual damage to the breaching
party.
35
<PAGE> 40
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER:
CP CLARE CORPORATION
By: /s/ Michael J. Ferrantino
-------------------------
Name: Michael J. Ferrantino
Title: Vice President and Chief
Operating Officer
36
<PAGE> 41
BUYER SUB:
CLARE MICRONIX INTEGRATED
SYSTEMS, INC.
By: /s/ Michael J. Ferrantino
--------------------------------------
Name: Michael J. Ferrantino
Title: Vice President
COMPANY:
MICRONIX INTEGRATED SYSTEMS,
INC.
By: /s/ Dennis Cocco
--------------------------------------
Name: Dennis Cocco
Title: President
PRINCIPAL STOCKHOLDERS:
Cocco Family Trust, dated April 30, 1997,
as community property
/s/ Dennis P. Cocco
--------------------------------------
Dennis P. Cocco, as Trustee
/s/ Jill L. Cocco
--------------------------------------
Jill L. Cocco, as Trustee
COCCO INVESTMENTS, LLC
By: /s/ James J. Scheinkman
--------------------------------------
James J. Scheinkman, General Manager
37
<PAGE> 42
/s/ DAVE ADAMS
-----------------------------------
Dave Adams
/s/ DENNIS COCCO
-----------------------------------
Dennis Cocco, individually
38
<PAGE> 43
LIST OF EXHIBITS AND SCHEDULES
Exhibit A: Charter of Buyer Sub
B: By-laws of Buyer Sub
C: List of Stockholders, Stockholdings and Consideration to be Paid
D: List of options to be granted following the Closing
E. Form of Legal Opinion for Counsel to Company and Dennis Cocco
F: Form of Employment Agreement (Cocco)
G: Form of Non-Competition Agreement (Cocco)
H: Form of Employment Agreement (Adams)
I: Form of Non-Competition Agreement (Adams)
J: Form of Legal Opinion of Corporate Counsel of Buyer
K: Form of Agreement of Merger
Schedule 2.3(a) Voting Agreements, etc.
2.3(c) Options
2.4 Subsidiaries
2.5 Encumbrances
2.6(a) Leased Real Property
2.6(b) Personal Property
2.7 Financial Statements
2.8 Tax Disclosures
2.9 Affiliated Accounts Receivable
2.10 Inventories
2.11 Absence of Changes
2.12 Business Not in the Ordinary Course
2.13 Banking Arrangements
2.14 Intellectual Property
2.15 Contracts, etc.
2.16 Litigation
2.17 Compliance with Laws
2.18 Insurance
2.19 Warranty Claims
2.22 Permits, Burdensome Agreements
2.24 Transactions with Interested Persons
<PAGE> 44
2.25 Employee Benefit Programs
2.26 Environmental Matters
2.27 Officers and Directors
2.30 Backlog
2.31 Labor Matters
2.32(a) Customers and Distributors
2.32(b) Suppliers
2.34 Stock Repurchases
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT C
LIST OF STOCKHOLDERS, STOCKHOLDINGS AND MERGER CONSIDERATION
MERGER
CONSIDERATION
- --------------------------------------------------------------------------------
OWNERSHIP CASH
NAME AND ADDRESS OF OF COMPANY AT
STOCKHOLDER SHARES CLOSING
- --------------------------------------------------------------------------------
<S> <C> <C>
Dennis P. Cocco and Jill L. Cocco or 10,518,000 $11,422,284.95
Successor Trustee(s), as Trustees of ($632,546.56)
the Cocco Family Trust, dated ---------------
April 30, 1997, as community property $10,789,738.39
- --------------------------------------------------------------------------------
Saint Anne School 100,000 $ 108,597.50
- --------------------------------------------------------------------------------
Cocco Investments, LLC 1,382,000 $ 1,500,817.44
- --------------------------------------------------------------------------------
Dave Adams 1,433,914 $ 1,557,194.74
- --------------------------------------------------------------------------------
Mike Crossley 383,336 $ 416,293.31
- --------------------------------------------------------------------------------
Craig Stodart 20,000 $ 21,719.50
- --------------------------------------------------------------------------------
Michael D. Adams 50,000 $ 54,298.75
- --------------------------------------------------------------------------------
Patrick Dennehey 50,000 $ 54,298.75
- --------------------------------------------------------------------------------
Bryon D. Romine 20,000 $ 21,719.50
- --------------------------------------------------------------------------------
Bret Burns 50,000 $ 54,298.75
- --------------------------------------------------------------------------------
Robert Maxwell 26,847 $ 29,155.17
- --------------------------------------------------------------------------------
Daniel R. Soucy 17,857 $ 19,392.26
- --------------------------------------------------------------------------------
Narasimham Patibandla 25,000 $ 27,149.37
- --------------------------------------------------------------------------------
James Rollins 34,684 $ 37,665.96
- --------------------------------------------------------------------------------
Shunsaku Ueda 20,000 $ 21,719.50
- --------------------------------------------------------------------------------
James T. Kellis 362,500 $ 393,665.93
- --------------------------------------------------------------------------------
Jim Everitt 20,000 $ 21,719.50
- --------------------------------------------------------------------------------
Dennis Wittman 25,000 $ 27,149.37
- --------------------------------------------------------------------------------
Leah Ferracone 10,000 $ 10,859.75
- --------------------------------------------------------------------------------
TOTAL: 14,549,138 $ 15,800,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 46
EXHIBIT D
List of options to purchase shares of Buyer to be granted immediately
following the Closing
NAME OF EMPLOYEE OPTIONS TO BE GRANTED
---------------- ---------------------
Dennis Cocco 240,000
Dave Adams 75,000
Michael Adams 18,000
Michael Crossley 20,000
James Kellis 30,000
Bret Burns 18,000
James Everitt 13,000
Narasimham Patibandla 13,000
Patrick Dennehey 13,000
Shunsaku Ueda 8,250
Craig Stodart 8,250
Keh-Chee Jen 5,000
Claus Sonderman 1,500
Robert Maxwell 13,000
Khampouth Pabmixay 500
Jeannette Rondas 500
Larry Dake 5,000
Daniel Soucy 5,000
Jose Alvarez 1,000
Byron Romine 5,000
Vernon Henson 1,000
Leah Ferracone 5,000
Brent Evans 500
Colleen Jones 500
<PAGE> 1
EXHIBIT 10.71
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 6, 1998 ("Effective Date") between
DENNIS COCCO of 4 Little Pond, Laguna Niguel, CA 92677 ("the Employee") and C.P.
CLARE CORPORATION, a Massachusetts corporation with its principal office at 78
Cherry Hill Drive, Beverly, MA 01915-1048 (the "Company"). Unless the context
otherwise requires, the term "Company" shall include all subsidiary corporations
of the Company.
WHEREAS, on the Effective Date, the Company acquired all of the
outstanding stock of Micronix Integrated Systems, Inc. ("Micronix") pursuant to
a merger with a subsidiary of the Company pursuant to an Agreement and Plan of
Merger dated as of July 6, 1998 between the Company, a wholly owned subsidiary
of the Company, Micronix, the Employee and the other principal shareholders of
Micronix (the "Transaction") and the Employee was previously the President and
principal shareholder of Micronix; and
WHEREAS, as a condition to the Transaction, the parties hereto have agreed
to enter into this Employment Agreement.
NOW THEREFORE, in consideration of the terms and mutual covenants herein
contained, the Employee and the Company agree as follows:
1. TERM OF EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs the Employee, and the Employee
hereby accepts employment by the Company, for a period of five years commencing
on the Effective Date and ending on the fifth anniversary of the Effective Date
(the "Initial Term"), subject to extension in accordance with the provisions of
subparagraph (b), below, unless terminated earlier in accordance with the terms
hereof (the "Employment Period").
(b) EXTENSION OF TIME. Unless either party shall have given notice of its
intention to terminate this Agreement 120 days prior to the end of the Initial
Term or any successive one year term or unless this Agreement is terminated
pursuant to Paragraph 8, the term of the employment of the Employee under this
Agreement shall be automatically renewed for successive one year terms.
2. CAPACITY. The Employee shall serve as President of Clare Micronix
Integrated Systems, Inc., a wholly owned subsidiary of the Company or, in the
event Clare Micronix Integrated Systems, Inc. is later combined with the
Company, as President of Clare Micronix, a division of CP Clare Corporation (in
either case, the "Division"), shall report to the Chief Operating Officer of the
Company and shall perform such duties and functions with respect to such
position as are assigned from time to time by the Board of Directors or by the
Chief Operating Officer or Chief Executive Officer of the Company. In all
events, Employee shall have and perform such duties and functions as are
appropriate for a division president. The Employee shall also be a member of the
CP Clare Executive Management Team, as it may be composed and operated from time
to time. During the Employment Period and unless otherwise agreed to by the
parties, the Division will maintain a material business presence in Orange
County, California (which will be the principal place for Employee's performance
of services) and the Employee shall not be required to relocate his personal
residence in order to perform his duties under this Agreement. To the extent
that Clare Micronix Integrated Systems, Inc. remains a wholly owned subsidiary
of the Company, the Employee shall be a director of the subsidiary.
<PAGE> 2
3. FULL-TIME EMPLOYMENT. The Employee shall devote his entire business
and professional time, attention and energies to the performance of his duties
to the Company and of any of its subsidiaries by which he may be employed and
shall not, directly or indirectly, actively engage in or concern himself with
any other activities or commitments which interfere with the performance of his
duties hereunder or which, even if non-interfering, may be inimical or contrary
to the best interests of the Company. Notwithstanding the foregoing, the
Employee may at all times during the Employment Period (i) subject in each case
to the approval of the Chief Executive Officer of the Company, serve as an
officer, director, trustee, or committee member of any religious, professional,
civic, charitable or educational organization, or as a director of any
corporation whose business is not competitive with that of the Company;
provided, however, that Chief Executive Officer shall have been deemed to
approve the activities set forth in Schedule 3 hereof; and (ii) engage in, and
devote time and effort to, any and all personal investments or business ventures
unrelated to the business or affairs of the Company, in each case so long as
such activities do not materially interfere with his obligations set forth in
this Paragraph 3 and provided that such activities are permitted under Paragraph
13 of this Agreement.
4. COMPENSATION AND BENEFITS. For all services rendered by the Employee
to the Company, the Company shall pay to the Employee during the Employment
Period the following compensation:
(a) BASE SALARY. The Employee shall be entitled to an annual base salary
of Two Hundred Thousand Dollars ($200,000) from the date of this Agreement until
the expiration of the Employment Period. The base salary may be increased (but
may not be reduced) by approval of the Board of Directors of the Company for any
fiscal year of the Company during the Employment Period. To that end, the
Employee shall receive a performance review at least once in each fiscal year of
the Company, in connection with which he shall be eligible for such merit
increases and other salary adjustments as the Board of Directors of the Company
shall approve.
(b) ANNUAL BONUS. In addition to his regular salary, the Employee shall be
eligible (subject to the provisions of Paragraph 8(e) hereof) to receive an
annual bonus each year of up to 50% of his base salary on terms consistent with
those applicable, from time to time, to the other members of the CP Clare
Executive Management Team including increases to such bonus amount based on
performance multiples that may be in effect from time to time. For the first
fiscal year of employment by the Employee, the bonus, if granted, shall be
prorated for the period from the Effective Date through the end of the fiscal
year.
(c) STOCK OPTION GRANT. In addition to his regular salary, the Employee
shall be eligible (subject to the provisions of Paragraph 8(e) hereof) to
receive grants of options to purchase Common Stock in the Company consistent
with the grants to other members of the CP Clare Executive Management Team.
(d) PERFORMANCE STOCK OPTION BONUS. In addition to his regular salary, the
Employee shall be eligible (subject to the provisions of Paragraph 8(e) hereof)
to receive annual grants of options to purchase Common Stock in the Company in
amounts set forth on Exhibit A to this Agreement ("Performance Options"). Grants
of Performance Options, if any, shall be determined following the end of each
fiscal year of the Company based on the performance of the Division in the
manner described on Exhibit A. Performance Options shall be granted pursuant to
the Company's 1995 Stock Option and Incentive Plan, and/or other option plan
providing for the issuance of stock options as may from time to time be in
effect. Performance Options will be issued at the fair market value
2
<PAGE> 3
on the date of grant. Any portion of the Performance Options which are unvested
on the date of termination of Employee's employment with the Company shall lapse
upon the date of termination, if such termination was the result of one of the
following: (i) Company's termination of Employee for Good Cause (as defined in
Paragraph 8(b)) or (ii) Employee's resignation of employment, for any reason.
Notwithstanding anything to the contrary in this Agreement, after the date of
termination of employment, the Employee shall retain Performance Options granted
under this Paragraph 4(d) and vesting shall continue pursuant to the terms and
conditions of the option agreement governing such options, except as provided in
the immediately preceding sentence. Performance Options will have provisions
regarding vesting and duration and registration provisions and will be in the
form substantially similar to Initial Options and any changes will not be
materially adverse to the Employee.
(e) PAYMENT OF SALARY AND BONUS. The Employee's base salary under
subparagraph (a) of this Paragraph 4 shall be payable in substantially equal
installments in accordance with the Company's existing payroll practices for its
executives. Any bonus payable under subparagraph (b) of this Paragraph 4 shall
be paid to the Employee within 60 days following the end of the fiscal year with
respect to which such bonus relates. Any stock option grants payable under
subparagraph (c) of this Paragraph 4 shall be made in a manner consistent with
the manner and time any options are issued to the CP Clare Executive Management
Team. Any Performance Option grants under subparagraph (d) of this Paragraph 4
shall be made within 90 days following the end of each applicable fiscal year to
which each option relates.
(f) WITHHOLDING TAXES. The Employee agrees that the Company shall withhold
from any and all payments required to be made to the Employee pursuant to this
Agreement all federal, state, local and/or other taxes which the Company
determines are required to be withheld in accordance with applicable statutes
and/or regulations from time to time in effect.
(g) ACCELERATION OF OPTIONS. The vesting of the right to exercise all
options granted to the Employee under Paragraphs 4 and 5 of this Agreement shall
be accelerated in the event that there shall be a Change of Control of the
Company (as hereafter defined).
5. INITIAL GRANT OF STOCK OPTIONS.
On the Effective Date, the Employee will be granted options to purchase
240,000 shares of Common Stock in the Company vesting cumulatively in five equal
amounts on each anniversary of the Effective Date. Such options shall be (i)
Incentive Stock Options, as such term is defined pursuant to Internal Revenue
Code Section 422, as it may be amended from time to time, and issued under the
Company's 1995 Stock Option and Incentive Plan to the extent that such options
qualify on the date of grant as Incentive Stock Options and (ii) non-qualified
stock options, to the extent that balance of such option do not qualify as
Incentive Stock Options with substantially the same terms and conditions as
options issued under the Plan referenced in clause (i) (collectively, the
"Initial Options"). The forms of Option Agreements to be issued to Employee
pursuant to this Section 5 are attached hereto as Exhibit B-1 and B-2. All
Initial Options shall have been approved in advance by the Board of Directors of
the Company and will be issued at fair market value on the Effective Date. The
shares of stock underlying the Initial Options not already registered for resale
will be registered for resale on Form S-8 within 30 days after the Effective
Date. Any portion of the Initial Options which are unvested on the date of
termination of Employee's employment with the Company shall lapse upon the date
of termination, if such termination was the result of one of the following: (i)
Company's termination of Employee for Good Cause (as defined in Paragraph 8(b))
or
3
<PAGE> 4
(ii) Employee's resignation of employment, for any reason. Notwithstanding
anything to the contrary in this Agreement, the Employee shall retain the
Initial Options after the date of termination of employment and vesting shall
continue pursuant to the terms and conditions of the option agreement governing
such options over the initial five year period, except as provided in the
immediately preceding sentence.
6. FRINGE BENEFITS; VACATIONS.
(a) EMPLOYEE BENEFIT PLAN. The Employee shall be eligible to participate
during the Employment Period in such of the employee benefit and health plans
and other fringe benefit programs as the Company shall establish or maintain for
its executive management employees from time to time (commensurate with the
Employee's position and compensation). The employee shall be considered an
officer of the Company for purposes of the Company's bylaw provisions regarding
indemnity.
(b) LIFE AND DISABILITY INSURANCE. The Company shall provide to the
Employee at the expense of the Company and keep in force during the Employment
Period policies of term or other life insurance comparable in scope and amount
to the policies currently owned by the Company for the benefit of the Employee
and set forth in Schedule 6(b)(1). Additionally, the Employee shall be entitled
to participate in the Company's group disability insurance program during the
Employment Period; provided, however, such disability program shall be
comparable in scope and amount to the policies currently owned by the Company
for the benefit of the Employee as set forth in Schedule 6(b)(2). Nothing in
this Paragraph 6(b) shall be deemed to prohibit the Company from modifying or
changing the policies pursuant to which the benefits described in this Paragraph
6(b) are received; provided, however, that the modification or change does not
result in a material detriment to the Employee. Upon termination of the
Employee's employment with the Company, unless the termination was due to Good
Cause or Performance Cause, or unless the Employee resigns, the Employee may
purchase from the Company any life or disability policies owned by the Company
solely for the benefit of the Employee. The purchase price shall be mutually
agreed between the Company and the Employee.
(c) CAR/LEASE ALLOWANCE. The Company shall maintain the leases and pay the
lease payments under the automobile leases referenced on Exhibit C, until the
expiration date or earlier termination (by purchase or otherwise) of each lease
indicated on Exhibit C. Thereafter, the Company's only obligation with respect
to automobiles will be to pay to the Employee a car allowance equal to the
amount of $650 per month or such greater amount as the Company is then providing
to its executive management team during the Employment Period. As of the
Effective Date, the Employee shall carry (or reimburse the Company for)
insurance and provide for gas and all maintenance costs, at Employee's sole
expense, on the vehicles leased pursuant to Exhibit C. All insurance policies
referenced in this Paragraph 6(c) shall name the Employee and the Company as
named insureds. The Employee may, at any time, at his sole expense, have
assigned to him and exercise any purchase options under the automobile leases
referenced on Exhibit C.
(d) VACATIONS. The Employee shall be entitled to vacation time in each
year consistent with the Company's vacation policy for its senior executives as
in effect from time to time. For purposes of determining time of service, years
of service with Micronix shall be included. For the first year of employment
only and in addition to vacation allocated to Employee under this Section,
Employee shall have the right to carry over up to five (5) days of accrued
vacation in Micronix. Employee agrees that, in consideration of the terms of
this Agreement, any additional accrued vacation from
4
<PAGE> 5
the period prior to the Effective Date shall be eliminated as of the date of
this Agreement. A copy of the Company's current vacation policy has been
provided to the Employee. The Employee shall also be entitled to all paid
holidays and personal days given by the Company to its executives.
7. REIMBURSEMENT. The Company shall promptly reimburse the Employee for
all reasonable business expenses incurred by him in connection with his
performance of his duties to the Company, upon substantiation of such expenses
in accordance with the policies of the Company in effect from time to time
during the Employment Period. The Company will not reimburse the Employee for
country club membership dues or fees.
8. TERMINATION OF EMPLOYMENT.
(a) TERMINATION WITHOUT CAUSE. The Company expressly reserves the right to
terminate the employment of the Employee hereunder without Good Cause or
Performance Cause, and other than as provided in subparagraphs (b),(c) and (d),
of this Paragraph 8. In the event that the Employee's employment shall have been
terminated by the Company other than for Good Cause or Performance Cause, the
Employee shall be entitled to receive (x) his base salary as provided in
Paragraph 4(a) hereof to the date of such termination and no other benefits,
including, without limitation, those provided for under Paragraphs 4(b), 4(c),
4(d) and 6 of this Agreement (except those that cannot be divested pursuant to
the Employee Retirement Income Security Act of 1974, as amended or other
applicable law) and except as otherwise provided in Section 8(c) hereof and (y)
for the remaining term of this Agreement following the date of termination, his
base salary as provided for in Paragraph 4(a) hereof at the rate in effect on
the date of termination, payable in equal installments in the same amounts and
in the same periodic intervals as his base salary was paid immediately prior to
such termination.
(b) VOLUNTARY TERMINATION AND TERMINATION FOR GOOD CAUSE OR PERFORMANCE
CAUSE.
(i) The Employee's employment may be voluntarily terminated by him
at any time by giving not less than four weeks written notice thereof to the
Company. Additionally, the Employee's employment may be terminated at any time
for Good Cause or for Performance Cause (each as hereinafter defined) effective
upon the giving of written notice of such termination for Good Cause or for
Performance Cause by the Company to the Employee.
(ii) If at any time during the term of this Agreement (A) the
Employee shall have voluntarily terminated his employment with the Company or
(B) the Company shall have terminated the employment of the Employee for Good
Cause the Employee shall be entitled to receive only his base salary as provided
in Paragraph 4(a) hereof to the date of such termination and no other benefits,
including, without limitation, those provided for under Paragraphs 4(b), 4(c),
4(d) and 6 of this Agreement (except those that cannot be divested pursuant to
the Employee Retirement Income Security Act of 1974, as amended or other
applicable law).
(iii) If at any time during the term of this Agreement, the Company
shall have terminated the employment of the Employee for Performance Cause, the
Employee shall be entitled to receive (x) his base salary as provided in
Paragraph 4(a) hereof to the date of such termination and no other benefits,
including, without limitation, those provided for under Paragraphs 4(b), 4(c),
4(d) and 6 of this Agreement (except those that cannot be divested pursuant to
the Employee Retirement Income Security Act of 1974, as amended or other
applicable law and except as otherwise provided in Section 8(e) hereof) and (y)
for the period of 18 months following such termination, his base
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<PAGE> 6
salary as provided for in Paragraph 4(a) hereof at the rate in effect on the
date of termination, payable in equal installments in the same amounts and in
the same periodic intervals as his base salary was paid immediately prior to
such termination.
(iv) For purposes of this Agreement, the term "Good Cause" shall
mean (i) conviction of the Employee of any criminal offense involving dishonesty
or breach of trust or any felony or crime of moral turpitude, (ii) willful
substantial misconduct in the performance of his duties, (iii) the willful
continuous neglect of the duties and responsibilities of his office (other than
failure to perform his duties and fulfill his responsibilities resulting from
the Employee's incapacity due to a physical or mental illness), or (iv) the
Employee's failure to perform any material term, covenant or condition required
to be performed by the Employee pursuant to this Agreement which failure remains
uncured 30 days after notice of such failure from the Company to the Employee
(provided, however, that this clause (iv) shall not be deemed to include
termination for Performance Cause as set forth in Paragraph 8(b)(5)), all to be
finally determined in the reasonable discretion of the Board of Directors of the
Company.
(v) For purposes of this Agreement, the term "Performance Cause"
shall mean the failure of the Employee to perform his duties under this
Agreement in a manner which is consistent with the standards of performance
generally applicable to an executive similarly situated in the industry in which
the Division operates to be finally determined in the reasonable discretion of
the Board of Directors, which failure remains uncured 30 days after notice of
such failure from the Company to the Employee.
(c) DISABILITY. In the event that the Employee shall sustain a disability
and be unable to perform his duties and responsibilities during the term of this
Agreement, shall have been certified by at least two (2) duly licensed and
qualified physicians approved by the Board of Directors of the Company (the
"Examining Physicians"), the Company shall continue to pay to the Employee while
such disability continues the full amount of his base salary as set forth in
Paragraph 4(a) hereof for a period following the Date of Disability equal to the
lesser of (i) six months or (ii) the period ending upon the last date of
inception of the payment of benefits under all disability insurance policies to
which the Employee may become entitled pursuant to Paragraph 6(b) hereof.
Thereafter, if the Employee's disability shall continue (as evidenced by the
continued absence of the Employee from his duties), the employment of the
Employee under this Agreement shall terminate and all obligations of the
Employee shall cease and the Employee shall be entitled to receive only the
benefits, if any, as may be provided by any insurance to which he may have
become entitled pursuant to Paragraph 6(b) hereof, the payment of any amounts of
the Employee's base salary then remaining to be paid under Paragraph 4(a) hereof
through the date of the termination of the Employee's employment and except as
provided in Section 8(e) hereof. "Disability" means the complete disability of
the Employee resulting from injury, sickness, disease or infirmity due to age,
whereby the Employee is unable to perform his usual services for the Company,
with or without reasonable accommodation as required by law; the "Date of
Disability" shall be deemed to be the date on which the Board of Directors of
the Company receives written notice from the Examining Physicians stating that
the Employee is suffering a Disability as defined herein. Following the Date of
Disability, Employee shall also be eligible to receive the benefits pursuant to
the (i) Initial Options as may be set forth in the Option Agreements, the forms
of which are set forth as Exhibits B-1 and B-2 hereof and (ii) the Performance
Options and other options that may have been granted to the Employee during the
Employment Period.
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<PAGE> 7
(d) DEATH. In the event of the Employee's death during the term of this
Agreement, the Employee's employment hereunder shall immediately terminate and,
in such event, the Employee's estate shall be entitled to receive the Employee's
base salary as provided in Paragraph 4(a) hereof to the last day of the month
during which the Employee's death shall have occurred and such additional
benefits, if any, as may be provided by any insurance to which the Employee may
have become entitled pursuant to Paragraph 6(b) hereof. Following the Employee's
death, the Employee's estate shall also be eligible to receive the benefits
pursuant to the (i) Initial Options as may be set forth in the Option
Agreements, the forms of which are set forth as Exhibits B-1 and B-2 hereof and
(ii) the Performance Options and other options that may have been granted to the
Employee during the Employment Period.
(e) TERMINATION FOR GOOD REASON FOLLOWING CHANGE OF CONTROL. The
Employee's employment may be terminated by him by notice for a Good Reason (as
hereinafter defined), effective upon the giving of such notice, at any time
within one hundred eighty (180) days following a Change of Control (as
hereinafter defined), in which event, notwithstanding the provisions of
Paragraph 8(b) hereof, the Employee shall be entitled to receive for the period
of 12 months following such termination, his base salary provided for in
Paragraph 4(a) hereof at the rate in effect on the date of termination, payable
in equal installments in the same amounts and in the same periodic intervals as
his base salary was paid immediately prior to such termination.
For purposes of this Agreement, the term "Good Reason" means any of the
following:
(i) A material diminution by the Company in the Employee's authority,
functions, duties or responsibilities in the capacity specified in
Paragraph 2 hereof; provided that such material diminution is not in
connection with a termination of the Employee's employment hereunder by the
Company otherwise in accordance with this Agreement; or
(ii) A failure by the Company to comply with any material provision of
this Agreement which has not been cured within thirty (30) days after notice
of such noncompliance has been given by the Employee to the Company.
For purposes of this Agreement, a "Change of Control" means that any of
the following events has occurred:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, (the "Act") (other than the
Company, any of its Subsidiaries (as hereinafter defined), or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Subsidiaries), together
with all "affiliates" and "associates" (as such terms are defined in Rule
12b-2 under the Act) of such person, shall become the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 50% or more of either (A) the combined
voting power of the Company's then outstanding securities having the right to
vote in an election of the Company's Board of Directors ("Voting Securities")
or (B) the then outstanding shares of Stock (as hereinafter defined) of the
Company (in either such case other than as a result of an acquisition of
securities directly from the Company); or
(ii) persons who, as of the Effective Date, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as
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<PAGE> 8
a result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board, provided that any person becoming a
director of the Company subsequent to the Effective Date whose election or
nomination for election was approved by a vote of at least a majority of the
Incumbent Directors shall, for purposes of this Plan, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 60% or more of
the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), (B)
any sale, lease, exchange or other transfer (in one transaction or a series
of transactions contemplated or arranged by any party as a single plan) of
all or substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company;
Notwithstanding the foregoing, a "Change of Control" shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other Voting Securities outstanding, increase (x) the
proportionate number of shares of Stock beneficially owned by any person to 50%
or more of the shares of Stock then outstanding or (y) the proportionate voting
power represented by the Voting Securities beneficially owned by any person to
50% or more of the combined voting power of all then outstanding Voting
Securities; provided, however, that if any person referred to in clause (x) or
(y) of this sentence shall thereafter become the beneficial owner of any
additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change of Control"
shall be deemed to have occurred for purposes of the foregoing clause (i).
For purposes of the foregoing definition of "Change of Control":
(A) the term "Stock" means the Common Stock, par value $.01 per
share, of the Company, subject to adjustment or change as a result of any
merger, consolidation, sale of all or substantially all of the assets of the
Company, or any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or similar transaction; and
(B) the term "Subsidiary" means any corporation or other entity
(other than the Company) in any unbroken chain of corporations or entities,
beginning with the Company if each of the corporations or entities (other than
the last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50% or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
(e) TREATMENT OF COMPENSATION ON TERMINATION.
(i) Current Year's Bonus and Option Grants. In the event of the
termination of the employment of the Employee for any reason, the Employee shall
not be entitled to receive any bonus payment or option awards pursuant to
Paragraphs 4(b), 4(c) and 4(d) hereof in respect of the fiscal year of the
Company in which the termination shall take place.
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<PAGE> 9
(ii) Previous Year' s Bonus and Option Grants. In the event that at
the time of his termination, the Employee is due, but has not yet received,
payment of an annual bonus or option award in respect of the preceding fiscal
year of the Company pursuant to Paragraph 4(b), 4(c) or 4(d), such bonus or
option award shall be paid to the Employee as set forth in Paragraph 4(e),
except that, notwithstanding the foregoing, if the Employee shall have been
terminated for Good Cause as provided in subparagraph (b) of this Paragraph 8,
the Employee shall forfeit and shall not be entitled to receive payment of any
such annual bonus or issuance of such stock options in respect of the preceding
fiscal year which the Employee shall not have received on or before the date of
such termination for Good Cause.
(iii) Previously Granted Options. Performance Options and Initial
Options granted to the Employee prior to the date of termination of Employee's
employment with the Company shall lapse or remain in place pursuant to the
provisions of Paragraphs 4(d) and 5 respectively.
9. INVENTIONS AND PATENTS.
(a) DISCLOSURE OF DEVELOPMENTS. The Employee will promptly and fully
disclose to the Company any and all inventions, discoveries, trade secrets and
improvements, whether or not patentable and whether or not they are made,
conceived or reduced to practice during working hours or using the Company's
data or facilities, which the Employee develops, makes, conceives or reduces to
practice during his employment by the Company, either solely or jointly with
others or which Employee developed, made, conceived or reduced to practice
during his employment by Micronix, either solely or jointly with others, except
pursuant to activities permitted under Paragraph 3 (collectively,
"Developments"). All such Developments shall be the sole property of the
Company, and the Employee hereby assigns to the Company, without further
compensation, all his right, title and interest in and to such Developments and
any and all related patents, patent applications, copyrights, copyright
applications, trademarks and trade names in the United States and elsewhere.
(b) MAINTENANCE OF RECORDS. The Employee will keep and maintain adequate
and current written records of all Developments (in the form of notes, sketches,
drawings and as may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all times.
(c) ASSISTANCE IN OBTAINING PATENTS. The Employee will assist the Company
in obtaining and enforcing patent, copyright and other forms of legal protection
for the Developments in any country. Upon request, the Employee will sign all
applications, assignments, instruments and papers and perform all acts necessary
or reasonably desired by the Company to assign all such Developments fully and
completely to the Company and to enable the Company, its successors, assigns and
nominees, to secure and enjoy the full and exclusive benefits and advantages
thereof. During his employment, the Employee will perform his obligations under
this subparagraph (c) without further compensation, except for reimbursement of
expenses incurred at the request of the Company. If the Employee is not employed
by the Company as an the Employee at the time he is requested to perform any
obligations under this subparagraph, he shall receive for such performance a
reasonable per diem fee, as well as reimbursement of any expenses incurred at
the request of the Company.
10. PROPRIETARY INFORMATION.
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(a) OBLIGATION TO KEEP CONFIDENTIAL. The Employee recognizes that his
relationship with the Company is one of high trust and confidence by reason of
his access to and contact with the trade secrets and confidential and
proprietary information of the Company. The Employee will not at any time,
either during his employment with the Company or thereafter, except as necessary
in connection with his duties under this Agreement, disclose to others, or use
for his own benefit or the benefit of others, any confidential or proprietary
information, and all other knowledge, information, documents or materials,
owned, developed or possessed by the Company, whether in tangible or intangible
form, the confidentiality of which the Company takes reasonable measures to
protect, and which pertains, in any manner, to subjects which include, but are
not limited to, the Company's research operations, inventions, discoveries,
trade secrets and improvements, whether or not patentable, customers (including
identities of customers and prospective customers, identities of individual
contacts at business entities which are customers or prospective customers,
preferences, businesses or habits), business relationships, products (including
prices, costs, sales or content), financial information or measurements,
business methods, future business plans, data bases, computer programs,
marketing plans, forecasts, licenses, pricing information and other information
owned, developed or possessed by the Company ("Proprietary Information") The
term "Proprietary Information" shall also include information described in the
immediately preceding sentence which is owned, developed or possessed by
Micronix.
(b) EXCEPTIONS. The Employee's undertakings and obligations under this
Paragraph 10 will not apply to any Proprietary Information which: (a) is or
becomes generally known to the public through no action on the part of the
Employee, (b) is generally disclosed to third parties by the Company without
restriction on such third parties, (c) is approved for release by written
authorization of the Board of Directors of the Company, or (d) is the subject
matter of a lawful request or subpoena by and within the authority of a court or
governmental agency or other body.
(c) RETURN OF PROPRIETARY INFORMATION. Upon termination of the employment
of the Employee with the Company or at any other time upon request, the Employee
will promptly deliver to the Company all notes, memoranda, notebooks, drawings,
records, reports, files and other documents (and all copies of reproductions of
such materials) in his possession or under his control, whether prepared by him
or others, which contain Proprietary Information. The Employee acknowledges that
the material is the sole property of the Company.
11. ABSENCE OF RESTRICTIONS UPON DISCLOSURE AND COMPETITION. The Employee
represents that his performance of all the terms of this Agreement does not and
will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to the date of
this Agreement, and he will not disclose to the Company or induce the Company to
use any confidential or proprietary information or material belonging to any
previous company or others.
12. OTHER OBLIGATIONS REGARDING PROPRIETARY INFORMATION. The Employee
acknowledges that the Company from time to time may have agreements with other
persons or with the US Government, or agencies thereof, which impose
obligations or restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the confidential nature of
such work. The Employee agrees to be bound by all such obligations and
restrictions which are made known to him and to take all action necessary to
discharge the obligations of the Company under such agreements.
13. NONCOMPETITION.
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<PAGE> 11
(a) During the Employment Period, the Employee agrees not to compete in
any manner, either directly or indirectly, with the Company, or to assist any
other person or entity to compete with the Company.
(b) During the Employment Period and for one (1) year following the
termination, for any reason, of his employment, the Employee agrees either on
his behalf or on behalf of any other person or entity, directly or indirectly,
not to hire, solicit, or encourage to leave the employ of the Company any person
who is then an employee of the Company. The restrictions described herein shall
apply to the activities of the Employee in any state or other jurisdiction in
which the Company engaged in business during the term of employment.
The restrictions against competition set forth in this Paragraph 13 are
considered by the parties to be reasonable for the purposes of protecting the
business of the Company. However, if any such restriction is found by any court
of competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
14. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors and assigns. This Agreement
and the rights and obligations of the parties hereunder are personal to the
Company and the Employee and are not assignable or transferable to any other
person, firm or corporation without the consent of the other party, provided,
however, that the Company may assign its rights and obligations hereunder to any
person or entity who or which succeeds to all or substantially all of the
Company's business and assets.
15. NOTICES. All notices required or permitted hereunder shall be in
writing and deemed effectively given upon personal delivery or upon deposit in
the United States mails, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address set forth in the introductory
paragraph of this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Paragraph 15. Any
notice to the Employee pursuant to this Section 15 shall be copied to The Busch
Firm, 2832 Dupont Drive, Irvine, CA 92612, Attn.: Tim Busch.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
18. HEADINGS. The Paragraph and subparagraph headings used in this
Agreement are for convenience only and shall not be deemed to be a party of this
Agreement.
19. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
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<PAGE> 12
20. GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the state of California applicable to
agreements made-to be performed entirely within such state, without giving
effect to the conflicts of laws principles thereof.
21. CONSTRUCTION OF AGREEMENT. The parties mutually acknowledge that they
and their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist. Each party also
acknowledges that each has been represented by legal counsel in the preparation
and negotiation of this Agreement.
22. DISPUTE RESOLUTION. If there is a dispute between the parties arising
out of or relating to this Agreement or their relationship, including but not
limited to its alleged breach or termination, the parties shall first attempt in
good faith to settle this dispute by mediation, either under the rules of the
American Arbitration Association, or with the assistance of another organization
established to provide mediation services. If no resolution is reached within
thirty days following the first mediation meeting, any remaining unresolved
controversy or claim arising out of or relating to this contract, its alleged
breach or termination, shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall occur in Los Angeles, California.
There shall be a single arbitrator agreed upon mutually by the parties. If
the parties cannot agree upon the selection of an arbitrator within 30 days
after the demand for arbitration given by one party to the other, the selection
of the arbitrator shall be made by obtaining a list of seven arbitrators from
the Los Angeles office of the American Arbitration Association. After obtaining
this list, the parties shall alternately strike names from the list, with the
Company to be the party striking first. After each party has stricken three
names from the list, the remaining name shall be the single arbitrator for this
proceeding. Alternatively, the parties may agree, by written stipulation, to
appoint a single arbitrator whose name is not on a list supplied by the American
Arbitration Association. The arbitrator shall have the authority to order such
discovery, by way of deposition, interrogatory, document production, or
otherwise, as the arbitrator considers necessary to a full and fair exploration
of the issues in dispute, consistent with the expedited nature of arbitration.
Each party shall be responsible for paying one half of the arbitrator's
fees, and its own costs and attorneys fees, except that the arbitrator shall be
empowered to award costs and attorneys fees to the prevailing party, should he
or she find that the position of the other party is without substantial merit.
The arbitrator's award shall be in writing and shall be accompanied by a written
opinion explaining the reasons for the arbitrator's decision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written
C.P. CLARE CORPORATION
/s/ _________________________________
its: Chief Executive Officer
EMPLOYEE:
/s/ _________________________________
Dennis Cocco
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<PAGE> 13
EXHIBIT A
PERFORMANCE OPTIONS
<PAGE> 14
EXHIBIT B-1
FORM OF OPTION AGREEMENT
<PAGE> 15
EXHIBIT B-2
FORM OF OPTION AGREEMENT
<PAGE> 16
EXHIBIT C
CAR LEASES AS OF EFFECTIVE DATE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CAR MAKE/MODEL LEASE DESCRIPTION EFFECTIVE DATE OF TERMINATION DATE MONTHLY PAYMENT
LEASE OF LEASE
</TABLE>
2
<PAGE> 17
SCHEDULE 3
APPROVED ACTIVITIES
Member and Director of St. Anne School, Laguna Niguel, CA
Member and active participant in Legatus (professional organization)
<PAGE> 18
SCHEDULE 6(b)(1)
LIFE INSURANCE POLICIES
<PAGE> 19
SCHEDULE 6(b)(2)
DISABILITY INSURANCE POLICIES
<PAGE> 1
EXHIBIT 10.72
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is entered into and
effective as of July 6, 1998 ("Effective Date") by and between CP CLARE
CORPORATION, a Massachusetts Corporation ("Clare") and DENNIS COCCO ("Cocco")
with reference to the following facts.
RECITALS
A. Immediately prior to the Effective Date, Cocco was an approximately
83% shareholder and president of Micronix Integrated Systems, Inc. ("Micronix"),
a California corporation.
B. On the Effective Date, Clare Micronix became a wholly owned
subsidiary of Clare by merger with a subsidiary of Clare (the "Transaction").
C. In order to protect the value of the business operations of Clare
and the goodwill of Micronix acquired by Clare in the Transaction, Clare
desires, and Cocco agrees to, the terms and conditions of this Agreement.
NOW THEREFORE, the parties agree as follows:
SECTION 1. DEFINED TERMS.
1.1 ENGAGE IN COMPETITIVE ACTIVITIES. For purposes of this Agreement
"Engage in Competitive Activities" shall mean:
(i) to engage in any aspect, directly or indirectly, of any
Competitive Activities;
(ii) to render any activities to any individual or entity engaged
in Competitive Activities, including without limitation, as an employee,
consultant, adviser or independent contractor; or
(iii) to become involved, interested in or affiliated with any
individual or entity engaged in Competitive Activities, in any capacity,
including, without limitation, as a partner, shareholder, joint venturer,
lender, guarantor, surety or principal.
1.2 COMPETITIVE ACTIVITIES. For purposes of this Agreement, "Competitive
Activities" shall mean activities substantially the same as any business or
activity conducted by Clare during the time the obligations of Cocco under this
Agreement are applicable, including, without limitation, activities actively
contemplated by Clare, demonstrated by discussions by Clare in Board of Director
meetings or Executive Management Team meetings; provided, however, if the
obligations of Cocco are applicable after the termination of Cocco's
relationship with Clare, Competitive Activities shall be limited to activities,
including contemplated activities, during the 12 month period prior to the date
of termination.
1.3 SERVICE AREA. For purposes of this Agreement, "Service Area" shall
mean the United States of America.
<PAGE> 2
SECTION 2. CONSIDERATION.
2.1 AMOUNT. Cocco acknowledges and agrees that this Agreement is a
condition of Clare's payment of the purchase price for the acquisition of
Micronix in the Transaction. In addition, Clare shall pay to Cocco the sum of
$1,250,000 in consideration of this Agreement, in five equal annual allotments
of $250,000. Each annual allotment shall be paid to Cocco in substantially equal
installments in accordance with the Company's payroll practices for its
executives, and commencing on the first payroll payment date after the Effective
Date (collectively, the "Periodic Payments"). Payment shall be made, if, during
the period commencing on the Effective Date until the date of payment, Cocco
remains in compliance with the terms of this Agreement.
2.2 PAYMENT TERMINATION.
(a) No Periodic Payments to Cocco shall be made after the date of
Cocco's termination of employment with Clare, in the event that termination
occurs as a result of any one of the following:
(i) resignation of Cocco (except as provided in Section 2.2(c)); or
(ii) termination of Cocco's employment by Clare for Good Cause (as
defined in Cocco's employment agreement with Clare in effect from time to time).
(b) Periodic Payments to Cocco shall be made for a period of 18 months
after the date of Cocco's termination of employment with Clare, in the event
that termination occurs as a result of Performance Cause (as defined in Cocco's
employment agreement with Clare in effect from time to time).
(c) Periodic Payments to Cocco shall be made for the same period he is
to receive base salary payments following the date of Cocco's termination of
employment with Clare for Good Reason following a Change in Control (pursuant to
Cocco's employment agreement with the Clare in effect from time to time).
(d) In the event that Cocco's termination of employment with Clare
occurs for reasons other than referenced in Section 2.2(a), (b) and (c),
Periodic Payments shall be made to Cocco if Cocco remains in compliance with the
terms of this Agreement.
SECTION 3. NONCOMPETITION AFTER EFFECTIVE DATE.
During the five-year period after the Effective Date, Cocco shall not
Engage in Competitive Activities within the Service Area, except as an employee
of or contractor to Clare.
SECTION 4. NONCOMPETITION AFTER TERMINATION.
If Cocco's employment is terminated by Clare or if Cocco resigns from
employment with Clare, in either case for any reason, Cocco shall not Engage in
Competitive Activities within the Service Area during the period ending on the
later of (a) the five year period following the Effective Date as set forth in
Section 3 or (b) one year after the date of termination.
<PAGE> 3
SECTION 5. OWNERSHIP OF SECURITIES.
Notwithstanding anything to the contrary in this Agreement,(Error!
Bookmark not defined.)(Error! Bookmark not defined.)(Error! Bookmark not
defined.), this Agreement shall not prohibit Cocco from owning, directly or
indirectly, solely as an investment, securities of any entity Engaged in
Competitive Activities which are traded on any national securities exchange or
listed on the National Association of Securities Dealers Automated Quotation
System so long as (i) Cocco is not a controlling party, or a member of a group
which controls the entity Engaged in Competitive Activities, and (ii) Cocco does
not, directly or indirectly, own five percent or more of any class of securities
of such entity.
SECTION 6. REMEDIES AND INJUNCTIVE RELIEF.
The parties agree that any breach of this Agreement would cause
irreparable injury to Clare which cannot be adequately compensated in monetary
damages. Therefore, Clare shall have, in addition to (and not in lieu of) other
rights and remedies available, the right to have the provisions of this
Agreement specifically enforced by any court of competent jurisdiction by way of
an injunction or other legal equitable relief. Injunctive relief shall be
available pursuant to Section 526 of the California Code of Civil Procedure and
Section 3422 of the California Civil Code (as either section may from time to
time be amended or renumerated) in addition to any other rights and remedies
Clare may have.
SECTION 7. SEVERABILITY
It is understood and agreed by the parties that the provisions of this
Agreement are reasonable and valid as to time, geographic area, scope of
business and in all other respects, and that such provisions are properly
required for the adequate protection of the business of Clare. If any court of
competent jurisdiction or arbitration panel shall refuse to enforce any or all
of the restrictions because the time, commencement date, geographic area, or
scope of business is deemed unreasonable, it is expressly understood and agreed
that this Agreement shall not be void, but that for the purpose of such
proceeding and in such jurisdiction, the restrictions contained in this
Agreement shall be deemed to be reduced only to the extent necessary to permit
enforcement of this Agreement.
SECTION 8. MISCELLANEOUS PROVISIONS
8.1 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed by, the internal laws of the State of California, without regard to
principles of conflicts of laws.
8.2 WAIVER, MODIFICATION AND AMENDMENT. No amendment of, supplement to
or waiver of any obligations under this Agreement will be enforceable or
admissible unless set forth in a writing signed by both parties. No delay or
failure to require performance of any provision of this Agreement shall
constitute a waiver of that provision as to that or any other instance. Any
waiver granted shall apply solely to the specific instance expressly stated.
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<PAGE> 4
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between Clare and Cocco regarding the specific subject matter of this Agreement,
and supersedes any prior understandings, agreements, or representations by or
between the parties, written or oral, to the extent they relate in any way to
the subject matter of this Agreement.
8.4 NOTICES. All notices, consents, requests, demands or other
communications to or upon the respective parties shall be in writing, if to
Cocco shall be copied to The Busch Firm, 2832 Dupont Drive, Irvine, CA 92612,
Attn.: Tim Busch, and shall be effective for all purposes upon receipt, by (i)
personal delivery, (ii) delivery by messenger, express or air courier or similar
courier, or (iii) delivery by United States first class mail, postage prepaid.
Either party may change its address by written notice to the other in the manner
set forth above. Receipt of communications by United States mail will be
sufficiently evidenced by return receipt. Other forms of delivery and
transmittal shall be sufficiently evidenced by a written or printed record of
receipt.
8.5 ASSIGNMENT. Neither party may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party. This Agreement shall be binding on and inure to the benefit of the
successors and permitted assigns of the parties.
8.6 THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
construed to give any person other than the express parties to this Agreement,
and their respective successors and permitted assigns, any benefits, rights or
remedies.
8.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 CONSTRUCTION OF AGREEMENT. The parties mutually acknowledge that
they and their attorneys have participated in the preparation and negotiation of
this Agreement. In cases of uncertainty this Agreement shall be construed
without regard to which of the parties caused the uncertainty to exist.
8.9 ATTORNEYS' FEES. If any legal action or other proceeding is
commenced which is related to this Agreement, the losing party shall pay the
prevailing party's actual attorneys' fees and expenses incurred in the
preparation for, conduct of or appeal or enforcement of judgment from the
proceeding. The phrase "prevailing party" shall mean the party who is determined
in the proceeding to have prevailed or who prevails by dismissal, default or
otherwise.
8.10 RIGHT TO OFFSET. Clare shall have the right to offset any amounts
that may from time to time during the effective period of this Agreement be owed
by Cocco or any Cocco Entities (as defined in the Agreement and Plan of Merger
referenced below) to Clare pursuant to the terms of Paragraph 8.6 of the
Agreement and Plan of Merger dated as of July 6, 1998 between Clare, a wholly
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owned subsidiary of Clare, Micronix, Cocco and the principal shareholders of
Micronix against amounts payable to Cocco under this Agreement.
IN WITNESS WHEREOF, this Agreement has been entered into as of the
Effective Date.
CP CLARE CORPORATION
By: ____________________________ ____________________________
Dennis Cocco
Its: ____________________________
Address: Address:
78 Cherry Hill Drive 4 Little Pond
Beverly, MA 01915-1048 Laguna Niguel, CA 92677
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<PAGE> 1
EXHIBIT 10.73
GRANT NUMBER: 544
C.P. CLARE CORPORATION
C.P. CLARE NON-QUALIFIED STOCK OPTION PLAN
GRANTED TO DENNIS COCCO
No. of Shares: 184,830 July 6, 1998
CP Clare Corporation (the "Company") hereby grants to Dennis Cocco (the
"Optionee") an Option to purchase on or prior to July 6, 2008 (the "Expiration
Date") all or any part of 184,830 shares (the "Option Shares") of common stock
of the Company, par value $0.01 per share ("Common Stock"), at a price of
$9.0625 per share, the fair market value on the date of grant, and subject to
the terms and conditions set forth hereinafter. This Option is intended to be a
Non-Qualified Stock Option and shall not be treated as an "incentive stock
option" within the meaning of Section 422(b) of the Internal Revenue Code. This
Option is not granted pursuant to the Company's 1995 Stock Option and Incentive
Plan (the "Plan"), but capitalized terms not otherwise defined herein shall have
the meanings assigned to them by Section 1 of the Plan.
1. VESTING SCHEDULE. Subject to Section 4 and Section 8 hereof, and subject to
the determination of the Committee to accelerate the vesting schedule
hereunder due to other circumstances, the Option shall become vested and
exercisable with respect to the following numbers of Option Shares at the
expiration of each of the following periods from the date of the Option:
- --------------------------------------------------------------------------------
Number of Option Shares for which Period from the date of the Option after
Option Exercisable which it becomes Exercisable
- --------------------------------------------------------------------------------
36,966 July 6, 1999
- --------------------------------------------------------------------------------
36,966 July 6, 2000
- --------------------------------------------------------------------------------
36,966 July 6, 2001
- --------------------------------------------------------------------------------
36,966 July 6, 2002
- --------------------------------------------------------------------------------
36,966 July 6, 2003
- --------------------------------------------------------------------------------
In any event the Option shall become fully vested and exercisable with respect
to all of the Option Shares five years after the date hereof. Once vested, the
Option shall continue to be exercisable to purchase Option Shares at any time or
times prior to the Expiration Date.
2. MANNER OF EXERCISE. The Optionee may exercise this Option
only in the following manner: from time to time on or
prior to the Expiration Date, the Optionee may give written
notice to the Company of his election to purchase some or
all of the vested
<PAGE> 2
Option Shares purchasable at the time of such notice. This notice shall
specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or
more of the following methods: (a) in cash, by certified or bank check or
other instrument acceptable to the Committee; (b) in the form of shares of
Common Stock that are not then subject to restrictions under any Company
plan and that have been held by the Optionee for at least six months; or
(c) by the Optionee delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to promptly
deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price as so provided, the Optionee and
the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure. Payment instruments will be received
subject to collection.
The delivery of certificates representing the Option Shares will be
contingent upon the Company's receipt from the Optionee of full payment for
the Option Shares, as set forth above and any agreement, statement or other
evidence that the Company may require to satisfy itself that the issuance
of Common Stock to be purchased pursuant to the exercise of Options
hereunder and any subsequent resale of the shares of Common Stock will be
in compliance with applicable laws and regulations.
3. NON-TRANSFERABILITY OF OPTION. This Option shall not be transferable by
the Optionee otherwise than by will or by the laws of descent and
distribution and this Option shall be exercisable, during the Optionee's
lifetime, only by the Optionee.
4. TERMINATION OF EMPLOYMENT. If the Optionee's employment by the Company
or a Subsidiary is terminated, the extent to which and the period within
which the Option may be exercised shall be as set forth below:
(a) TERMINATION DUE TO DEATH. If the Optionee's employment terminates by
reason of death, the Option shall become fully exercisable and may
thereafter be exercised by the Optionee's legal representative or
legatee for a period of 12 months from the date of death or until the
Expiration Date, if earlier.
(b) TERMINATION DUE TO DISABILITY. If the Optionee's employment
terminates by reason of Disability, the Option shall become fully
exercisable and may thereafter be exercised for a period of 12 months
from the date of termination or until the Expiration Date, if earlier.
The death of the Optionee during the 12 month period provided in this
Section 4(b) shall extend such period for six months from the date of
death or until the Expiration Date, if earlier.
(c) TERMINATION DUE TO RETIREMENT. If the Optionee's employment
terminates by reason of Retirement, the Option may thereafter be
exercised to the extent it was exercisable on the date of termination
for a period of 12 months from the date of termination or until the
Expiration Date, if earlier. The death of the Optionee
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<PAGE> 3
during the 12-month period provided in this Section 4(c) shall extend
such period for six months from the date of death or until the
Expiration Date, if earlier.
(d) TERMINATION FOR GOOD CAUSE. If the Optionee's employment terminates
for Good Cause, as defined in the Employment Agreement between
Optionee and the Company dated July 6, 1998, the Option shall
immediately terminate and be of no further force and effect.
(e) OTHER TERMINATION. If the Optionee's employment is terminated by the
Company for any reason other than death, Disability, Retirement or
Good Cause, the Option shall continue to vest on the schedule set
forth in Section 1 hereof, and thereafter may be exercisable until the
Expiration Date.
(f) RESIGNATION. If the Optionee's employment terminates due to his
resignation from the Company, the Option may thereafter be exercised,
to the extent it was exercisable on the date of termination, for a
period of three months from the date of such termination or until the
Expiration Date, if earlier.
5. NO SPECIAL EMPLOYMENT RIGHTS. This Option will not confer upon the Optionee
any right with respect to continued employment by the Company or a
Subsidiary, nor will it interfere in any way with any right of the
Optionee's employer to terminate the Optionee's employment at any time.
6. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock that may be
purchased by exercise of this Option unless and until a certificate or
certificates representing such shares of Common Stock are duly issued and
delivered to the Optionee. Adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock
certificate is issued only to the extent such adjustment would be made
under the Plan for an option issued pursuant to the Plan.
7. TAX WITHHOLDING. No later than the date as of which part or all of the
value of any shares of Common Stock received under the Option first becomes
includible in the Optionee's gross income for Federal tax purposes, the
Optionee shall make arrangements with the Company regarding the payment of
any federal, state or local taxes required to be withheld with respect to
such income.
8. ACCELERATION. Upon a Change in Control, the Option shall automatically
become fully exercisable notwithstanding any provision to the contrary
herein.
9. RECAPITALIZATIONS; MERGERS. In the event of any merger, consolidation,
sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction, the outstanding
shares of Common Stock are increased or decreased or are exchanged for a
different number or kind of shares or other securities of the Company,
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<PAGE> 4
or additional shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities consolidation or merger or sale
of all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for securities, cash or
other property of any other corporation or business entity or in the event
of a liquidation of the Company, the Option shall be treated as if it had
been issued pursuant to the Plan.
10. MISCELLANEOUS.
(a) NOTICES. Notices hereunder shall be mailed or delivered to the Company
at its principal place of business, 78 Cherry Hill Drive, Beverly, MA
01915-1048 and shall be mailed or delivered to the Optionee at the
address set forth below, or in either case at such other address as
one party may subsequently furnish to the other party in writing.
(b) ENTIRE AGREEMENT; MODIFICATION. This Option constitutes the entire
agreement between the parties relative to the subject matter hereof,
and supersedes all proposals, written or oral, and all other
communications between the parties relating to the subject matter of
this Option. This Option may be modified, amended or rescinded only by
a written agreement executed by both parties; PROVIDED, HOWEVER, that
the Committee may, at any time, amend or cancel the Option (or provide
a substitute Award at the same or reduced exercise or purchase price
or with no exercise or purchase price) for the purpose of satisfying
changes in law or for any other lawful purpose, but no such action
shall adversely affect Optionee's rights under the Option without the
Optionee's consent.
(c) SEVERABILITY. The invalidity, illegality or unenforceability of any
provision of this Option shall in no way affect the validity, legality
or enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS. This Option shall be binding upon the inure to
the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 3 hereof.
(e) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without
reference to the conflict of laws provisions thereof.
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<PAGE> 5
(f) EFFECTIVE DATE. This Agreement shall be effective as of the date of
execution thereof by the Company and the Optionee. This Agreement was
adopted by the Compensation Committee of the Board of Directors of the
Corporation on June 17th, 1998 and is intended to be an approved plan
in accordance with Rule 16b-3 (d) (1) promulgated pursuant to the
Securities Exchange Act of 1934, as amended.
CP CLARE CORPORATION
By: ______________________________________
Title: ___________________________________
Receipt of the foregoing Option is acknowledged and its terms and conditions are
hereby agreed to:
Date: , 1998 Optionee: __________________________________
Dennis Cocco
Address: 4 Little Pond, Laguna Niguel, CA 92677
--------------------------------------
Social Security Number: _______________________
<PAGE> 1
EXHIBIT 10.74
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 6. 1998 ("Effective Date") between
DAVID ADAMS of 24871 Crown Royale, Laguna Niguel, CA 92677 ("the Employee") and
C.P. CLARE CORPORATION, a Massachusetts corporation with its principal office at
78 Cherry Hill Drive, Beverly, MA 01915-1048 (the "Company"). Unless the context
otherwise requires, the term "Company" shall include all subsidiary corporations
of the Company.
WHEREAS, on the Effective Date, the Company acquired all of the
outstanding stock of Micronix Integrated Systems, Inc. ("Micronix") pursuant to
a merger with a subsidiary of the Company pursuant to an Agreement and Plan of
Merger dated as of July 6, 1998 between the Company, a wholly owned subsidiary
of the Company, Micronix, Employee and the other principal shareholder of
Micronix (the "Transaction") and the Employee was previously an officer and
principal shareholder of Micronix; and
WHEREAS, as a condition to the Transaction, the parties hereto have agreed
to enter into this Employment Agreement.
NOW THEREFORE, in consideration of the terms and mutual covenants herein
contained, the Employee and the Company agree as follows:
1. TERM OF EMPLOYMENT.
(a) EMPLOYMENT. The Company hereby employs the Employee, and the Employee
hereby accepts employment by the Company, for a period of five years commencing
on the Effective Date and ending on the fifth anniversary of the Effective Date
(the "Initial Term"), subject to extension in accordance with the provisions of
subparagraph (b), below, unless terminated earlier in accordance with the terms
hereof (the "Employment Period").
(b) EXTENSION OF TIME. Unless either party shall have given notice of its
intention to terminate this Agreement 120 days prior to the end of the Initial
Term or any successive one year term or unless this Agreement is terminated
pursuant to Section 8, the term of the employment of the Employee under this
Agreement shall be automatically renewed for successive one year terms.
2. CAPACITY. The Employee shall serve as Executive Vice President, Sales
and Marketing of Clare Micronix Integrated Systems, Inc., a wholly owned
subsidiary of CP Clare Corporation or, in the event Clare Micronix Integrated
Systems, Inc. is later combined with the Company, Executive Vice President,
Sales and Marketing of Clare Micronix, a division of CP Clare Corporation (in
either case, the "Division"), shall report to the President of the Division and
shall perform such duties and functions with respect to such position as are
assigned from time to time by the President of the Division. During the
Employment Period and unless otherwise agreed to by the parties, the Division
will maintain a material business presence in Orange County, California and the
Employee shall not be required to relocate his personal residence in order to
perform his duties under this Agreement.
3. FULL-TIME EMPLOYMENT. The Employee shall devote his entire business
and professional time, attention and energies to the performance of his duties
to the Company and of any of its subsidiaries by which he may be employed and
shall not, directly or indirectly, actively engage
<PAGE> 2
in or concern himself with any other activities or commitments which interfere
with the performance of his duties hereunder or which, even if non-interfering,
may be inimical or contrary to the best interests of the Company.
Notwithstanding the foregoing, the Employee may at all times during the
Employment Period (i) subject in each case to the approval of the Chief
Executive Officer of the Company, serve as an officer, director, trustee, or
committee member of any religious, professional, civic, charitable or
educational organization, or as a director of any corporation whose business is
not competitive with that of the Company; and (ii) engage in, and devote time
and effort to, any and all personal investments or business ventures unrelated
to the business or affairs of the Company, in each case so long as such
activities do not materially interfere with his obligations set forth in this
Paragraph 3 and provided that such activities are permitted under Paragraph 13
of this Agreement.
4. COMPENSATION AND BENEFITS. For all services rendered by the
Employee to the Company, the Company shall pay to the Employee during the
Employment Period the following compensation:
(a) BASE SALARY. The Employee shall be entitled to an annual base salary
of One Hundred Fifty Thousand Dollars ($150,000) from the date of this Agreement
until the expiration of the Employment Period. The base salary may be increased
(but may not be reduced) by approval of the Board of Directors of the Company
for any fiscal year of the Company during the Employment Period. To that end,
the Employee shall receive a performance review at least once in each fiscal
year of the Company, in connection with which he shall be eligible for such
merit increases and other salary adjustments as the Board of Directors of the
Company shall approve.
(b) ANNUAL BONUS. In addition to his regular salary, the Employee shall be
eligible (subject to the provisions of Paragraph 8(e) hereof) to receive an
annual bonus each year of up to the greater of (i) 50% of his base salary or
(ii) $100,000 on terms consistent with the Company's annual bonus plan;
provided, however, that the bonus applicable to the first two fiscal years of
employment shall not be less than $100,000. For the first fiscal year of
employment by the Employee, the bonus shall be prorated for the period from the
Effective Date through the end of the fiscal year.
(c) MICRONIX ACCRUED BONUS. The Company agrees that prior to the effective
date of the Transaction, the Employee accrued and is due to receive a bonus in
the amount of $36,885.28 from Micronix. Such bonus shall be paid to the Employee
no later than 20 days following the Effective Date.
(d) STOCK OPTION GRANT. In addition to his regular salary, the Employee
shall be eligible (subject to the provisions of Paragraph 8(e) hereof) to
receive grants of options to purchase Common Stock in the Company in accordance
with the Company's policies in effect from time to time.
(e) PAYMENT OF SALARY AND BONUS. The Employee's base salary under
subparagraph (a) of this Paragraph 4 shall be payable in substantially equal
installments in accordance with the Company's existing payroll practices for its
executives. Any bonus payable under subparagraph (b) of this Paragraph 4 shall
be paid to the Employee within 90 days following the end of the fiscal year with
respect to which such bonus relates. Any stock option grants payable under
subparagraph (d) of this Paragraph 4 shall be made in a manner consistent with
the Company's policies.
(e) WITHHOLDING TAXES. The Employee agrees that the Company shall withhold
from any and all payments required to be made to the Employee pursuant to this
Agreement all federal, state,
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local and/or other taxes which the Company determines are required to be
withheld in accordance with applicable statutes and/or regulations from time to
time in effect.
5. INITIAL GRANT OF STOCK OPTIONS.
On the Effective Date, the Employee will be granted options to purchase
75,000 shares of Common Stock in the Company vesting in five equal amounts on
each anniversary of the Effective Date. Such options shall be (i) Incentive
Stock Options, as such term is defined pursuant to Internal Revenue Code Section
422, as it may be amended from time to time, and issued under the Company's 1995
Stock Option and Incentive Plan to the extent that such options qualify on the
date of grant as Incentive Stock Options and (ii) non-qualified stock options,
to the extent that balance of such option do not qualify as Incentive Stock
Options with substantially the same terms and conditions as options issued under
the Plan referenced in clause (i) (collectively, the "Initial Options"). All
Initial Options shall have been approved in advance by the Board of Directors of
the Company and will be issued at fair market value on the Effective Date. The
shares of stock underlying the Initial Options not already registered for resale
will be registered for resale on Form S-8 within 30 days after the Effective
Date. Any portion of the Initial Options which are unvested on the date of
termination of Employee's employment with the Company shall lapse upon the date
of termination, if such termination was the result of one of the following: (i)
Company's termination of Employee for Good Cause (as defined in Paragraph 8(b))
or (ii) Employee's resignation of employment, for any reason. Notwithstanding
anything to the contrary in this Agreement, the Employee shall retain the
Initial Options after the date of termination of employment and vesting shall
continue pursuant to the terms and conditions of the option agreement governing
such options over the initial five year period, except as provided in the
immediately preceding sentence.
6. FRINGE BENEFITS; VACATIONS.
(a) EMPLOYEE BENEFIT PLAN. The Employee shall be eligible to participate
during the Employment Period in such of the employee benefit and health plans
and other fringe benefit programs as the Company shall establish or maintain for
its employees from time to time (commensurate with the Employee's position and
compensation).
(b) LIFE AND DISABILITY INSURANCE. The Company shall provide to the
Employee at the expense of the Company and keep in force during the Employment
Period a policy of term life insurance with a death benefit in the amount of two
(2) times base salary, in accordance with the policy in effect from time to
time. Additionally, the Employee shall be entitled to participate in the
Company's group disability insurance program during the Employment Period.
(c) VACATIONS. The Employee shall be entitled to vacation time in each
year consistent with the Company's vacation policy for its senior executives as
in effect from time to time. For purposes of determining time of service, years
of service with Micronix shall be included. A copy of the Company's current
vacation policy has been provided to the Employee. The Employee shall also be
entitled to all paid holidays and personal days given by the Company to its
employees similarly situated.
(d) CAR ALLOWANCE. The Employee shall be entitled to a car allowance of
$250 per month during the Employment Period.
7. REIMBURSEMENT. The Company shall promptly reimburse the Employee for
all reasonable business expenses incurred by him in connection with his
performance of his duties to the
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<PAGE> 4
Company, upon substantiation of such expenses in accordance with the policies of
the Company in effect from time to time during the Employment Period. The
Company will not reimburse the Employee for country club membership dues or
fees. The Company will reimburse the Employee for airline upgrades purchased by
the Employee and used for business travel by the Employee pursuant to airline
programs.
8. TERMINATION OF EMPLOYMENT.
(a) TERMINATION WITHOUT CAUSE. The Company expressly reserves the right to
terminate the employment of the Employee hereunder without cause, and other than
as provided in subparagraphs (c) and (d), of this Paragraph 8. In such event,
the Employee shall be entitled to receive (i) his base salary as provided in
Paragraph 4(a) hereof to the date of such termination and no other benefits,
including, without limitation, those provided for under Paragraphs 4(b), 4(c)
and 6 of this Agreement (except those that cannot be divested pursuant to the
Employee Retirement Income Security Act of 1974, as amended or other applicable
law), and (ii) for the period of one (1) year following such termination his
base salary as provided for in Paragraph 4(a) hereof at the rate in effect on
the date of such termination of employment, payable in equal installments in the
same amounts and in the same periodic intervals as his base salary was paid
immediately prior to such termination.
(b) VOLUNTARY TERMINATION AND TERMINATION FOR GOOD CAUSE. The Employee's
employment may be voluntarily terminated by him at any time by giving not less
than four weeks written notice thereof to the Company. Additionally, the
Employee's employment may be terminated at any time for Good Cause (as
hereinafter defined) effective upon the giving of written notice of such
termination for Good Cause by the Company to the Employee. If at any time during
the term of this Agreement (i) the Employee shall have voluntarily terminated
his employment with the Company or (ii) the Company shall have terminated the
employment of the Employee for Good Cause (as hereinafter defined) the Employee
shall be entitled to receive only his base salary as provided in Paragraph 4(a)
hereof to the date of such termination and no other benefits, including, without
limitation, those provided for under Paragraphs 4(b), 4(c) and 6 of this
Agreement (except those that cannot be divested pursuant to the Employee
Retirement Income Security Act of 1974, as amended or other applicable law).
For purposes of this Agreement, the term "Good Cause" shall mean (i)
conviction of the Employee of any criminal offense involving dishonesty or
breach of trust or any felony or crime of moral turpitude, (ii) willful
misconduct in the performance of his duties not cured within 15 days after
notice of such misconduct from the Company, (iii) the willful continuous neglect
of the duties and responsibilities of his office (other than failure to perform
his duties and fulfill his responsibilities resulting from the Employee's
incapacity due to a physical or mental illness) not cured within 15 days after
notice of such neglect from the Company, or (iv) the Employee's failure to
perform any term, covenant or condition required to be performed by the Employee
pursuant to this Agreement not cured within 15 days after notice of such failure
from the Company, all to be finally determined in the sole discretion of the
Board of Directors of the Company.
(c) DISABILITY. In the event that the Employee shall sustain a disability
and be unable to perform his duties and responsibilities during the term of this
Agreement, shall have been certified by at least two (2) duly licensed and
qualified physicians approved by the Board of Directors of the Company (the
"Examining Physicians"), the Company shall continue to pay to the Employee while
such disability continues the full amount of his base salary as set forth in
Paragraph 4(a) hereof for a
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period following the Date of Disability equal to the lesser of (i) six months or
(ii) the period ending upon the date of inception of the payment of benefits
under any disability insurance to which the Employee may become entitled
pursuant to Paragraph 6(b) hereof. Thereafter, if the Employee's disability
shall continue (as evidenced by the continued absence of the Employee from his
duties), the employment of the Employee under this Agreement shall terminate and
all obligations of the Employee shall cease and the Employee shall be entitled
to receive only the benefits, if any, as may be provided by any insurance to
which he may have become entitled pursuant to Paragraph 6(b) hereof, the payment
of any amounts of the Employee's base salary then remaining to be paid under
Paragraph 4(a) hereof through the date of the termination of the Employee's
employment. "Disability" means the inability to perform the essential functions
of the job, with or without reasonable accommodation as required by law; the
"Date of Disability" shall be deemed to be the date on which the Board of
Directors of the Company receives written notice from the Examining Physicians
stating that the Employee is suffering a Disability as defined herein.
(d) DEATH. In the event of the Employee's death during the term of this
Agreement, the Employee's employment hereunder shall immediately terminate and,
in such event, the Employee's estate shall be entitled to receive the Employee's
base salary as provided in Paragraph 4(a) hereof to the last day of the month
during which the Employee's death shall have occurred and such additional
benefits, if any, as may be provided by any insurance to which the Employee may
have become entitled pursuant to Paragraph 6(b) hereof.
(e) TREATMENT OF COMPENSATION ON TERMINATION.
(i) Current Year's Bonus and Option Grants. In the event of the
termination of the employment of the Employee for any reason, the Employee shall
not be entitled to receive any bonus payment or option awards pursuant to
Paragraphs 4(b) and 4(c) hereof in respect of the fiscal year of the Company in
which the termination shall take place. Notwithstanding anything to the contrary
in this Paragraph 8(e)(i), the Employee shall receive a prorated (to the date of
termination) portion of any bonus for the first two fiscal years of employment
referenced in Paragraph 4(b) in the event of termination during the first two
fiscal years of employment.
(ii) Previous Year' s Bonus and Option Grants. In the event that at
the time of his termination, the Employee is due, but has not yet received,
payment of an annual bonus in respect of the preceding fiscal year of the
Company pursuant to Paragraph 4(b) or 4(c), such bonus shall be paid to the
Employee at the time it is paid to the other employees of the Company except
that, notwithstanding the foregoing, if the Employee shall have been terminated
for Good Cause as provided in subparagraph (b) of this Paragraph 8, the Employee
shall forfeit and shall not be entitled to receive payment of any such annual
bonus or issuance of such stock options in respect of the preceding fiscal year
which the Employee shall not have received on or before the date of such
termination for Good Cause.
9. INVENTIONS AND PATENTS.
(a) DISCLOSURE OF DEVELOPMENTS. The Employee will promptly and fully
disclose to the Company any and all inventions, discoveries, trade secrets and
improvements, whether or not patentable and whether or not they are made,
conceived or reduced to practice during working hours or using the Company's
data or facilities, which the Employee develops, makes, conceives or reduces to
practice during his employment by the Company, either solely or jointly with
others or which Employee developed, made, conceived or reduced to practice
during his employment by
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Micronix, either solely or jointly with others (collectively, "Developments").
All such Developments shall be the sole property of the Company, and the
Employee hereby assigns to the Company, without further compensation, all his
right, title and interest in and to such Developments and any and all related
patents, patent applications, copyrights, copyright applications, trademarks and
trade names in the United States and elsewhere.
(b) MAINTENANCE OF RECORDS. The Employee will keep and maintain adequate
and current written records of all Developments (in the form of notes, sketches,
drawings and as may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all times.
(c) ASSISTANCE IN OBTAINING PATENTS. The Employee will assist the Company
in obtaining and enforcing patent, copyright and other forms of legal protection
for the Developments in any country. Upon request, the Employee will sign all
applications, assignments, instruments and papers and perform all acts necessary
or reasonably desired by the Company to assign all such Developments fully and
completely to the Company and to enable the Company, its successors, assigns and
nominees, to secure and enjoy the full and exclusive benefits and advantages
thereof. During his employment, the Employee will perform his obligations under
this subparagraph (c) without further compensation, except for reimbursement of
expenses incurred at the request of the Company. If the Employee is not employed
by the Company as an the Employee at the time he is requested to perform any
obligations under this subparagraph, he shall receive for such performance a
reasonable per diem fee, as well as reimbursement of any expenses incurred at
the request of the Company.
10. PROPRIETARY INFORMATION.
(a) OBLIGATION TO KEEP CONFIDENTIAL. The Employee recognizes that his
relationship with the Company is one of high trust and confidence by reason of
his access to and contact with the trade secrets and confidential and
proprietary information of the Company. The Employee will not at any time,
either during his employment with the Company or thereafter, disclose to others,
or use for his own benefit or the benefit of others, any confidential or
proprietary information, and all other knowledge, information, documents or
materials, owned, developed or possessed by the Company, whether in tangible or
intangible form, the confidentiality of which the Company takes reasonable
measures to protect, and which pertains, in any manner, to subjects which
include, but are not limited to, the Company's research operations, inventions,
discoveries, trade secrets and improvements, whether or not patentable,
customers (including identities of customers and prospective customers,
identities of individual contacts at business entities which are customers or
prospective customers, preferences, businesses or habits), business
relationships, products (including prices, costs, sales or content), financial
information or measurements, business methods, future business plans, data
bases, computer programs, marketing plans, forecasts, licenses, pricing
information and other information owned, developed or possessed by the Company
("Proprietary Information") The term "Proprietary Information" shall also
include information described in the immediately preceding sentence which is
owned, developed or possessed by Micronix.
(b) EXCEPTIONS. The Employee's undertakings and obligations under this
Paragraph 10 will not apply to any Proprietary Information which: (a) is or
becomes generally known to the public through no action on the part of the
Employee, (b) is generally disclosed to third parties by the Company without
restriction on such third parties, (c) is approved for release by written
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authorization of the Board of Directors of the Company, or (d) is the subject
matter of a lawful request or subpoena by and within the authority of a court or
governmental agency or other body.
(c) RETURN OF PROPRIETARY INFORMATION. Upon termination of the employment
of the Employee with the Company or at any other time upon request, the Employee
will promptly deliver to the Company all notes, memoranda, notebooks, drawings,
records, reports, files and other documents (and all copies of reproductions of
such materials) in his possession or under his control, whether prepared by him
or others, which contain Proprietary Information. The Employee acknowledges that
the material is the sole property of the Company.
11. ABSENCE OF RESTRICTIONS UPON DISCLOSURE AND COMPETITION. The Employee
represents that his performance of all the terms of this Agreement does not and
will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to the date of
this Agreement, and he will not disclose to the Company or induce the Company to
use any confidential or proprietary information or material belonging to any
previous company or others.
12. OTHER OBLIGATIONS REGARDING PROPRIETARY INFORMATION. The Employee
acknowledges that the Company from time to time may have agreements with other
persons or with the U S Government, or agencies thereof, which impose
obligations or restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the confidential nature of
such work. The Employee agrees to be bound by all such obligations and
restrictions which are made known to him and to take all action necessary to
discharge the obligations of the Company under such agreements.
13. NONCOMPETITION.
(a) During the Employment Period, the Employee agrees not to compete in
any manner, either directly or indirectly, with the Company, or to assist any
other person or entity to compete with the Company.
(b) During the Employment Period and for one (1) year following the
termination, for any reason, of his employment, the Employee agrees either on
his behalf or on behalf of any other person or entity, directly or indirectly,
not to hire, solicit, or encourage to leave the employ of the Company any person
who is then an employee of the Company. The restrictions described herein shall
apply to the activities of the Employee in any state or other jurisdiction in
which the Company engaged in business during the term of employment.
The restrictions against competition set forth in this Paragraph 13 are
considered by the parties to be reasonable for the purposes of protecting the
business of the Company. However, if any such restriction is found by any court
of competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
14. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors and assigns. This Agreement
and the rights and obligations of the parties hereunder are personal to the
Company and the Employee and are not assignable or transferable to any other
person, firm or corporation without the consent of the other party, provided,
however, that
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the Company may assign its rights and obligations hereunder to any person or
entity who or which succeeds to all or substantially all of the Company's
business and assets.
15. NOTICES. All notices required or permitted hereunder shall be in
writing and deemed effectively given upon personal delivery or upon deposit in
the United States mails, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address set forth in the introductory
paragraph of this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Paragraph 15. Any
notice to the Employee pursuant to this Section 15 shall be copied to The Busch
Firm, 2532 Dupont Drive, Irvine, CA 92715, Attn.: Tim Busch.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.
17. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
18. HEADINGS. The Paragraph and subparagraph headings used in this
Agreement are for convenience only and shall not be deemed to be a party of this
Agreement.
19. SEVERABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
20. GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the state of California applicable to
agreements made-to be performed entirely within such state, without giving
effect to the conflicts of laws principles thereof.
21. CONSTRUCTION OF AGREEMENT. The parties mutually acknowledge that they
and their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist. Each party also
acknowledges that each has been represented by legal counsel in the preparation
and negotiation of this Agreement. The Company shall reimburse the Employee for
fees and expenses of Rutan & Tucker LLP incurred by the Employee in connection
with the Transaction, up to a maximum amount of $10,000.
22. DISPUTE RESOLUTION. If there is a dispute between the parties arising
out of or relating to this Agreement or their relationship, including but not
limited to its alleged breach or termination, the parties shall first attempt in
good faith to settle this dispute by mediation, either under the rules of the
American Arbitration Association, or with the assistance of another organization
established to provide mediation services. If mediation is unsuccessful, any
remaining unresolved controversy or claim arising out of or relating to this
contract, its alleged breach or termination, shall be resolved by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall occur in Los Angeles, California.
There shall be a single arbitrator agreed upon mutually by the parties. If
the parties cannot agree upon the selection of an arbitrator within 30 days
after the demand for arbitration given by one
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party to the other, the selection of the arbitrator shall be made by obtaining a
list of seven arbitrators from the Los Angeles office of the American
Arbitration Association. After obtaining this list, the parties shall
alternately strike names from the list, with the Employee to be the party
striking first. After each party has stricken three names from the list, the
remaining name shall be the single arbitrator for this proceeding.
Alternatively, the parties may agree, by written stipulation, to appoint a
single arbitrator whose name is not on a list supplied by the American
Arbitration Association.
Each party shall be responsible for paying one half of the arbitrator's
fees, and its own costs and attorneys fees, except that the arbitrator shall be
empowered to award costs and attorneys fees to the prevailing party, should he
or she find that the position of the other party is without substantial merit.
The arbitrator's award shall be in writing and shall be accompanied by a written
opinion explaining the reasons for the arbitrator's decision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written
C.P. CLARE CORPORATION
/s/ __________________________________
its: Chief Executive Officer
EMPLOYEE:
/s/ __________________________________
David Adams
<PAGE> 1
EXHIBIT 10.75
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is entered into and
effective as of July 6, 1998 ("Effective Date") by and between CP CLARE
CORPORATION, a Massachusetts Corporation ("Clare") and DAVID ADAMS ("Adams")
with reference to the following facts.
RECITALS
A. Immediately prior to the Effective Date, Adams was an approximately
10% shareholder and an officer of Micronix Integrated Systems, Inc.
("Micronix"), a California corporation.
B. On the Effective Date, Clare Micronix became a wholly owned
subsidiary of Clare by merger with a subsidiary of Clare (the "Transaction").
C. In order to protect the value of the business operations of Clare and
the goodwill of Micronix acquired by Clare in the Transaction, Clare desires,
and Adams agrees to, the terms and conditions of this Agreement.
NOW THEREFORE, the parties agree as follows:
SECTION 1. DEFINED TERMS.
1.1 ENGAGE IN COMPETITIVE ACTIVITIES. For purposes of this Agreement
"Engage in Competitive Activities" shall mean:
(i) to engage in any aspect, directly or indirectly, of any
Competitive Activities;
(ii) to render any activities to any individual or entity engaged in
Competitive Activities, including without limitation, as an employee,
consultant, adviser or independent contractor; or
(iii) to become involved, interested in or affiliated with any
individual or entity engaged in Competitive Activities, in any capacity,
including, without limitation, as a partner, shareholder, joint venturer,
lender, guarantor, surety or principal.
1.2 COMPETITIVE ACTIVITIES. For purposes of this Agreement, "Competitive
Activities" shall mean activities substantially the same as any business or
activity conducted by Clare relating to its semiconductor and circuit products
groups during the time the obligations of Adams under this Agreement are
applicable, including, without limitation, activities actively contemplated by
Clare, demonstrated by discussions by Clare in Board of Director meetings or
Executive Management Team meetings; provided, however, if the obligations of
Adams are applicable after the termination of Adams's relationship with Clare,
Competitive Activities shall be limited to activities, including contemplated
activities, during the 12 month period prior to the date of termination.
1.3 SERVICE AREA. For purposes of this Agreement, "Service Area" shall
mean the United States of America.
<PAGE> 2
SECTION 2. CONSIDERATION.
Adams acknowledges and agrees that this Agreement is a condition of
Clare's payment of the purchase price for the acquisition of Micronix in the
Transaction.
SECTION 3. NONCOMPETITION AFTER EFFECTIVE DATE.
During the three-year period after the Effective Date, Adams shall not
Engage in Competitive Activities within the Service Area, except as an employee
of or contractor to Clare.
SECTION 4. NONCOMPETITION AFTER TERMINATION.
If Adams's employment is terminated by Clare or if Adams resigns from
employment with Clare, in either case for any reason, Adams shall not Engage in
Competitive Activities within the Service Area during the period ending on the
later of the three year period following the Effective Date as set forth in
Section 3 or one year after the date of termination.
SECTION 5. OWNERSHIP OF SECURITIES.
Notwithstanding anything to the contrary in this Agreement,(Error!
Bookmark not defined.)(Error! Bookmark not defined.)(Error! Bookmark not
defined.), this Agreement shall not prohibit Adams from owning, directly or
indirectly, solely as an investment, securities of any entity Engaged in
Competitive Activities which are traded on any national securities exchange or
listed on the National Association of Securities Dealers Automated Quotation
System so long as (i) Adams is not a controlling party, or a member of a group
which controls the entity Engaged in Competitive Activities, and (ii) Adams does
not, directly or indirectly, own five percent or more of any class of securities
of such entity.
SECTION 6. REMEDIES AND INJUNCTIVE RELIEF.
The parties agree that any breach of this Agreement would cause
irreparable injury to Clare which cannot be adequately compensated in monetary
damages. Therefore, Clare shall have, in addition to (and not in lieu of) other
rights and remedies available, the right to have the provisions of this
Agreement specifically enforced by any court of competent jurisdiction by way of
an injunction or other legal equitable relief. Injunctive relief shall be
available pursuant to Section 526 of the California Code of Civil Procedure and
Section 3422 of the California Civil Code (as either section may from time to
time be amended or renumerated) in addition to any other rights and remedies
Clare may have.
SECTION 7. SEVERABILITY
It is understood and agreed by the parties that the provisions of this
Agreement are reasonable and valid as to time, geographic area, scope of
business and in all other respects, and that such provisions are properly
required for the adequate protection of the business of Clare. If any court of
competent jurisdiction or arbitration panel shall refuse to enforce any or all
of the restrictions because the time, commencement date, geographic area, or
scope of business is deemed unreasonable, it is expressly understood and agreed
that this Agreement shall not be void, but that for the purpose of such
proceeding and in such jurisdiction, the restrictions contained in this
Agreement shall be deemed to be reduced only to the extent necessary to permit
enforcement of this Agreement.
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SECTION 8. MISCELLANEOUS PROVISIONS
8.1 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed by, the internal laws of the State of California, without regard to
principles of conflicts of laws.
8.2 WAIVER, MODIFICATION AND AMENDMENT. No amendment of, supplement to
or waiver of any obligations under this Agreement will be enforceable or
admissible unless set forth in a writing signed by both parties. No delay or
failure to require performance of any provision of this Agreement shall
constitute a waiver of that provision as to that or any other instance. Any
waiver granted shall apply solely to the specific instance expressly stated.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between Clare and Adams regarding the specific subject matter of this Agreement,
and supersedes any prior understandings, agreements, or representations by or
between the parties, written or oral, to the extent they relate in any way to
the subject matter of this Agreement.
8.4 NOTICES. All notices, consents, requests, demands or other
communications to or upon the respective parties shall be in writing and shall
be effective for all purposes upon receipt, by (i) personal delivery, (ii)
delivery by messenger, express or air courier or similar courier, or (iii)
delivery by United States first class mail, postage prepaid. Either party may
change its address by written notice to the other in the manner set forth above.
Receipt of communications by United States mail will be sufficiently evidenced
by return receipt. Other forms of delivery and transmittal shall be sufficiently
evidenced by a written or printed record of receipt.
8.5 ASSIGNMENT. Neither party may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party. This Agreement shall be binding on and inure to the benefit of the
successors and permitted assigns of the parties.
8.6 THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall be
construed to give any person other than the express parties to this Agreement,
and their respective successors and permitted assigns, any benefits, rights or
remedies.
8.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 CONSTRUCTION OF AGREEMENT. The parties mutually acknowledge that
they and their attorneys have participated in the preparation and negotiation of
this Agreement. In cases of uncertainty this Agreement shall be construed
without regard to which of the parties caused the uncertainty to exist.
8.9 ATTORNEYS' FEES. If any legal action or other proceeding is
commenced which is related to this Agreement, the losing party shall pay the
prevailing party's actual attorneys' fees and
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expenses incurred in the preparation for, conduct of or appeal or
enforcement of judgment from the proceeding. The phrase "prevailing party" shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
IN WITNESS WHEREOF, this Agreement has been entered into as of the
Effective Date.
CP CLARE CORPORATION
By: ______________________________ ___________________________
David Adams
Its: _____________________________
Address: Address:
78 Cherry Hill Drive 24871 Crown Royal
Beverly, MA 01915-1048 Laguna Niguel, CA
