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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-27016
ROSS TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-2507960
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5316 Highway 290 West, Suite 500
Austin, Texas 78735-8930
(512) 436-2000
(Address and Telephone Number of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Number of shares outstanding of each of the issuer's classes of common stock, as
of August 1, 1998: Common Stock, $.001 par value, 23,456,965 shares.
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ROSS TECHNOLOGY, INC.
QUARTERLY REPORT ON FORM 10-Q/A
THREE MONTHS ENDED JUNE 29, 1998
INDEX
<TABLE>
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Page
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<S> <C>
Title Page ..................................................................... 1
Index .......................................................................... 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets - June 29,
1998 and March 30, 1998 ............................................ 3
Condensed Consolidated Statements of Operations for the
Three Months Ended June 29, 1998 and June 30, 1997.................. 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended June 29, 1998 and June 30, 1997.................. 5
Notes to Condensed Consolidated Financial Statements ............... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 9
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings ............................................ 11
ITEM 2. Changes in Securities ........................................ 12
ITEM 3. Defaults Upon Senior Securities ............................. 12
ITEM 4. Submission of Matters to a Vote of Security-Holders .......... 12
ITEM 5. Other Information ............................................ 12
ITEM 6. Exhibits and Reports on Form 8-K ............................. 14
SIGNATURES ................................................................... 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 29, MARCH 30,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 6,456 $ 787
Trade accounts receivable, net ............................... 2,616 2,712
Receivable from Fujitsu ...................................... 457 3,343
Inventory .................................................... 4,228 7,808
Prepaid expenses and other assets ............................ 230 512
----------- -----------
Total current assets ................................. 13,987 15,162
Property and equipment, net .................................... 1785 3,325
----------- -----------
Total assets ................................................... $ 15,772 $ 18,487
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable ....................................... $ 3,475 $ 6,091
Accrued liabilities .......................................... 10,411 5,083
Payable to Fujitsu ........................................... 1,303 1,293
Notes payable ................................................ 20,000 15,000
----------- -----------
Total current liabilities ............................ 35,189 27,467
----------- -----------
Stockholders' deficit:
Preferred stock .............................................. 1 1
Common stock ................................................. 23 23
Additional paid-in capital ................................... 132,079 132,079
Accumulated deficit .......................................... (150,269) (139,832)
----------- -----------
(18,166) (7,729)
Less: treasury stock ......................................... (1,251) (1,251)
----------- -----------
Total stockholders' deficit .......................... (19,417) (8,980)
----------- -----------
Total liabilities and stockholders' deficit .................... $ 15,772 $ 18,487
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
JUNE 29, JUNE 30,
1998 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales ................................ $ 7,833 $ 11,813
Cost of sales ............................ 6,590 11,175
------------- -------------
Gross profit ........................... 1,243 638
------------- -------------
Operating expenses:
Research and development, net .......... 3,046 1,546
Selling, general and administrative .... 3,074 3,600
Severance cost.......................... 5,248 --
------------- -------------
Total operating expenses ........... 11,368 5,146
------------- -------------
Loss from operations ............... (10,125) (4,508)
Interest expense, net .................... (312) (651)
------------- -------------
Loss before income taxes ........... (10,437) (5,159)
Income tax expense (benefit) ............. -- --
------------- -------------
Net loss ........................... $ (10,437) $ (5,159)
============= =============
Net loss applicable to
common shareholders ................ $ (10,437) $ (5,159)
============= =============
Net loss per share - Basic and diluted ... $ (.44) $ (0.22)
============= =============
Weighted average common shares outstanding
- Basic and diluted ................ 23,477 23,525
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 29, JUNE 30,
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................... $ (10,437) $ (5,159)
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Depreciation and amortization .................................... 1,642 1,490
Change in assets and liabilities:
Trade accounts receivable ...................................... 96 3,858
Receivable from Fujitsu ........................................ 2,886 1,383
Inventory ...................................................... 3,580 1,023
Prepaid expenses ............................................... 282 1,353
Trade accounts payable ......................................... (2,616) (3,947)
Payable to Fujitsu ............................................. 10 2,434
Accrued liabilities ............................................ 5,328 (4,069)
----------- -----------
Net cash provided by (used in) operating activities .......... 771 (1,634)
----------- -----------
Cash flows from investing activities:
Capital expenditures ............................................... (102) (86)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings on notes payable .......................... 5,000 6,500
----------- -----------
Net cash provided by financing activities ...................... 5,000 6,500
----------- -----------
Net increase in cash and cash equivalents ...................... 5,669 4,780
Cash and cash equivalents at beginning of period ..................... 787 2,811
----------- -----------
Cash and cash equivalents at end of period ........................... $ 6,456 $ 7,591
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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ROSS TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) FINANCIAL STATEMENT PRESENTATION
The financial statements of ROSS Technology, Inc. and subsidiary (the
"Company") included herein have been prepared without audit pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC") and,
in the opinion of management, reflect all adjustments necessary, such
adjustments being of a normal recurring nature, to present fairly the financial
condition and the results of operations for such interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however, management
believes that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto for the
fiscal year ended March 30, 1998, included in the Company's filing with the SEC
on Form 10-K. The results for interim periods are not necessarily indicative of
the results for the respective fiscal years.
(2) INVENTORIES
<TABLE>
<CAPTION>
June 29, March 30,
1998 1998
--------- ---------
<S> <C> <C>
Die bank $ 487 $ 694
Work-in-process 1,997 5,297
Finished goods 1,744 1,817
--------- ---------
$ 4,228 $ 7,808
========= =========
</TABLE>
Die bank inventory, consisting of silicon wafers and cut and tested
die, is comparable to raw material inventory in other manufacturing industries.
Work-in-process inventory includes work in process as well as the Company's
inventories of multi-die packages (MDPs) and components and sub-systems to be
incorporated into module, board and system products. Finished goods inventory
includes finished module, board and system products as well as MDPs and ASICs
offered for sale to OEM customers.
(3) NOTES PAYABLE
The notes payable to a bank at June 29, 1998, were outstanding under a
$20,000,000 revolving credit facility with a bank, due November 30, 1998.
Interest accrues at the bank's quoted rate (6.3% at June 29, 1998). The notes
payable are guaranteed by Fujitsu. Both the credit facility and Fujitsu's
guaranty expire on December 31, 1998.
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(4) NET INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share is based on the weighted average of
all common shares issued and outstanding, and is calculated by dividing net
income (loss) available to common stockholders by the weighted average shares
outstanding during the period. Diluted earnings per share is calculated by
dividing net income (loss) available to common stockholders by the weighted
average number of common shares used in the basic calculation plus the number of
common shares that would be issued assuming conversion of all potentially
dilutive common shares outstanding.
<TABLE>
<CAPTION>
Three Months Ended
--------------------
June 29, June 30,
1998 1997
-------- --------
<S> <C> <C>
Net loss applicable to common stockholders ................. $(10,437) $ (5,159)
======== ========
Weighted average shares outstanding - Basic and diluted .... 23,477 23,525
======== ========
Basic and diluted loss per share ........................... $ (.44) $ (.22)
======== ========
</TABLE>
For the quarter ended June 29, 1998, options totaling 3,787,004 and the
conversion of Series B Convertible Preferred Stock to 20,000,000 shares of
common stock were excluded from the computation of diluted earnings per share
because they would have been antidilutive for this period. For quarter ended
June 30, 1997, options totaling 721,615 were excluded from the computation of
diluted earnings per common share because they would have been antidilutive for
this period.
(5) SEVERANCE COST
As previously reported, the Company has commenced an orderly shutdown
of its operations. In conjunction with the Company's orderly shutdown of its
operations and in order to provide certain employees with an incentive to
continue his or her employment with the Company, the Company adopted an Employee
Retention and Severance Plan (the "Retention Plan"). The Company provided
severance packages to all eligible terminated employees as required by its
general severance policy, and substantially all of the executive officers have
been retained pursuant to individual retention agreements. Given the Company's
uncertain financial position, retention agreements were provided by the Company
to such executive officers to provide incentives so that the key personnel
necessary to effect the sale of the Company's assets remained with the Company
until such time that their services were no longer required. The total cost of
the Retention Plan and severance packages totals $5.2 million, of which $3.2
million relates to prior contractual obligations of the Company and obligations
of the Company under its general severance policy. At June 29, 1998, these
severance costs met the criteria as stated in Emerging Issues Task Force issue
No. 94-3 and, therefore, these severance costs have been accrued in the first
quarter of Fiscal 1999.
As part of the preparation for the shutdown of the Company's business,
on June 1, 1998, the Company issued notices to its employees under the Federal
Workers Adjustment and Retraining Notification Act (the "WARN Act"). These
notices provided advance notice to all employees of the scheduled termination of
their employment in connection with the shutdown. Approximately 138 employees,
or 70% of the Company's work force (excluding employees at the Company's Design
Center in Israel), were laid off on July 31, 1998, including the members of the
Company's "Viper" development team.
(6) SUBSEQUENT EVENTS
The Company has entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") to sell its manufacturing, sales and service operations and
certain assets related to the Company's 32-bit hyper-SPARC(TM) business (the
"BridgePoint Sale") to a newly formed Texas corporation ("Buyer"), of which Joe
Jones (currently Vice President of Operations of the Company), is president and
a stockholder. The Asset Purchase Agreement provides for an aggregate
consideration of $5.66 million, of which $250,000 will be deposited by Buyer
into an escrow account for an indemnification holdback amount to
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cover possible claims. Also, the Company will pay $1.72 million to the Buyer at
the closing in consideration for the Buyer's assumption of and undertaking to
pay, discharge and perform certain warranty repair liabilities of the Company.
The Company has also entered into an agreement to sell all of the
issued and outstanding stock of ROSS Semiconductors (Israel) Ltd. ("RIL") to
Fujitsu Limited ("Fujitsu"), the holder of a majority of the outstanding shares
of the Company's Common Stock and the holder of all outstanding shares of the
Company's Series B Convertible Preferred Stock, for $2.5 million in cash,
pursuant to a Share Acquisition Agreement, dated as of August 6, 1998, between
the Company and Fujitsu (the "RIL Agreement"). In connection with the RIL
Agreement, Fujitsu has agreed to retain RIL's employees. This transaction was
consummated on August 10, 1998.
Pursuant to an asset purchase and license agreement (the "Asset
Purchase and License Agreement") dated July 10, 1998, between the Company and
Fujitsu, the Company has sold (the "IP Sale") certain intellectual property
rights to Fujitsu for $7.6 million (with a royalty-free license back to the
Company for certain of those rights). The IP Sale was consummated on July 27,
1998. The intellectual property acquired by Fujitsu under the Asset and License
Agreement (the "Acquired IP") included (a) intellectual property relating to the
DANlite1, DANlite2 and DANlite3 microprocessor cores; (b) intellectual property
relating to the Colorado 4 microprocessor; (c) certain intellectual property
relating to the HyperSPARC(TM) module and test programs and photon test bus; (d)
certain intellectual property relating to the 64-bit Viper development project;
and (e) four patents relating the Company's 32-bit microprocessor designs. The
Acquired IP does not include all of the intellectual property relating to the
Company's 64-bit Viper development project. The consideration paid by Fujitsu
included consideration for the termination of Fujitsu's obligations to pay
future royalties to the Company for Fujitsu's proposed use of the DANlite
microprocessor core in a new product currently under development by Fujitsu.
In furtherance of the Company's previously announced plans to commence
an orderly shutdown of its operations, on July 22, 1998 the Company adopted a
Plan of Complete Liquidation and Dissolution (the "Plan of Liquidation")
pursuant to which the Company will be liquidated by the sale of all or
substantially all of its remaining assets and payment of claims, obligations and
expenses owing to the Company's creditors. The Company does not believe that it
will have any funds or assets available for distribution to either preferred or
common stockholders.
The BridgePoint Sale and the Plan of Liquidation have been approved by
Fujitsu, as holder of a majority of the outstanding shares of the Company's
common stock and all of the outstanding shares of the Company's Series B
Convertible Preferred Stock. The Company has filed a preliminary information
statement with respect to the BridgePoint Sale and the Plan of Liquidation with
the SEC and will mail the information statement to its stockholders following
the SEC's review and clearance of the preliminary information statement. The
BridgePoint Sale will not be effective until at least twenty days after the
mailing of the information statement and following satisfaction or waiver of the
other conditions to that sale. The Plan of Liquidation will not be effective
until at least twenty days after the mailing of the information statement. The
Company intends to proceed with liquidation and dissolution regardless of
whether the BridgePoint Sale is consummated.
8
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The Company estimates total future obligations and commitments associated
with the Company's planned shutdown of its operations, including employee
related costs, at approximately $20 million (excluding the Company's obligations
under its revolving credit facility guaranteed by Fujitsu). The Company has
received gross proceeds of $10.1 million from the IP Sale and the sale of RIL,
and will receive approximately $3.9 million of proceeds (net of payment for
warranty liability assumption) if the BridgePoint Sale is consummated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT
This Quarterly Report contains forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, with respect to
the financial condition, results of operations and business of ROSS Technology,
Inc. and its subsidiary (collectively, unless the context otherwise requires,
"ROSS", the "Company", or the "Registrant"). Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially and adversely from those set forth in the forward-looking statements,
including without limitation the availability of financial resources adequate to
the Company's short-, medium- and long-term needs, general economic conditions,
and the other risks and uncertainties described from time to time in the
Company's public announcements and SEC filings, including without limitation the
Company's Current, Quarterly, and Annual Reports on Forms 8-K, 10-Q, and 10-K,
respectively. The Company cautions that the foregoing list of important factors
is not exclusive. The Company does not undertake to update any written or oral
forward-looking statement that may be made from time to time by or on behalf of
the Company.
The information contained in this Quarterly Report is not a complete
description of the Company's business or the risks associated with an investment
in the Company. More complete discussions can be found in the Company's Annual
Report on Form 10-K for the fiscal year ended March 30, 1998, as supplemented by
the information contained in the Current Reports on Form 8-K dated July 30, 1998
and August 11, 1998 and this Quarterly Report.
RESULTS OF OPERATIONS
Net Sales. Net sales in the three-month period ended June 29, 1998 (the
"first quarter") of the fiscal year ending March 29, 1999 ("Fiscal 1999")
decreased 33.7% to $7.8 million from $11.8 million in the corresponding period
of the fiscal year ended March 30, 1998 ("Fiscal 1998"). This reduction in sales
reflects the previously reported migration of the Company's primary customers
away from the Company's 32-bit products to 64-bit products sold by the Company's
competitors, primary Sun Microsystems, Inc. ("Sun"). This reduction was lessened
by a $5.0 million end of life ("EOL") order from Fujitsu. This order was placed
and
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shipped during the first quarter of Fiscal 1999 in connection with the Company's
EOL program, which provided the Company's customers the opportunity to place EOL
orders until July 31, 1998, with all such orders to be shipped on or before
November 28, 1998.
Gross Profit. Gross profit as a percentage of net sales for the quarter
ended June 29, 1998 increased to 15.9% as compared with 5.4% of net sales for
the comparable period in Fiscal 1998. This increase was primarily attributable
to the Company's ability to ship orders from stock which allowed the Company to
reduce its manufacturing overhead.
Research and Development Expense. Net research and development ("R&D")
expenses were 38.9% of net sales for the quarter ended June 29, 1998, compared
with 13.1% of net sales for the comparable period in Fiscal 1998. Absolute R&D
expenses increased $1.5 million in the quarter ended June 29, 1998, from the
comparable period in the prior fiscal year. This increase was primarily
attributable to reimbursement by Fujitsu of $4.5 million in expenses, in the
first quarter of Fiscal 1998, relating to the development of the Company's
64-bit Viper project pursuant to a Development Agreement (the "Viper Agreement")
between Fujitsu and the Company. No such reimbursements occurred during the
first quarter of Fiscal 1999. As previously reported, the Company will not
complete development of the "Viper" project and the Company and Fujitsu are
currently negotiating the termination of the Viper Agreement.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expenses were 39.2% of net sales for the quarter ended
June 29, 1998, compared with 30.5% of net sales for the comparable period in
Fiscal 1998. Absolute SG&A expenses decreased $.5 million in the quarter ended
June 29, 1998 from the comparable period in the prior fiscal year. The decrease
in SG&A expense is primarily attributable to the Company's decision to stop all
marketing and advertising activities, partially offset by an increase in legal
and related expenses associated with the Company's planned shutdown of its
operations, particularly expenses related to the Company's obligations under the
federal Workers Adjustment and Retraining Notification Act.
Severance Cost. As previously reported, the Company has commenced an
orderly shutdown of its operations. In conjunction with the Company's orderly
shutdown of its operations and in order to provide certain employees with an
incentive to continue his or her employment with the Company, the Company
adopted an Employee Retention and Severance Plan (the "Retention Plan"). The
Company provided severance packages to all eligible terminated employees as
required by its general severance policy, and substantially all of the executive
officers have been retained pursuant to individual retention agreements. Given
the Company's uncertain financial position, retention agreements were provided
by the Company to such executive officers to provide incentives so that the key
personnel necessary to effect the sale of the Company's assets remained with the
Company until such time that their services were no longer required. The total
cost of the Retention Plan and severance packages totals $5.2 million, of which
$3.2 million relates to prior contractual obligations of the Company and
obligations of the Company under its general severance policy. At June 29, 1998,
these severance costs met the criteria as stated in Emerging Issues Task Force
issue No. 94-3 and, therefore, these severance costs have been accrued in the
first quarter of Fiscal 1999.
As part of the preparation for the shutdown of the Company's business,
on June 1, 1998, the Company issued notices to its employees under the Federal
Workers Adjustment and Retraining Notification Act (the "WARN Act"). These
notices provided advance notice to all employees of the scheduled termination of
their employment in connection with the shutdown. Approximately 138 employees,
or 70% of the Company's work force (excluding employees at the Company's Design
Center in Israel), were laid off on July 31, 1998, including the members of the
Company's "Viper" development team.
Net Interest Expense. The Company had net interest expense of $.3
million for the quarter ended June 29, 1998, versus interest expense of $.7
million in the quarter ended June 30, 1998, reflecting a lower level of debt
during the first quarter of Fiscal 1999 as compared to the corresponding period
in Fiscal 1998.
Income Tax Expense. The Company has established a 100% reserve against
its deferred income tax asset and will not record income tax expense or benefit
until such time as the Company achieves profitability. Although it is
anticipated that the Company will not generate any future tax obligations as a
result of any future transactions, it is possible that such tax obligations may
occur.
Future Operating Results. The Company intends to dissolve and liquidate
and pay out the net proceeds of the sale of its remaining assets to satisfy the
Company's obligations to its creditors. The Company does not believe it will
have any funds or assets remaining to make distributions to either preferred or
common stockholders.
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LIQUIDITY AND CAPITAL RESOURCES
The Company experienced significant negative cash flows during Fiscal
1998. Historically, the Company has been dependent on Fujitsu for its capital
requirements. Fujitsu has provided a guarantee for a credit facility with DKB
for a maximum principal amount of $20 million. The line of credit and guaranty
is scheduled to expire on December 31, 1998. As of August 10, 1998, the Company
has borrowed the maximum $20 million of available credit provided by the
existing credit facility. There is no assurance that DKB will renew the line of
credit or that Fujitsu will agree to extend or renew the guaranty, on their
existing terms or otherwise. In addition, there can be no assurance that the
Company will not experience negative cash flow from operations and the Company
may in the future be required to seek additional external sources of financing
to fund the shutdown of its operations, which it does not believe it will be
able to obtain from Fujitsu or any other third party. Although the Company hopes
it will have sufficient funds from sales of its inventory and assets to fund an
orderly shutdown of its operations, the Company may nevertheless be forced to
seek protection under Federal bankruptcy laws.
On May 18, 1998, the Company was informed by The Nasdaq Stock Market of the
Company's failure to maintain certain listing requirements for the Nasdaq
National Market - failure to maintain a closing bid price of greater than or
equal to $1.00 per share and failure to maintain a market value of public float
greater than or equal to $5 million. On July 15, 1998, the Company received
another notice from The Nasdaq Stock Market informing the Company that it no
longer met the minimum net tangible assets requirement for continued listing on
the Nasdaq National Market. As a result of the Company's noncompliance with
these rules, the Company's common stock was delisted from the Nasdaq National
Market effective at the close of business on July 31, 1998. The Company's Common
Stock continues to trade on the over-the-counter bulletin board market
maintained by The Nasdaq Stock Market.
The Company's principal source of liquidity as of June 29, 1998, consisted
of $6.5 million of cash. The Company currently has no availability under any
credit facility. As of June 29, 1998, the Company had negative working capital
of $21.2 million, an accumulated deficit of $150.3 million and stockholders'
deficit of $15.8 million.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in routine litigation arising in the ordinary
course of business, and, while the results of the proceedings cannot be
predicted with certainty, the Company believes that the final outcome of such
proceedings will not be material.
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ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
As previously reported, as a result of the Company's continuing and
substantial economic deterioration, on June 1, 1998, the Company announced that
it would commence an orderly shutdown of its operations. The decision was
precipitated by a continuing decrease in revenues from the Company's sales of
its 32-bit products. The Company intends to cease all of its operations by the
end of calendar 1998.
As part of the preparation for the shutdown of the Company's business,
on June 1, 1998, the Company issued notices to its employees under the Federal
Workers Adjustment and Retraining Notification Act (the "WARN Act"). These
notices provided advance notice to all employees of the scheduled termination of
their employment in connection with the shutdown. Approximately 138 employees,
or 70% of the Company's work force (excluding employees at the Company's Design
Center in Israel), were laid off on July 31, 1998, including the members of the
Company's "Viper" development team.
The Company at this time is seeking to maximize its asset value for its
creditors. While the Company hopes to pay all of its creditors in full, its
ability to do so is dependent upon its ability to generate sufficient cash from
the sale of products and assets. The Company does not believe that it will have
any funds or assets available for distribution to preferred or common
stockholders.
The Company has entered into an Asset Purchase Agreement (the "Asset
Purchase Agreement") to sell its manufacturing, sales and service operations and
certain assets related to the Company's 32-bit hyper-SPARC(TM) business (the
"BridgePoint Sale") to a newly formed Texas corporation ("Buyer"), of which Joe
Jones (currently Vice President of Operations of the Company), is president and
a stockholder. The Asset Purchase Agreement provides for an aggregate
consideration of $5.66 million, of which $250,000 will be deposited by Buyer
into an escrow account for an indemnification holdback amount to cover possible
claims. Also, the Company will pay $1.72 million to the Buyer at the closing in
consideration for the Buyer's assumption of and undertaking to pay, discharge
and perform certain warranty repair liabilities of the Company.
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The Company has also entered into an agreement to sell all of the
issued and outstanding stock of ROSS Semiconductors (Israel) Ltd. ("RIL") to
Fujitsu Limited ("Fujitsu"), the holder of a majority of the outstanding shares
of the Company's Common Stock and the holder of all of the outstanding shares of
the Company's Series B Convertible Preferred Stock, for $2.5 million in cash,
pursuant to a Share Acquisition Agreement, dated as of August 6, 1998, between
the Company and Fujitsu (the "RIL Agreement"). In connection with the RIL
Agreement, Fujitsu has agreed to retain RIL's employees. This transaction was
consummated on August 10, 1998.
Pursuant to an asset purchase and license agreement (the "Asset
Purchase and License Agreement") dated July 10, 1998, between the Company and
Fujitsu, the Company has sold (the "IP Sale") certain intellectual property
rights to Fujitsu for $7.6 million (with a royalty-free license back to the
Company for certain of those rights). The IP Sale was consummated on July 27,
1998. The intellectual property acquired by Fujitsu under the Asset and License
Agreement (the "Acquired IP") included (a) intellectual property relating to the
DANlite1, DANlite2 and DANlite3 microprocessor cores; (b) intellectual property
relating to the Colorado 4 microprocessor; (c) certain intellectual property
relating to the HyperSPARC(TM) module and test programs and photon test bus; (d)
certain intellectual property relating to the 64-bit Viper development project;
and (e) four patents relating the Company's 32-bit microprocessor designs. The
Acquired IP does not include all of the intellectual property relating to the
Company's 64-bit Viper development project. The consideration paid by Fujitsu
included consideration for the termination of Fujitsu's obligations to pay
future royalties to the Company for Fujitsu's proposed use of the DANlite
microprocessor core in a new product currently under development by Fujitsu.
In furtherance of the Company's previously announced plans to commence
an orderly shutdown of its operations, on July 22, 1998, the Company adopted a
Plan of Complete Liquidation and Dissolution (the "Plan of Liquidation")
pursuant to which the Company will be liquidated by the sale of all or
substantially all of its remaining assets and payment of claims, obligations and
expenses owing to the Company's creditors.
The BridgePoint Sale and the Plan of Liquidation have been approved by
Fujitsu, as holder of a majority of the outstanding shares of the Company's
common stock and all of the outstanding shares of the Company's Series B
Convertible Preferred Stock. The Company has filed a preliminary information
statement with respect to the BridgePoint Sale and Plan of Liquidation with the
SEC and will mail the information statement to its stockholders following the
SEC's review and clearance of the preliminary information statement. The
BridgePoint Sale will not be effective until at least twenty days after the
mailing of the information statement and following satisfaction or waiver of the
other conditions to that sale. The Plan of Liquidation will not be effective
until at least twenty days after the mailing of the information statement. The
Company intends to proceed with liquidation and dissolution regardless of
whether the BridgePoint Sale is consummated.
The Company estimates total future obligations and commitments
associated with the Company's planned shutdown of its operations, including
employee related costs, at approximately $20 million (excluding the Company's
obligations under its revolving credit
13
<PAGE> 14
facility guaranteed by Fujitsu). The Company has received gross proceeds of
$10.1 million from the IP Sale and the sale of RIL, and will receive
approximately $3.9 million of proceeds (net of payment for warranty liability
assumption) if the BridgePoint Sale is consummated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
No. Description
2.1 Plan of Complete Liquidation and Dissolution of ROSS
Technology, Inc.
2.2 Asset Purchase Agreement dated as of July 23, 1998 between
the Registrant and BridgePoint Technical Manufacturing
Corporation
10.1 Asset Purchase and License Agreement dated July 10, 1998
between the Registrant and Fujitsu Limited *
10.2 Share Acquisition Agreement dated as of August 6, 1998 between
the Registrant and Fujitsu Limited
* Incorporated by reference to the Registrant's Current Report on Form
8-K dated August 11, 1998.
(b) Reports on Form 8-K
Two Current Reports on Form 8-K dated July 30, 1998 and August 11, 1998
reporting the delisting of the Company's common stock from the Nasdaq
National Market, the agreement to sell the Company's BridgePoint business
unit, the adoption of the Plan of Liquidation and the sale of certain
intellectual property to Fujitsu.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSS TECHNOLOGY, INC.,
a Delaware corporation
Date: August 13, 1998 /s/ F. S. (KIT) WEBSTER III
---------------------------
F. S. (KIT) WEBSTER III
Chief Financial Officer
15
<PAGE> 16
Exhibit Index
<TABLE>
<S> <C>
2.1 Plan of Complete Liquidation and Dissolution of ROSS
Technology, Inc.
2.2 Asset Purchase Agreement dated as of July 23, 1998 between
the Registrant and BridgePoint Technical Manufacturing
Corporation
10.1 Asset Purchase and License Agreement dated July 10, 1998
between the Registrant and Fujitsu Limited *
10.2 Share Acquisition Agreement dated as of August 6, 1998 between
the Registrant and Fujitsu Limited
27 Financial Data Schedule
</TABLE>
* Incorporated by reference to the Registrant's Current Report on Form
8-K dated August 11, 1998.
<PAGE> 1
EXHIBIT 2.1
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF
ROSS TECHNOLOGY, INC.
This Plan of Complete Liquidation and Dissolution (the "PLAN") is intended
to accomplish the complete liquidation and dissolution of ROSS Technology, Inc.,
a Delaware corporation (the "COMPANY"), in accordance with Section 275 and other
applicable provisions of the General Corporation Law of Delaware ("DGCL") and
Sections 331 and 336 (or Sections 332 and 337, as appropriate) of the Internal
Revenue Code of 1986, as amended (the "CODE").
1. Approval and Adoption of Plan
This Plan shall be effective when all of the following steps have been
completed:
(a) Resolutions of the Company's Board of Directors. The Company's
Board of Directors shall have adopted a resolution or resolutions with
respect to the following:
(i) Complete Liquidation and Dissolution: The Board of Directors
shall determine that it is deemed advisable for the Company to be
liquidated completely and dissolved.
(ii) Adoption of the Plan: The Board of Directors shall approve
this Plan as the appropriate means for carrying out the complete
liquidation and dissolution of the Company.
(iii) Sale of Assets: The Board of Directors shall determine
that, as part of the Plan, it is deemed expedient and in the best
interests of the Company to sell all or substantially all of the
Company's assets in order to facilitate liquidation and distribution
to the Company's creditors and stockholders, as appropriate.
(b) Adoption of This Plan by the Company's Preferred and Common
Stockholders. The holders of a majority of the outstanding shares of the
Company's Series B Convertible Preferred Stock, par value $.001 per
share (the "PREFERRED STOCK") and the holders of a majority of the
outstanding shares of common stock of the Company, par value $0.001 per
share (the "COMMON STOCK"), entitled to vote shall have adopted this
Plan, including the dissolution of the Company and those provisions
authorizing the Board of Directors to sell all or substantially all of
the Company's assets, by written consent or at a special meeting of the
stockholders of the Company called for such purpose by the Board of
Directors.
2. Dissolution and Liquidation Period
Once the Plan is effective, the steps set forth below shall be
completed at such times as the Board of Directors, in its absolute
discretion, deems necessary, appropriate or advisable. Without limiting the
generality of the foregoing, the Board of Directors may instruct the
officers of the Company to delay the taking of any of the following steps
until the Company has performed such actions as the Board or such officers
determine to be necessary, appropriate or advisable for the Company to
maximize the value of the Company's assets upon liquidation; provided that
such steps may not be delayed longer than is permitted by applicable law.
(a) The filing of a Certificate of Dissolution of the Company (the
"CERTIFICATE OF DISSOLUTION") pursuant to Section 275 of the DGCL
specifying the date (no later than ninety (90) days after the filing)
upon which the Certificate of Dissolution will become effective (the
"EFFECTIVE DATE"), and the completion of all actions that may be
necessary, appropriate or desirable to dissolve and terminate the
corporate existence of the Company;
(b) The cessation of all of the Company's business activities and
the withdrawal of the Company from any jurisdiction in which it is
qualified to do business, except and insofar as necessary for the sale
of its assets and for the proper winding up of the Company pursuant to
Section 278 of the DGCL;
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<PAGE> 2
(c) The negotiation and consummation of sales of all of the assets
and properties of the Company, including the assumption by the purchaser
or purchasers of any or all liabilities of the Company, insofar as the
Board of Directors of the Company deems such sales to be necessary,
appropriate or advisable;
(d) The giving of notice of the dissolution to all persons having a
claim against the Company and the rejection of any such claims in
accordance with Section 280 of the DGCL;
(e) The offering of security to any claimant on a contract whose
claim is contingent, conditional or unmatured in an amount the Company
determines is sufficient to provide compensation to the claimant if the
claim matures, and the petitioning of the Delaware Court of Chancery to
determine the amount and form of security sufficient to provide
compensation to any such claimant who has rejected such offer in
accordance with Section 280 of the DGCL;
(f) The petitioning of the Delaware Court of Chancery to determine
the amount and form of security which would be reasonably likely to be
sufficient to provide compensation for (i) claims that are the subject
of pending litigation against the Company, and (ii) claims that have not
been made known to the Company or that have not arisen, but are likely
to arise or become known within five (5) years after the date of
dissolution (or longer in the discretion of the Delaware Court of
Chancery), each in accordance with Section 280 of the DGCL;
(g) The payment, or the making of adequate provision for payment,
of all claims made against the Company and not rejected, including all
expenses of the sale of assets and of the liquidation and dissolution
provided for by the Plan in accordance with Section 280 of the DGCL;
(h) The posting of all security offered and not rejected and all
security ordered by the Court of Chancery in accordance with Section 280
of the DGCL; and
(i) The distribution of the remaining funds of the Company and the
distribution of remaining unsold assets of the Company, if any, to its
stockholders pursuant to Sections 4, 7 and 8 below.
Notwithstanding the foregoing, the Company shall not be required to
follow the procedures described in Section 280 of the DGCL, and the
adoption of the Plan by the Company's preferred and common stockholders
shall constitute full and complete authority for the Board of Directors and
the officers of the Company, without further stockholder action, to proceed
with the dissolution and liquidation of the Company in accordance with any
applicable provision of the DGCL, including, without limitation, Section
281(b) thereof.
3. Authority of Officers and Directors
After the Effective Date, the Board of Directors and the officers of
the Company shall continue in their positions for the purpose of winding up
the affairs of the Company as contemplated by Delaware law. The Board of
Directors may appoint officers, hire employees and retain independent
contractors in connection with the winding up process, and is authorized to
pay to the Company's officers, directors and employees, or any of them,
compensation or additional compensation above their regular compensation,
in money or other property, in recognition of the extraordinary efforts
they, or any of them, will be required to undertake, or actually undertake,
in connection with the successful implementation of this Plan. Adoption of
this Plan by holders of a majority of the outstanding shares of Preferred
Stock and Common Stock shall constitute the approval of the Company's
stockholders of the Board of Directors' authorization of the payment of any
such compensation.
The adoption of the Plan by the Company's preferred and common
stockholders shall constitute full and complete authority for the Board of
Directors and the officers of the Company, without further stockholder
action, to do and perform any and all acts and to make, execute and deliver
any and all agreements, conveyances, assignments, transfers, certificates
and other documents of any kind and character which the Board or such
officers deem necessary, appropriate or advisable: (i) to sell, dispose,
convey, transfer and deliver the assets of the Company, (ii) to satisfy or
provide for the satisfaction of the
2
<PAGE> 3
Company's obligations in accordance with Sections 280 and 281 of the DGCL,
(iii) to distribute all of the remaining funds of the Company and any
unsold assets of the Company to the Company's preferred stockholders (up to
the $50 million liquidation preference of the Preferred Stock), with the
remaining amounts, if any, distributable to the common stockholders, and
(iv) to dissolve the Company in accordance with the laws of the State of
Delaware and cause its withdrawal from all jurisdictions in which it is
authorized to do business.
4. Conversion of Assets Into Cash or Other Distributable Form
Subject to approval by the Board of Directors, the officers, employees
and agents of the Company, shall, as promptly as feasible, proceed to
collect all sums due or owing to the Company, to sell and convert into cash
any and all corporate assets and, out of the assets of the Company, to pay,
satisfy and discharge or make adequate provision for the payment,
satisfaction and discharge of all debts and liabilities of the Company
pursuant to Section 2 above, including all expenses of the sale of assets
and of the liquidation and dissolution provided for by the Plan.
5. Professional Fees and Expenses
It is specifically contemplated that the Board of Directors may
authorize the payment of a retainer fee to a law firm or law firms selected
by the Board for legal fees and expenses of the Company, including, among
other things, to cover any costs payable pursuant to the indemnification of
the Company's officers or members of the Board provided by the Company
pursuant to its Certificate of Incorporation and Bylaws or the DGCL or
otherwise.
In addition, in connection with and for the purpose of implementing
and assuring completion of this Plan, the Company may, in the absolute
discretion of the Board of Directors, pay any brokerage, agency and other
fees and expenses of persons rendering services to the Company in
connection with the collection, sale, exchange or other disposition of the
Company's property and assets and the implementation of this Plan.
6. Indemnification
The Company shall continue to indemnify its officers, directors,
employees and agents in accordance with its Certificate of Incorporation
and Bylaws and any contractual arrangements, for actions taken in
connection with this Plan and the winding up of the affairs of the Company.
The Board of Directors, in its absolute discretion, is authorized to obtain
and maintain insurance as may be necessary, appropriate or advisable to
cover the Company's obligations hereunder.
7. Liquidating Trust
The Board of Directors may establish a Liquidating Trust (the
"LIQUIDATING TRUST") and distribute assets of the Company to the
Liquidating Trust. The Liquidating Trust may be established by agreement
with one or more Trustees selected by the Board. If the Liquidating Trust
is established by agreement with one or more Trustees, the trust agreement
establishing and governing the Liquidating Trust shall be in form and
substance determined by the Board of Directors. In the alternative, the
Board may petition the Delaware Court of Chancery for the appointment of
one or more Trustees to conduct the liquidation of the Company subject to
the supervision of the Court. Whether appointed by an agreement or by the
Court, the Trustees shall in general be authorized to take charge of the
Company's property, and to collect the debts and property due and belonging
to the Company, with power to prosecute and defend, in the name of the
Company, or otherwise, all such suits as may be necessary or proper for the
foregoing purposes, and to appoint an agent under it and to do all other
acts which might be done by the Company that may be necessary, appropriate
or advisable for the final settlement of the unfinished business of the
Company.
8. Liquidating Distributions
Liquidating distributions, in cash or in kind, shall be made from time
to time after the adoption of the Plan to the holders of record, at the
close of business on the date of the filing of a Certificate of
3
<PAGE> 4
Dissolution of the Company as provided in Section 2 above, of outstanding
shares of stock of the Company, according to the priorities of the various
classes of the Company's stock and pro rata in accordance with the
respective number of shares then held of record; provided that in the
opinion of the Board of Directors adequate provision has been made for the
payment, satisfaction and discharge of all known, unascertained or
contingent debts, obligations and liabilities of the Company (including
costs and expenses incurred and anticipated to be incurred in connection
with the sale of assets and complete liquidation of the Company). All
determinations as to the time for and the amount and kind of liquidations
shall be made in the exercise of the absolute discretion of the Board of
Directors and in accordance with Section 281 of the DGCL.
Any assets distributable to any creditor or stockholder of the Company
who is unknown or cannot be found, or who is under a disability and for
whom there is no legal representative, shall escheat to the state or be
treated as abandoned property pursuant to applicable state law.
9. Amendment, Modification or Abandonment of Plan
If for any reason the Company's Board of Directors determines that
such action would be in the best interests of the Company, it may amend,
modify or abandon the Plan and all action contemplated thereunder,
notwithstanding stockholder approval, to the extent permitted by the DGCL;
provided, however, that the Company will not amend or modify the Plan under
circumstances that would require additional stockholder approval under the
DGCL and the federal securities laws without complying with the DGCL and
the federal securities laws. Upon the abandonment of the Plan, the Plan
shall be void.
10. Cancellation of Stock and Stock Certificates
Following the dissolution of the Company, the Company's stock transfer
books shall be closed and the Company's capital stock and stock
certificates evidencing the Company's Preferred Stock and Common Stock will
be treated as no longer being outstanding.
11. Liquidation under Section 331 and 336 (or Sections 332 and 337, as
appropriate)
It is intended that this Plan shall be a plan of complete liquidation
within the terms of Sections 331 and 336 (or Sections 332 and 337, as
appropriate) of the Code. The Plan shall be deemed to authorize such action
as, in the opinion of counsel for the Company, may be necessary to conform
with the provisions of said Sections 331 and 336 (or Sections 332 and 337,
as appropriate).
12. Filing of Tax Forms
The appropriate officer of the Company is authorized and directed,
within thirty (30) days after the effective date of the Plan, to execute
and file a United States Treasury Form 966 pursuant to Section 6043 of the
Code and such additional forms and reports with the Internal Revenue
Service as may be appropriate in connection with this Plan and the carrying
out thereof.
4
<PAGE> 1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BETWEEN
ROSS TECHNOLOGY, INC.
AND
BRIDGEPOINT TECHNICAL MANUFACTURING CORPORATION
DATED AS OF JULY 23, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINED TERMS
1.1 Defined Terms............................................... 1
1.2 Additional Defined Terms.................................... 8
1.3 References and Titles....................................... 8
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1 Agreement to Sell and Buy................................... 9
2.2 Excluded Assets............................................. 10
2.3 Purchase Price.............................................. 10
2.4 Indemnification Holdback Amount; Tax Holdback............... 11
2.5 Payments at Closing......................................... 11
2.6 Proration................................................... 11
2.7 Assumption of Liabilities and Obligations; Assumption
Payment..................................................... 12
2.8 Allocation.................................................. 12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller.................... 13
3.2 Representations and Warranties of Buyer..................... 16
3.3 Employee Matters............................................ 17
ARTICLE 4
COVENANTS
4.1 Conduct of Business......................................... 18
4.2 No Solicitation of Transactions............................. 21
4.3 Access and Information...................................... 21
4.4 Compliance With Laws........................................ 22
4.5 Notification of Certain Matters............................. 22
4.6 Third Party Consents........................................ 22
4.7 Supply Agreement............................................ 23
4.8 Interim Assistance.......................................... 23
4.9 Risk of Loss................................................ 23
4.10 Additional Agreements....................................... 24
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation....................... 24
5.2 Conditions to Obligation of Buyer........................... 25
5.3 Conditions to Obligations of the Seller..................... 26
ARTICLE 6
CLOSING
6.1 Closing..................................................... 26
6.2 Actions to Occur at Closing................................. 27
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination................................................. 28
7.2 Effect of Termination....................................... 29
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Buyer.................................... 29
8.2 Indemnification of Seller................................... 29
8.3 Defense of Third-Party Claims............................... 29
8.4 Direct Claims............................................... 31
8.5 Limitation as to Time....................................... 31
8.6 Dispute Resolution.......................................... 31
8.7 Instructions to Escrow Agent................................ 31
ARTICLE 9
GENERAL PROVISIONS
9.1 Survival of Representations, Warranties, and Covenants;
Limitation of Liability..................................... 32
9.2 Further Actions............................................. 32
9.3 Amendment and Modification.................................. 32
9.4 Waiver of Compliance........................................ 32
9.5 Specific Performance........................................ 33
9.6 Severability................................................ 33
9.7 Expenses and Obligations.................................... 33
9.8 Parties in Interest......................................... 33
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.9 Notices..................................................... 34
9.10 Counterparts................................................ 35
9.11 Entire Agreement............................................ 35
9.12 Governing Law............................................... 35
9.13 Public Announcements........................................ 35
9.14 Assignment.................................................. 35
</TABLE>
<TABLE>
<S> <C>
Exhibits:
Exhibit A Assumption Agreement
Exhibit B Bill of Sale and Assignment
Exhibit C Indemnification Escrow Agreement
Exhibit D Seller's Legal Opinions
Exhibit E Buyer's Legal Opinions
Exhibit 1 Assumed Contracts
Exhibit 2 Equipment
Exhibit 3 Inventory
Exhibit 4 Software
Exhibit 5 Leased Real Property
Exhibit 6 Leased Equipment
Exhibit 7 Assumed Purchase Orders
Exhibit 8 Employees Offered Employment with Buyer
Exhibit 9 Key Assumed Contracts
</TABLE>
<TABLE>
<S> <C>
Schedules:
Schedule 2.2(e) Personal Property
Schedule 3.1(b) Required Filings and Consents
Schedule 3.1(d) Litigation
Schedule 3.1(e) Interests of Third Parties in the Acquired Assets
Schedule 3.1(i) Intellectual Property
Schedule 3.1(j) Environmental
Schedule 3.1(k) Taxes
</TABLE>
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of July 23, 1998, by and among Ross Technology, Inc., a Delaware corporation
("SELLER"), and BridgePoint Technical Manufacturing Corporation, a Texas
corporation ("BUYER").
RECITALS
A. Seller owns and operates a manufacturing (including failure analysis and
reliability testing), sale, distribution and customer service business for the
32-bit hyperSPARC(TM) families of microprocessors and the hyperSTATION(TM) and
SPARCplug(TM) families of 32-bit systems and products (the "BUSINESS");
provided, that the term "Business" does not include Seller's design facilities
or design business.
B. Seller desires to sell and Buyer desires to buy the assets used or held
for use in the operation of the Business, both tangible and intangible,
excluding the Excluded Assets (as hereinafter defined), upon the terms and
conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the respective representations,
warranties, agreements, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINED TERMS
1.1 Defined Terms. The following terms shall have the following meanings
in this Agreement:
"ACCOUNTS RECEIVABLE" means the rights of Seller to cash payment for the
sale of microprocessors, systems, products and other Inventory and Products and
all other amounts that would be classified as an account receivable in
accordance with GAAP.
"AFFILIATE" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.
"APPLICABLE LAWS" means all laws, statutes, rules, regulations, ordinances,
judgments, orders, decrees, injunctions, and writs of any Governmental Entity
having jurisdiction over the Acquired Assets or the Business, as may be in
effect on or prior to the Closing.
1
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"ASSUMED CONTRACTS" means all Contracts for hardware or technical support,
the Contract for the Leased Real Property, the Software licenses, those
Contracts set forth on Exhibit 1 and any other contracts of Seller entered into
in the ordinary course of the Business with the approval of Joe David Jones
during the period after June 29, 1998 through the Closing Date, in each case
that relate to the Acquired Assets or the Business or any part thereof, but
specifically excluding the Excluded Contracts.
"ASSUMPTION AGREEMENT" means the Assumption Agreement between Buyer and
Seller substantially in the form of Exhibit A.
"BILL OF SALE AND ASSIGNMENT" means the Bill of Sale and Assignment by
Seller to Buyer substantially in the form of Exhibit B.
"BUSINESS DAY" means any other day than (i) a Saturday or Sunday or (ii) a
day on which commercial banks in Austin, Texas, are authorized or required to be
closed.
"BUYER" has the meaning set forth in the first paragraph of this Agreement
and includes its permitted successors and assigns.
"BUYER INDEMNIFIED COSTS" means all damages, losses, claims, liabilities,
demands, charges, suits, settlements, penalties, costs, and expenses (including
court costs, reasonable attorneys' fees and other expenses incurred in
investigating and preparing for, or otherwise in connection with, any litigation
or proceeding) that any of the Buyer Indemnified Parties incurs (a) resulting
from Seller's operation or control of any of the Acquired Assets or the Business
prior to the Closing Date (other than Assumed Liabilities), including violation
of any Environmental Laws or offsite disposal, transportation or arrangement for
disposal or transportation of any Hazardous Substances; (b) relating to or
arising out of any breach or default by Seller of any of the representations,
warranties, covenants or agreements under this Agreement or any other agreement
or document executed in connection herewith; (c) under any Excluded Contract,
any Assumed Contract for which a Consent, if required, has not been obtained, or
any other contract or agreement not expressly assumed by Buyer pursuant to the
terms hereof; (d) with respect to warranty repair liabilities or obligations for
Products sold prior to the Closing Date, other than the Assumed Warranty
Repairs; and (e) relating to or arising out of any law or contract with respect
to each (i) Employee Benefit Plan and all associated contracts and documents,
(ii) employee benefit plan (as such term is described in Section 3(3) of ERISA),
which is or was sponsored, maintained, or contributed to by any member of
Seller's ERISA Group either presently or at any time since 1974 and all
associated contracts and documents, and (iii) employee and former employee of
Seller or any ERISA Group, in connection with any event commencing, occurring,
or failing to occur on or prior to the Closing Date.
"BUYER INDEMNIFIED PARTIES" means Buyer, each affiliate of Buyer, each
member of an ERISA Group in which Buyer is a member and each of their officers,
directors, employees, consultants, and stockholders.
2
<PAGE> 7
"CERCLA" has the meaning set forth in the definition of Environmental Laws
contained in this Section 1.1.
"CHIP DESIGNS" means the designs for Products and the related materials and
documentation of any kind relating to the designs for Products, and the
Intellectual Property rights therein, including all architectural designs and
diagrams, logic designs and diagrams, chip layouts and mask works, flow
diagrams, patents, inventions, copyrights and know-how relating to the designs
for Products.
"CLOSING" means the consummation of the transactions contemplated by this
Agreement in accordance with the provisions of Article 6.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"CONSENTS" means all governmental consents and approvals, and all consents
and approvals of third parties, in each case that are necessary in order to
transfer record and beneficial ownership in the Acquired Assets to Buyer and
otherwise to consummate the transactions contemplated hereby.
"CONTRACTS" means all agreements, contracts, or other binding commitments
or arrangements, written or oral (including any amendments and other
modifications thereto), to which Seller is a party or is otherwise bound and
which affect or relate to the Acquired Assets or the Business.
"DEBT," without duplication, means (a) all indebtedness (including the
principal amount thereof or, if applicable, the accreted amount thereof and the
amount of accrued and unpaid interest thereon) of Seller, whether or not
represented by bonds, debentures, notes or other securities, for the repayment
of money borrowed, (b) all deferred indebtedness of Seller for the payment of
the purchase price of property or assets purchased, other than Trade Payables
not more than 90 days past due, (c) all obligations of Seller to pay rent or
other payment amounts under a lease of real or personal property which is
required to be classified as a capital lease or a liability on the face of a
balance sheet prepared in accordance with GAAP, (d) any outstanding
reimbursement obligation of Seller with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of Seller, (e) any
payment obligation of Seller under any interest rate swap agreement, forward
rate agreement, interest rate cap or collar agreement or other financial
agreement or arrangement entered into for the purpose of limiting or managing
interest rate risks, (f) all indebtedness for borrowed money secured by any
Lien existing on property owned by Seller, whether or not indebtedness secured
thereby shall have been assumed, (g) all guaranties, endorsements, assumptions
and other contingent obligations of Seller in respect of, or to purchase or to
otherwise acquire, indebtedness for borrowed money of others, and (h) all
premiums, penalties and change of control payments required to be paid or
offered in respect of any of
3
<PAGE> 8
the foregoing as a result of the consummation of the transactions contemplated
by this Agreement regardless if any of such are actually paid.
"EMPLOYEE BENEFIT PLAN" means each (i) "employee benefit plan" within the
meaning of Section 3(3) of ERISA, (ii) employment agreement, and (iii) personnel
policy, stock option plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation policy, severance pay
plan, policy, or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting agreement,
workers' compensation and other employee benefit plan, agreement, arrangement,
program, practice, or understanding, which is sponsored, maintained, or
contributed to by the Seller or any member of Seller's ERISA Group for the
benefit of the employees, former employees, independent contractors, or agents
of the Seller, or has been so sponsored, maintained, or contributed to at any
time since 1974.
"ENVIRONMENTAL LAWS" means all Applicable Laws and rules of common law
pertaining to the protection, conservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource) or to human health or safety, or the exposure to, or
the use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended and as in effect on or prior to the Closing. The term
Environmental Law includes, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), the Emergency Planning and
Community Right to Know Act and the Superfund Amendments and Reauthorization Act
of 1986, the Resource Conservation and Recovery Act, the Hazardous and Solid
Waste Amendments Act of 1984, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act of 1970, the Oil Pollution Act of 1990, the Hazardous Materials
Transportation Act, and any similar or analogous statutes, regulations and
decisional law of any Governmental Entity, as each of the foregoing may be
amended and in effect on or prior to the Closing.
"EQUIPMENT" means Seller's right, title and interests in the material items
of equipment, equipment structures, machinery, tools, motor vehicles, fixtures,
leasehold improvements, computer hardware, systems, infrastructure and
communications systems or devices necessary for or used primarily in the
Business, including those listed on Exhibit 2, and all non-material items of
equipment, equipment structures, fixtures, computer hardware, systems,
infrastructure and communications systems or devices necessary for or used
primarily in the Business, including all such items located at the Leased Real
Property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA GROUP" means any corporation, trade, business, or entity under
common control within the meaning of Section 414(b), (c), (m), or (o) of the
Code.
"ESCROW AGENT" means Silicon Valley Bank, or any other nationally
recognized banking institution agreed to by Buyer and Seller, and includes its
successors and assigns.
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"EXCLUDED CONTRACTS" means (a) all employment, change of control and
severance Contracts; (b) all Employee Benefit Plans and contracts associated
with Employee Benefit Plans, including all assets or funds held in trust, or
otherwise, associated with or used in connection with the Employee Benefit Plans
or contracts associated with Employee Benefit Plans; (c) all Contracts for Debt;
(d) any collective bargaining agreement; and (e) all Contracts that have
terminated or expired prior to the Closing Date; in each case other than
Contracts specifically enumerated on Exhibit 1.
"EXCLUDED LIABILITIES" means all debts, obligations and liabilities of
Seller of any kind or character, whether known or unknown, absolute, accrued,
contingent or otherwise, including debts, obligations and liabilities arising
under the Excluded Contracts and any Assumed Contracts for which a Consent, if
required, has not been obtained as of the Closing (except to the extent such
liability is assumed by Buyer pursuant to Section 4.6), other than the Assumed
Liabilities.
"GAAP" means generally accepted accounting principles in the United States.
"GOVERNMENTAL ENTITY" means any governmental department, commission, board,
bureau, agency, court or other instrumentality of the United States or any
state, county, parish or municipality, jurisdiction, or other political
subdivision thereof.
"HAZARDOUS SUBSTANCE" means any substance presently or hereafter listed,
defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated under any Environmental Law or by any
Governmental Entity including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance, petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos, urea formaldehyde foam insulation, lead
or polychlorinated biphenyls.
"INDEMNIFICATION ESCROW AGREEMENT" means the Indemnification Escrow
Agreement among Seller, Buyer, and Escrow Agent substantially in the form
attached hereto as Exhibit C.
"INDEMNIFIED COSTS" means the Buyer Indemnified Costs or the Seller
Indemnified Costs, as the case may be.
"INDEMNIFIED PARTIES" means the Buyer Indemnified Parties or the Seller
Indemnified Parties, as the case may be.
"INTELLECTUAL PROPERTY" means all Trademarks, Know-how, mask work,
copyrights, copyright registrations and applications for registration, Patents
and all other intellectual property rights (including internet domain names),
whether registered or not, licensed to or owned by Seller, including all
tradenames and the goodwill related to the foregoing.
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<PAGE> 10
"INTELLECTUAL PROPERTY LICENSE AGREEMENT" means the agreement by and among
Buyer, Seller and Fujitsu Limited in such form as is mutually acceptable to
Buyer and Seller (provided, that such agreement shall be completed prior to
August 6, 1998).
"INVENTORY" means all work-in-progress, raw materials and finished goods of
Seller purchased for or used in the Business as of the Closing Date, including
all finished, unfinished, consigned and contracted inventory, as more
specifically described on Exhibit 3.
"KNOW-HOW" means all trade secrets, plans, ideas, concepts and data,
research records, all promotional literature, customer and supplier lists and
similar data and information and all other confidential or proprietary technical
and business information.
"KNOWLEDGE" means, with respect to a specified party hereto, the actual
knowledge of such party, including the actual knowledge of such party's
officers, directors and executive officers (after due inquiry of their direct
subordinates), but excluding, in the case of Seller, Joe David Jones and the
persons under his direct supervision or direction.
"LEASED REAL PROPERTY" means Seller's leasehold interests, easements,
licenses, rights to access and rights-of-way for the property located at 4007
Commercial Center Drive, Austin, Texas, 78744.
"LIENS" means all liens, pledges, claims, security interests, restrictions,
mortgages, deeds of trust, tenancies, possessory interests, conditional sale or
other title retention agreements, assessments, easements, covenants,
restrictions, rights of first refusal, burdens, options or encumbrances of any
kind, other than the Assumed Liabilities.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
operations, properties, condition (financial or otherwise), results of
operations, Acquired Assets (taken as a whole), liabilities, or prospects
(taking into account the declining nature of the Business for the 12 month
period ended June 29, 1998) of the Business.
"PATENTS" means all foreign and domestic patents and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
renewals, and extensions of the foregoing) owned by Seller.
"PERMITS" means all permits, registrations, licenses, authorizations and
the like issued or required to be issued by any Governmental Entity to Seller
relating to the Acquired Assets or used or held for use in the Business.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization, or other entity.
"PERSONAL PROPERTY" means all of the Equipment, Software, Products,
furniture, furnishings, office equipment, supplies, plants, spare parts, and
other tangible personal
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property (including the URL site maintained by Seller and the 1-800 telephone
number used therein) which are owned or leased by Seller and which are
necessary for, used primarily or held for use primarily in the Business,
including all such personal property located at the Leased Real Property. The
term Personal Property shall not include any of the Excluded Assets.
"PRODUCTS" means all Inventory, microprocessors, systems and other products
sold, held for sale, provided to customers or held for provision to customers in
the ordinary course of the Business.
"PURCHASE ORDERS" means orders or requests for sales of Products, Inventory
or services of Seller in the ordinary course of the Business, whether or not
evidenced by a Contract.
"SELLER INDEMNIFIED COSTS" means any and all damages, losses, claims,
liabilities, demands, charges, suits, settlements, penalties, costs, and
expenses (including court costs, reasonable attorneys' fees and other expenses
incurred in investigating and preparing for, or otherwise in connection with,
any litigation or proceeding) that any of the Seller Indemnified Parties incurs
(a) resulting from Buyer's operation or control of the Acquired Assets on and
after the Closing Date (including the Assumed Liabilities and liabilities
arising from Buyer's employment or termination of the Transferred Employees,
other than liabilities waived or assumed by Seller pursuant to Section 3.3), and
(b) that relate to or arise out of any breach or default by Buyer of any
representation, warranty, covenant or agreement under this Agreement or any
agreement or document executed in connection herewith.
"SELLER INDEMNIFIED PARTIES" means Seller and each officer, director,
employee, consultant, stockholder, and Affiliate of Seller.
"SOFTWARE" means all computer programs, software, electronic data files,
source codes, documentation, user manuals, technical manuals and other similar
documents, each in any media or format, and all revisions, modifications,
enhancements or additions thereto, owned by or licensed to Seller and used
primarily in or necessary for the Business, including all test programs,
software verification programs and Inventory tracking programs and those listed
on Exhibit 4, in each case including all related Intellectual Property.
"TAXES" means taxes, charges, fees, imposts, levies, interest, penalties,
additions to tax or other assessments or fees of any kind, including, but not
limited to, income, corporate, capital, employment, excise, property, sales,
use, turnover, value added and franchise taxes, deductions, withholdings and
customs duties, imposed by any Governmental Entity and any payments with respect
thereto required under any tax-sharing agreement.
"TAX RETURNS" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Entity in connection with the determination,
assessment, collection or administration of any Taxes or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
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"TRADE PAYABLES" means accounts payable of Seller arising in the ordinary
course of the Business for Inventory and services purchased for or used in the
Business, but excluding any principal, interest, service or fees for Debt.
"TRADEMARKS" means (a) trademarks, service marks, trade names, trade dress,
labels, logos, and all other names and slogans associated with any products or
embodying the goodwill of the Business, whether or not registered, and any
applications or registrations therefor and (b) any associated goodwill incident
thereto owned by Seller.
1.2 Additional Defined Terms. The following terms are defined in the
section indicated:
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Acquired Assets............................................. 2.1
Acquisition Proposal........................................ 4.2
Assumed Liabilities......................................... 2.7
Assumed Purchase Orders..................................... 2.1(c)
Assumed Warranty Repairs.................................... 2.7(a)
Assumption Payment.......................................... 2.7
Buyer's Agreements.......................................... 3.2(a)
Closing Date................................................ 6.1
Design License.............................................. 2.1(i)
Employees................................................... 3.3(b)
Excluded Assets............................................. 2.2
Indemnification Holdback Amount............................. 2.4
Indemnifying Party.......................................... 8.3
Purchase Price.............................................. 2.3
Ross License................................................ 2.1(j)
Seller's Agreements......................................... 3.1(a)
Tax Certificate............................................. 6.2(b)
Tax Holdback Amount......................................... 2.4(b)
Transferred Employees....................................... 3.3(b)
</TABLE>
1.3 References and Titles. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections, and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections, and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections, or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of such Articles, Sections, subsections or other subdivisions, and shall be
disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof," and words of similar
import, refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The words "this Section," "this subsection," and
words of similar import, refer only to the Sections or subsections hereof in
which such words occur. The word "or" is not exclusive, and the word "including"
(in its various forms) means "including without limitation." Pronouns in
masculine, feminine, or neuter genders shall be construed to state and
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include any other gender and words, terms, and titles (including terms defined
herein) in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural and the conjunctive and disjunctive forms of such defined terms.
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1 Agreement to Sell and Buy. Subject to the terms and conditions set
forth in this Agreement and except for the Excluded Assets, Seller shall sell,
assign, transfer and deliver to Buyer on the Closing Date, and Buyer shall
purchase on the Closing Date, all of the Acquired Assets, free and clear of any
Liens or liabilities (except for liabilities assumed by Buyer in accordance with
Section 2.7). The assets (the "Acquired Assets") to be assigned, transferred and
delivered by Seller hereunder shall include (i) the manufacturing, testing and
quality control Equipment and facilities for the production of microprocessors,
(ii) the software verification laboratories, facilities, materials and
Equipment, and (iii) the delivery, receipt and storage facilities, Equipment and
materials for wafers, gases, chemicals and other raw materials used in the
Business, including:
(a) the Inventory;
(b) the Leased Real Property (including the leasehold interests
described on Exhibit 5 hereto);
(c) the Equipment (including the Equipment leasehold interests
described on Exhibit 6 hereto);
(d) the Assumed Contracts;
(e) the Purchase Orders set forth on Exhibit 7 and any Purchase Orders
entered into by Seller after June 29, 1998 and prior to the Closing Date
that are executed or consented to in writing by Joe David Jones or persons
under Joe David Jones' supervision or direction (the "ASSUMED PURCHASE
ORDERS");
(f) the revenue, cash, cash equivalents, Accounts Receivable and other
proceeds of any kind for Products shipped, or sales of Products made, as
part of the Business after June 29, 1998;
(g) the Software;
(h) the Intellectual Property (other than Trademarks) necessary to or
used primarily in the Business (other than Intellectual Property covered by
the Design License or included in the Software);
(i) a non-exclusive, royalty free, non-terminable, transferable
license to use all Intellectual Property (other than Trademarks) with
respect to the Chip Designs (including
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<PAGE> 14
designs, diagrams, layouts and mask works and related materials and
documentation) throughout the world solely for the purpose of conducting
the Business, including testing and quality control and software
verification (the "DESIGN LICENSE"), as more fully described in the
Intellectual Property License Agreement;
(j) a non-exclusive, royalty free, non-terminable, transferable
license to use, license, assign and sublicense all Trademarks in respect of
the name "ROSS Technology," and all derivative products and works resulting
from such marks or created by Buyer with respect to such marks throughout
the world for the longer of 12 months or until all Acquired Assets bearing
such marks on the Closing Date have been sold or distributed by Buyer (the
"ROSS LICENSE");
(k) all Trademarks used in the Business (other than those covered by
the Ross License), including Seller's rights to market, sell, distribute
and use the SPARC(TM) family of Trademarks;
(l) all Permits relating to the Business and the Assets (including all
international traffic licenses, fire department permits, air and water
pollution control permits, environmental permits and all other required
licenses);
(m) the Personal Property (other than Equipment, Software and
Inventory); and
(n) the books and records relating to the Business, including all
customer lists, marketing and leads lists, product lists and all other
sales or marketing, production or supply lists, in each case whether in the
form of a list or database, including the right to modify such lists and
use and create derivative products of such lists.
2.2 Excluded Assets. The Excluded Assets shall consist of the following:
(a) Seller's books and records relating to internal corporate matters
and any other books and records not necessary for or used primarily in the
Business or the Acquired Assets;
(b) the Excluded Contracts;
(c) the Chip Designs, except to the extent licensed to Buyer pursuant
to the Design License;
(d) all assets, whether tangible or intangible, of Seller not
necessary for or used primarily in the Business, including all design
facilities and related assets not located at the Leased Real Property;
(e) the Personal Property, if any, identified on Schedule 2.2(e);
(f) all cash and cash equivalents on hand as of June 29, 1998; and
(g) all Accounts Receivable not described in Section 2.1(f).
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2.3 Purchase Price. The aggregate purchase price payable by Buyer to
Seller in consideration for the sale of the Acquired Assets and the Business
shall be an amount equal to $5,660,000 (the "PURCHASE PRICE") (subject to the
Indemnification Holdback Amount, the Tax Holdback Amount, and any prorations
pursuant to Section 2.8).
2.4 Indemnification Holdback Amount; Tax Holdback.
(a) At the Closing, Buyer shall withhold $250,000 of the Purchase
Price and shall deposit such amount (the "INDEMNIFICATION HOLDBACK AMOUNT")
with the Escrow Agent.
(b) At the Closing, Buyer shall withhold from the Purchase Price the
amount shown on the Tax Certificate as owed by Seller to the Texas
comptroller of public accounts (the "Tax Holdback Amount") and shall
deposit such amount with the Escrow Agent pursuant to the Escrow Agreement.
If a Tax Certificate is not delivered to Buyer at Closing, or if the Tax
Certificate delivered at Closing does not cover all periods up to and
including the Closing Date, Buyer shall make a good faith estimate (based
on the recommendations of Seller's and Buyer's respective independent
accountants) of an amount sufficient to cover all Texas Taxes that are due
and unpaid by Seller for all periods up to and including the Closing Date,
and this amount shall be deemed to be the Tax Holdback Amount. Buyer shall,
and shall instruct the Escrow Agent to, release the Tax Holdback Amount to
Seller if and when Seller delivers to Buyer a Tax Certificate stating that
no Texas Taxes are due for any period up to and including the Closing Date;
provided that Buyer shall be entitled, and Seller shall instruct the Escrow
Agent, to release and deduct from the Tax Holdback Amount any Texas Taxes
of Seller paid or required to be paid by Buyer. Buyer shall consult with
Seller prior to paying any such Taxes and shall not pay any such Taxes so
long as Seller is reasonably contesting such Taxes.
2.5 Payments at Closing. At the Closing, subject to the satisfaction of
the other terms and conditions of this Agreement, Buyer shall:
(a) pay or cause to be paid to Seller cash, via wire transfer of
immediately available funds to an account designated by Seller, in an
amount equal to the Purchase Price minus the Indemnification Holdback
Amount and the Tax Holdback Amount; and
(b) deposit or cause to be deposited the Indemnification Holdback
Amount with the Escrow Agent.
At the Closing, subject to the satisfaction of other terms and conditions
of this Agreement, Seller shall pay or cause to be paid to Buyer cash, via wire
transfer of immediately available funds to an account designated by Buyer, in an
amount equal to the Assumption Payment.
2.6 Proration. All sales taxes (other than any sales taxes arising as a
result of the transactions contemplated by this Agreement), ad valorem taxes,
utility charges, insurance premiums, rent and lease payments, payroll costs,
accrued vacation and sick time for Employees, and normal operating expenses
(including the payment of reasonable Trade Payables for Inventory or services
received or first ordered with the approval of Joe David Jones or persons under
Joe David
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<PAGE> 16
Jones' direction or supervision as part of the Business after June 29, 1998 and
that are paid in the ordinary course of business, but excluding principal and
interest payments on Debt, Debt service or fees and amounts that have been or
should be set forth as general and administrative expenses of Seller in
accordance with GAAP) and other expenses reasonably allocable to the Business
if the Business were to be accounted for as a separate operating division of
Seller, in each case incurred in the Business shall be prorated between Buyer
and Seller as of 11:59 p.m. on June 29, 1998. All of such prorated items shall
be settled between Buyer and Seller as a net adjustment to the Purchase Price
on the Closing Date. To the extent that the parties are not able to determine
the actual amounts of such prorations as of the Closing Date, such amounts
shall be determined based upon the parties' reasonable estimates thereof. The
parties shall adjust the proration based on actual taxes and charges within a
reasonable time after such actual numbers become first available (but in no
event later than three months after the Closing Date) and shall settle such
amounts in cash.
2.7 Assumption of Liabilities and Obligations; Assumption Payment. As of
the Closing Date, Buyer shall assume and undertake to pay, discharge and perform
the following (the "Assumed Liabilities"):
(a) the warranty repair liabilities for (i) manufacturing defects and
normal wear and tear (but not for design defects or failure of fitness for
a particular purpose) for all Products sold prior to the Closing Date, and
(ii) design defects for microprocessors (but not systems or products) and
failure of fitness for a particular purpose (other than for Disagreed
Uses), in each case for Products sold after June 29, 1998 and on or prior
to the Closing Date (the "ASSUMED WARRANTY REPAIRS");
(b) all obligations arising under Assumed Contracts and Assumed
Purchase Orders (other than Assumed Contracts or Assumed Purchase Orders
for which a Consent, if required, has not been obtained (except to the
extent assumed by Buyer pursuant to Section 4.6)) for events occurring
after June 29, 1998, except for knowing or bad faith violations of the
terms or conditions of such Contracts or Purchase Orders by Seller that are
not directly attributable to Joe David Jones or other officers, directors
or employees of Buyer at the time of any such violation or to persons under
their immediate supervision at such time;
(c) Trade Payables for Inventory or services received or first ordered
with the approval of Joe David Jones or persons under Joe David Jones'
supervision or direction as part of the Business after June 29, 1998.
All of the Excluded Liabilities, whether reported by the Closing Date or
thereafter, shall remain and be the obligation and liability solely of Seller.
Seller shall pay to Buyer at the Closing, in consideration for the assumption of
the Assumed Warranty Repairs, an amount equal to $1,720,000 (the "ASSUMPTION
PAYMENT").
2.8 Allocation. On or before the Closing Date, Seller and Buyer shall
negotiate in good faith an allocation of the Purchase Price among the Acquired
Assets (as well as the Assumed Liabilities) that complies with Section 1060 of
the Code with respect to the allocation of the Purchase Price. If the allocation
is not agreed upon on or before the Closing Date, then Buyer and
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<PAGE> 17
Seller agree that the allocation shall be made and consistently reported by
Buyer and Seller in compliance with Section 1060 based upon an asset valuation
supplied by Ernst & Young L.L.P. The cost of such appraisal shall be shared
equally by Buyer and Seller. Buyer will order such appraisal as soon as
practicable after such date as Buyer and Seller fail to agree on such
allocation. The appraisal, if required, shall be provided to Seller within 45
days after the date of such order. Seller and Buyer shall not take any position
on their respective Tax Returns that is inconsistent with the allocation of the
Purchase Price among the Acquired Assets and Assumed Liabilities as determined
in accordance with this Section 2.8. Buyer and Seller shall duly prepare and
timely file such reports and information returns as may be required under
section 1060 of the Code and any Treasury regulations thereunder and any
corresponding provisions of applicable state income tax laws to report such
allocation of the Purchase Price.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows (with the understanding that Buyer is relying on
such representations and warranties in entering into and performing this
Agreement).
(a) Organization, Authority. Seller is a Delaware corporation, duly
organized, validly existing and in good standing in the state of its
incorporation and has all necessary corporate power and authority to
execute this Agreement and the other documents to be executed by it in
connection herewith (collectively with this Agreement, "SELLER'S
AGREEMENTS") and to consummate the transactions contemplated hereby and
thereby. Seller's execution, delivery and (subject to Seller obtaining the
approval of its stockholders, which shall have been duly obtained by all
necessary action prior to the Closing Date) performance of Seller's
Agreements and the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action on its part and,
assuming the due execution and delivery of Buyer's Agreements by Buyer,
will constitute the valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, except as limited
by bankruptcy, insolvency, fraudulent conveyance or other laws affecting
creditors' rights or equitable principles generally.
(b) No Conflict; Required Filings and Consents. Except as set forth on
Schedule 3.1(b) or as would not, either singly or in aggregate, have a
Material Adverse Effect, the execution, delivery and performance of
Seller's Agreements by Seller does not require the consent of any
Governmental Entity or third party (other than Consents required to assign
the Acquired Assets to Buyer, each of which is listed on Schedule 3.1(b)),
will not conflict with or violate the provisions of Seller's certificate of
incorporation or bylaws or any Applicable Law or any judgment, order or
ruling of any government authority having jurisdiction over Seller, will
not, directly or indirectly, conflict with or constitute a breach or
default under any Contract or Permit to which Seller is a party or to which
Seller or the Acquired Assets are subject, and will not result in the
creation of any Lien on the Acquired Assets.
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(c) Compliance with Applicable Law. To Seller's Knowledge, (i) Seller
is in compliance with all Applicable Laws applicable to the Business and
the Acquired Assets and has not violated such Applicable Laws in the
ownership, use or operation of the Business, and (ii) no such violations
have occurred which would affect Seller's ability to perform its
obligations hereunder.
(d) Absence of Litigation. Except as set forth on Schedule 3.1(d),
Seller is not subject to any judgment, settlement, injunction, order or
arbitration decision relating to the Acquired Assets or ownership, use or
operations of the Business, and there is no litigation or administrative
proceeding pending or, to Seller's Knowledge, threatened against Seller
relating to the Acquired Assets or the Business or which would affect
Seller's ability to perform its obligations hereunder.
(e) Liens; Assumed Contracts. Seller owns and has, and following the
Closing Buyer will have, good and marketable title to the Acquired Assets,
which Acquired Assets include all real and personal property necessary to
conduct the Business as currently conducted. Except as would not, either
singly or in the aggregate, have a Material Adverse Effect, (i) each of the
Assumed Contracts (including each lease or sublease) is a valid and binding
obligation of Seller and is in full force and effect, and Seller is not,
and (ii) to the Knowledge of Seller, no other party is, in default in any
material respect under such Assumed Contracts (including each lease or
sublease). Except as set forth on Schedule 3.1(e), no person other than
Seller has any interest in any of the Acquired Assets, other than Seller's
landlord with respect to Leased Real Property. The Acquired Assets shall be
free and clear of all Liens as of the Closing Date.
(f) Real Property. The Acquired Assets do not include any real
property other than Leased Real Property. Seller has a valid leasehold
interest in the Leased Real Property.
(g) Insurance. Seller has held insurance issued by sound and reputable
insurers against such risks as companies engaged in the Business, in
accordance with reasonable business practice, would customarily be insured.
(h) Labor. Seller is not a party to any collective bargaining
agreement and has not agreed to recognize any union or other collective
bargaining representative, nor has any union or collective bargaining
representative been certified as the exclusive bargaining representative of
any of its employees. To Seller's Knowledge, no union organizational
campaign or representation petition is currently pending with respect to
any employees of Seller.
(i) Intellectual Property. All Intellectual Property used in the
Business is listed on Schedule 3.1(i). The Intellectual Property used by
Seller in the Business is licensed to or owned by Seller, and Seller's
rights to Intellectual Property included in the Acquired Assets will be
assignable to Buyer on the Closing Date, subject to the receipt of any
Consents required to assign such Intellectual Property to Buyer, each of
which is listed on Schedule 3.1(b). Except as set forth on Schedule 3.1(i),
all licenses of Intellectual Property are, to Seller's Knowledge, valid and
uncontested, and Seller has received no notice of
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infringements or unlawful use of such property in connection with the
operations of the Business.
(j) Environmental Matters. Except as set forth in Schedule 3.1(j)
attached hereto and as would not, either singly or in the aggregate, have a
Material Adverse Effect, (i) Seller has conducted the Business in
compliance with all applicable Environmental Laws, including, without
limitation, having all environmental permits, registrations, licenses and
other approvals and authorizations necessary for the operation of the
Business as presently conducted; (ii) none of the Leased Real Property and
other real property owned, operated or used in the Business by Seller
contain any Hazardous Substance as a result of any activity of Seller in
amounts exceeding the levels permitted by applicable Environmental Laws;
(iii) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to the
Knowledge of Seller, threatened, against Seller relating to any violation,
or alleged violation, of any Environmental Law; (iv) no Hazardous Substance
has been disposed of, released or transported or arranged for transport or
disposal in violation of any applicable Environmental Law from any Leased
Real Property or other real property used in the Business by Seller as a
result of any activity prior to Closing; and (v) there have been no
environmental investigations, studies, audits, tests, reviews or other
analysis regarding compliance or non-compliance with any applicable
Environmental Law conducted by or which are in the possession of Seller
relating to the activities of Seller which are not listed on Schedule
3.1(j) attached hereto prior to the date hereof.
(k) Taxes. Seller has timely filed or caused to be timely filed all
Tax Returns affecting the Business or the Acquired Assets which are
required to be filed by Seller, all such Tax Returns which have been filed
are accurate and complete in all material respects, and Seller has timely
paid all Taxes shown on such Tax Returns or on any Tax assessment received
by Seller to the extent that such Taxes have become due. Seller is not
currently the beneficiary of any extension of time within which to file any
Tax Return. There are no Liens for Taxes upon the Business or the Acquired
Assets. Seller has not received notice of any Tax deficiency or
delinquency. Except as set forth on Schedule 3.1(k), (i) no Internal
Revenue Service audit of Seller is pending or, to the Knowledge of Seller,
threatened, and the results of any completed audits are properly reflected
in the Financial Statements and (ii) Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency. All monies required to be
withheld by Seller from employees or collected from customers for Taxes and
the portion of any Taxes to be paid by Seller to any Governmental Entity or
set aside in accounts for such purposes have been so paid or set aside.
There are no legal, administrative, or tax proceedings pursuant to which
Seller is or, to Seller's Knowledge, could be made liable for any Taxes,
penalties, interest, or other charges, the liability for which could extend
to Buyer as transferee of the Business or the Acquired Assets. None of the
Acquired Assets directly or indirectly secures any debt the interest on
which is exempt from tax under sec. 103(a) of the Code, and none of the
Acquired Assets is "tax-exempt use property" within the meaning of
sec. 168(h) of the Code. Seller is not a party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income tax purposes.
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(l) Texas Sales Tax. Seller represents and warrants that the Acquired
Assets constitute the entire operating assets of a separate branch,
division, or identifiable segment of a business as such phrase is used in
sec. 151.304(b)(2) of the Texas Tax Code and sec. 3.316(d) of Title 34 of
the Texas Administrative Code.
(m) Disclosure. No representation or warranty made by Seller and
contained in this Agreement contains any untrue statement of a material
fact or omits any material fact required to make any statement contained
herein not misleading. Seller is not aware of any impending or contemplated
event or occurrence that would cause any of the foregoing representations
not to be true and complete on the date of such event or occurrence as if
made on that date.
3.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as follows (with the understanding that Seller is relying on such
representations and warranties in entering into and performing this Agreement):
(a) Organization; Authority. Buyer is a Texas corporation, duly
organized, validly existing and in good standing in the state of its
incorporation and has all necessary corporate power and authority to
execute this Agreement and the other documents to be executed by it in
connection herewith (collectively with this Agreement, "BUYER'S
AGREEMENTS") and to consummate the transactions contemplated hereby and
thereby. Buyer's execution, delivery and performance of Buyer's Agreements
and the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary action on its part and, assuming the
due execution and delivery of Seller's Agreements (as hereinafter defined)
by Seller, will constitute the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms, except
as limited by bankruptcy, insolvency, fraudulent conveyance or other laws
affecting creditors' rights or equitable principles generally.
(b) No Conflict. The execution and delivery of the Buyer's Agreements
by Buyer do not, and the performance by Buyer of the transactions
contemplated hereby or thereby will not, violate, conflict with, or result
in any breach of any provision of Buyer's Articles of Incorporation or
Bylaws, violate, conflict with, or result in a violation or breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or result in the acceleration of, or
entitle any party to accelerate any obligation under any of the terms,
conditions, or provisions of any Contract to which Buyer is a party, or
violate any order, writ, judgment, injunction, decree, statute, law, rule,
or regulation, of any Governmental Entity applicable to Buyer. No Consent
of any Governmental Entity is required by or with respect to Buyer in
connection with the execution and delivery of any Buyer's Agreements by
Buyer or the consummation of the transactions contemplated hereby or
thereby.
(c) Required Filings and Consents. The execution, delivery and
performance of Buyer's Agreements by Buyer does not require the consent of
a Governmental Entity or a third party not affiliated with Buyer.
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(d) Sellers' Representations and Warranties. No facts have come to the
attention of Buyer or its officers, directors or employees that cause such
persons to believe that any representation or warranty made by Seller, as
of the dates such representations and warranties are made, contains any
untrue statement.
(e) Financing. Buyer has delivered to Seller true and correct copies
of the non-binding summaries of terms and conditions from its prospective
lenders in connection with Buyer's financing of the transactions
contemplated hereby, and such documents have not been materially modified,
superseded, rescinded or revoked as of the date hereof.
3.3 Employee Matters.
(a) Representations and Warranties.
(i) Neither the Seller nor any corporation, trade, business, or
entity under common control with the Seller, within the meaning of
Section 414(b), (c), (m), or (o) of the Internal Revenue Code of
1986, as amended ("CODE"), or Section 4001 of ERISA, ("COMMONLY
CONTROLLED ENTITY") contributes to or has an obligation to contribute
to, nor has the Seller or any Commonly Controlled Entity at any time
contributed to or had an obligation to contribute to, either (A) a
multiemployer plan within the meaning of Section 3(37) of ERISA or
(B) a plan subject to Title IV of ERISA.
(ii) All obligations of Seller arising under the continuation of
health coverage provisions of Section 4980B of the Code and Sections
601 through 608 of ERISA or similar state law have been performed.
(iii) Seller shall retain or assume each Employee Benefit Plan,
and Buyer shall not assume or be liable for any obligations under any
Employee Benefit Plan or portion of any Employee Benefit Plan or
under any employee benefit plan maintained by a Commonly Controlled
Entity.
(b) Offers of Employment. Seller shall use commercially reasonable
efforts, consistent with its present business plan, to retain the employees
presently employed in the Business (the "EMPLOYEES") until the Closing
Date. On or prior to the Closing Date, Buyer shall offer (and Seller shall
permit Buyer to offer) employment with Buyer in substantially similar jobs
(as defined in the retention and severance package for the "BridgePoint
business unit," a true and correct copy of which has been provided to Buyer
and Buyer's counsel), effective as of the Closing Date, to the Employees
listed on Exhibit 8 hereto and who are employed in the Business on the
Closing Date. Subject to the foregoing, such offer shall otherwise be on
terms and conditions determined by Buyer and shall include an initial bonus
package to each such Employee who accepts Buyer's offer of employment
effective as of the Closing Date (the "TRANSFERRED EMPLOYEES") comparable
to the "BridgePoint business unit" severance and retention package
presently offered by Seller.
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Upon the Closing, Seller waives any claims against Buyer and any of
Seller's employees who are extended an offer of employment by Buyer to the
extent such claims arise from such employment or offer of Employment by
Buyer, including any claims arising under the "BridgePoint business unit"
severance and retention package, and any employment agreement or
non-competition agreement between such person and Seller.
(c) Benefits. Buyer shall use commercially reasonable efforts to
provide the Transferred Employees with a benefits package substantially
equivalent in the aggregate to the benefits package presently provided to
such Transferred Employees by Seller (excluding any stock option or other
equity and non-equity incentive or bonus plans or agreements); provided,
that Buyer shall be so obligated only (i) to the extent Seller has provided
Buyer and Buyer's counsel, at least 30 days prior to the Closing Date, a
true and correct copy of each Employee Benefit Plan in effect on such date
and (ii) if Seller uses all commercially reasonable efforts to assist Buyer
in obtaining such benefits for the Transferred Employees.
(d) Non-Solicitation. Seller shall not, for a one year period
following the Closing Date, induce, entice, hire or attempt to hire or
employ any Transferred Employee on its own behalf or on behalf of any
person who is engaged in the same or a similar business as the Business, or
induce or attempt to induce any Employee to leave the employ or cease doing
business with Buyer or its Affiliates.
(e) COBRA. With respect to each "qualifying event" (within the meaning
of Section 603 of ERISA and Section 4980B(f)(3) of the Code) that occurred
on or prior to the Closing Date, Seller shall cause to be provided to all
employees and former employees of the Business sufficient medical, mental
health, vision, dental, and other group health plan benefits to satisfy the
obligations, if any, of Seller, any Commonly Controlled Entity (as defined
in Section 3.1(l)), and (solely for employees other than the Transferred
Employees) Buyer under the continuation of coverage provisions described in
Section 4980B of the Code and Sections 601 through 608 of ERISA and any
similar continuation of health coverage provisions under applicable state
law to the extent not preempted by applicable federal law. Nothing in this
Section 3.1(e)shall be construed to impose on Seller any obligation to
maintain medical, mental health, vision, dental or other group health
benefits not mandated by applicable law.
ARTICLE 4
COVENANTS
4.1 Conduct of Business.
(a) Except as contemplated by this Agreement or to the extent that
Buyer shall otherwise consent in writing, from the date of this Agreement
until the Closing, Seller covenants and agrees that Seller shall not:
(i) conduct the Business in any manner except in the ordinary
course consistent with its present business plan; or
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(ii) fail to use commercially reasonable efforts to preserve intact
the present business organization of the Business and to keep available
the services of its present officers, managerial personnel and key
employees or independent contractors (provided, that Seller shall not be
required to pay any such persons more than their present compensation
and existing benefits and severance packages) and preserve its
relationships with customers, suppliers and others having Business
dealings with it; or
(iii) fail to use commercially reasonable efforts to maintain the
Acquired Assets in their current condition, except for scheduled
expiration of any Assumed Contracts or ordinary wear and tear and damage
by casualty governed by Section 4.9 or fail to repair, maintain, or
replace any of the Acquired Assets consisting of equipment in the
ordinary course of business in accordance with past practice; or
(iv) modify, terminate or renew any lease for Equipment; or
(v) agree or offer to sell, license, sublicense, transfer or
otherwise limit or dispose of any Intellectual Property necessary for or
used in the Business; or
(vi) discontinue any Product line; or
(vii) incur any material Trade Payables or make any material
capital expenditure related to the Business; or
(viii) alter Seller's processes, methods or procedures of
manufacture, sale or marketing of Products; or
(ix) except for amendments, terminations (without payment of
penalty or damages), renewals, or failures to renew (without payment of
penalty or damages) of employment agreements with employees in the
ordinary course of business and consistent with past practice (subject
to prior consultation with Buyer reasonably in advance thereof),
materially amend, terminate, or fail to use all commercially reasonable
efforts to renew any Assumed Contract (other than Contracts for leased
Equipment), or default in any material respect (or take or omit to take
any action that, with or without the giving of notice or passage of
time, would constitute a material default) under any Assumed Contract or
enter into any new material Contract; or
(x) adopt any new employee benefit plan or amend any Employee
Benefit Plan, or increase in any manner the compensation or fringe
benefits of any officer, director, or employee or other personnel
(whether employees or independent contractors), except as required by
law; or
(xi) terminate any officers, managerial personnel or supervisory
employees of Seller used in the Business without prior consultation with
Buyer regarding the basis for such termination; or
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(xii) acquire (including, without limitation, by merger,
consolidation, or the acquisition of any equity interest or assets)
or sell (whether by merger, consolidation, or the sale of an equity
interest or assets), lease, or dispose of any Acquired Assets except
for fair value in the ordinary course of business and consistent with
past practice or, even if in the ordinary course of business and
consistent with past practices (other than with respect to
Inventory), whether in one or more transactions, in no event
involving an Acquired Asset or Acquired Assets having an aggregate
fair market value in excess of $25,000; or
(xiii) mortgage, pledge, or subject to any Lien any of the Acquired
Assets; or
(xiv) change in any material respect its existing practices and
procedures with respect to the collection of Accounts Receivable (except
with respect to good faith attempts to obtain payment of a past due
receivable or a contested receivable) or cancel, settle, waive or
otherwise compromise any right or claim relating to the Acquired Assets;
or
(xv) change in any material respect its existing practices and
procedures with respect to Accounts Payable or delay or postpone (beyond
Seller's ordinary practice) the payment of any Accounts Payable or other
liabilities relating to the Business; or
(xvi) change existing practices and procedures for Inventory
tracking, accounting and control; or
(xvii) agree to or make any commitment, orally or in writing, to
take any actions prohibited by this Agreement.
(b) Buyer understands and acknowledges that Seller is currently in the
process of disposing of its saleable assets (other than the Acquired
Assets, except as sold to Buyer under this Agreement), shutting down its
operations (other than the Business, except as sold to Buyer under this
Agreement) and preparing for a subsequent dissolution and liquidation.
Accordingly, no action or inaction of Seller relating to the foregoing
shall be considered a breach of this Agreement solely to the extent that
such actions or inactions do not relate to the Business or affect the
Acquired Assets. Without limiting the foregoing, neither (i) the mailing of
"End of Life" letters in form and substance substantially as sent prior to
the date hereof to its customers and suppliers notifying them of the
foregoing or (ii) the sale of certain assets of Seller to Fujitsu Limited
pursuant to the Asset Purchase Agreement, dated as of July 7, 1998, between
Seller and Fujitsu Limited, in the form provided to Buyer and Buyer's
counsel shall be considered a breach of this Agreement. In addition, no
action of Seller shall be deemed a breach of this Agreement if it is taken
at the direction of Joe David Jones or by any person under Joe David Jones'
supervision or direction.
(c) During the period after June 29, 1998 through the Closing Date,
Seller shall provide Buyer and Buyer's officers, directors and employees
full access to the operation and
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management of the Business and the right to participate, where
commercially practicable, in the operations, management and
decision-making processes of the Business; provided, that Seller shall
have the final decision making authority. In addition, during such period
Seller shall provide reasonable advance notice to Buyer of any proposed
sales of microprocessors (including the proposed use for such
microprocessors) and Buyer shall, as soon as is reasonably practicable
(but in any event within two (2) business days of receipt by Buyer),
notify Seller as to whether Buyer agrees or disagrees with the fitness of
such Product for the intended purpose. If Buyer fails to respond to such
notice within two (2) business days of receipt thereof, Buyer shall be
deemed to have agreed to the intended purpose set forth in such notice. If
Buyer timely disagrees with the fitness for the particular purpose
intended for such Product (each, a "DISAGREED USE"), then Seller shall
either (i) not sell such Product for such use, or (ii) sell such Product
and retain the warranty repair liabilities for failure of fitness for a
particular purpose for such Products.
4.2 No Solicitation of Transactions. Seller shall not, nor shall it permit
any of its Affiliates to, nor shall it authorize or permit any officer,
director or employee of or any investment banker, attorney or other advisor or
representative of Seller or any of its Affiliates to, (i) solicit, initiate or
encourage the submission of any Acquisition Proposal, or (ii) enter into any
agreement (other than confidentiality and standstill agreements in accordance
with the immediately following proviso) with respect to any such proposal;
provided, however, that to the extent required by the fiduciary obligations of
the Board of Directors of Seller, determined in good faith by a majority of the
disinterested members thereof based on the advice of Seller's counsel, Seller
may, in response to an unsolicited request therefor, participate in discussions
or negotiations with, or furnish information to, any person or "group" (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) pursuant to a confidentiality and standstill agreement with respect to
an Acquisition Proposal. Buyer acknowledges that Seller's Board of Directors
may in good faith determine that its fiduciary obligations may require Seller
to so respond to an Acquisition Proposal which the Board of Directors deems to
be superior in light of all of the relevant terms. For purposes hereof an
"ACQUISITION PROPOSAL" means any proposal, other than a proposal by Buyer, for
the sale of all or any portion of the Business (other than Products in the
normal course of business), and does not include a proposal for the
acquisition, merger or combination of Seller as a whole or the sale of any
assets of Seller other than the Acquired Assets. Notwithstanding the above,
Seller may continue discussions currently in progress regarding an acquisition
proposal.
4.3 Access and Information. Until the Closing, Seller shall afford to
Buyer and its representatives (including accountants and counsel) reasonable
access, during normal business hours, upon reasonable notice and in such manner
as will not unreasonably interfere with the conduct of the business of Seller,
to all properties, books, records, and Tax Returns of Seller and all other
information with respect to the Business, together with the opportunity to make
copies of such books, records, and other documents and to discuss the Business
of Seller with such officers, directors, managerial personnel, accountants,
consultants, and counsel for Seller as Buyer deems reasonably necessary or
appropriate for the purposes of familiarizing itself with Seller and the
Business, including the right to visit Seller's facilities; provided, that
Seller shall not be obligated to provide any documents which Seller determines
in good faith would result in a loss of a legal privilege for the disclosure of
such documents, including the attorney-client privilege. Buyer shall maintain
the confidentiality of all materials reviewed by Buyer or its representatives,
and shall return
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any copies of such materials to Seller after the termination of this Agreement,
all in accordance with the confidentiality letter, dated as of June 24, 1998,
between Buyer and Seller.
4.4 Compliance With Laws. Prior to the Closing, Seller shall use
reasonable efforts to cause the Business to be operated in accordance with all
Applicable Laws, regulations, rules, and orders. If Seller (or its counsel)
receives an administrative or other order or notification relating to any
violation or claimed violation of the Applicable Laws or the rules and
regulations of any Governmental Entity, Seller shall promptly notify Buyer in
writing and use reasonable efforts to take such steps as may be necessary to
cure such violation or contest such claimed violation in good faith.
4.5 Notification of Certain Matters. Each party hereto shall give prompt
written notice to the other party of (a) the occurrence, or failure to occur, of
any event of which it becomes aware that has caused or that would be likely to
cause any representation or warranty of such party contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date
hereof to the Closing Date, and (b) the failure of such party, or any officer,
director, employee, or agent of such party, to comply with or satisfy in any
material respect any covenant, condition, or agreement to be complied with or
satisfied by it hereunder. No such notification shall affect the representations
or warranties of the parties or the conditions to their respective obligations
hereunder.
4.6 Third Party Consents. After the date hereof and prior to the Closing,
Seller shall use all commercially reasonable efforts to obtain the written
consent from any party to any Contract, agreement or instrument, including each
Assumed Contract, Permit, Software license, Intellectual Property license or
Lease which is required to permit the consummation of the transactions
contemplated hereby. Buyer shall provide all reasonable assistance to Seller to
obtain such consents, including by providing financial information about Buyer
to Seller and such other parties to a Contract, to the extent that such
assistance does not conflict with or violate any confidentiality or
non-disclosure restrictions applicable to Buyer. No Consent required for the
assignment of the Acquired Assets set forth on Schedule 3.1(b), except as
specifically set forth in Section 5.2(d), shall be a condition to Buyer's
obligation to consummate the transactions contemplated by this Agreement.
Except for any breach of the covenants set forth in Article 4, Seller shall
have no liability to Buyer for the failure to obtain any such Consents.
Notwithstanding anything to the contrary contained in this Agreement, Seller
will not assign to Buyer at the Closing any Acquired Assets which require,
prior to its assignment, the Consent of any third party unless such Consent has
been obtained prior to or on the Closing Date. With respect to each such
Acquired Asset not assigned at the Closing, Seller shall maintain its interest
in such Acquired Asset and Buyer and Seller shall use all commercially
reasonable efforts to obtain such Consents. Such Acquired Assets shall be
promptly assigned and transferred to Buyer immediately upon receipt of such
Consent. Notwithstanding the absence of any Consent to the assignment of an
Acquired Asset, Seller shall maintain its interests in such Acquired Asset for
the benefit of Buyer and, to the extent that Seller may provide Buyer with such
benefits without violating the terms of any Contract affecting such Acquired
Asset, Buyer shall be entitled to all benefits in and under such Acquired Asset
from and after the Closing Date. To the extent the benefits (net of any related
expenses, which shall be prorated in accordance with Section 2.6), under an
Assumed Contract are provided to Buyer, Buyer shall perform at its sole expense
the obligations of Seller to be performed under the Assumed Contracts and shall
indemnify Seller for all obligations arising under such Assumed Contracts for
events occurring after June 29, 1998 (except for knowing or bad faith
violations of the terms or conditions of such Assumed
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Contracts by Seller that are not directly attributable to Joe David Jones or
other officers, directors or employees of Buyer at the time of any such
violation or persons under their immediate supervision at such time).
4.7 Supply Agreement. Seller will use all reasonable efforts to cause
Fujitsu Limited to enter into an agreement with Buyer for the purchase of
silicon and cell license rights upon the same or substantially similar terms and
conditions as those set forth in the unsigned Silicon Wafer Supply Agreement
between Seller and Fujitsu Limited.
4.8 Interim Assistance. To the extent practicable, Seller will provide
reasonable assistance to Buyer (i) through July 31, 1998 to instruct Buyer and
its representatives with respect to the testing procedures, processes and
engineering for the Business, including making reasonably available to Buyer a
team of up to three (3) of Seller's employees (specifically including Phil
Rostron), and (ii) through the later of July 31, 1998 or the Closing Date for
the orderly transfer of accounting and Inventory tracking processes and
procedures for the Business, including making reasonably available a team of up
to four (4) of Seller's employees (specifically including Carter Godwin). To the
extent practicable, Seller shall provide Buyer the right to use, or a limited
sublicense for, the enterprise resource planning software system licensed to
Seller by SAP for the period necessary for Buyer to achieve an orderly
transition of the Business.
4.9 Risk of Loss.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Acquired Assets from any cause whatsoever shall
be borne by Seller at all times prior to the Closing. In the event of any
such loss, damage, impairment, confiscation, or condemnation, whether or
not covered by insurance, Seller shall promptly notify Buyer of such loss,
damage, impairment, confiscation, or condemnation, which notice shall
provide an estimate of the costs to repair, restore or replace such
Acquired Assets and shall state whether Seller intends to repair, restore
or replace such assets.
(b) If Seller, at its expense, repairs, replaces, or restores such
Acquired Assets to their prior condition to the satisfaction of Buyer
before the Closing, Seller shall be entitled to all insurance proceeds and
condemnation awards, if any, by reason of such award or loss.
(c) If Seller does not or cannot restore or replace lost, damaged,
impaired, confiscated or condemned Acquired Assets, Buyer may at its
option:
(i) terminate this Agreement by notice forthwith without any
further obligation hereunder if the replacement cost of such Acquired
Assets exceeds $500,000 in the aggregate; or
(ii) proceed to the Closing of this Agreement without Seller
completing the restoration and replacement of such Acquired Assets,
provided that Seller shall assign all rights under applicable insurance
policies and condemnation awards, if any, to Buyer and that the Purchase
Price shall be reduced by the repair or replacement costs of any
Acquired Asset to the extent not covered by such insurance proceeds or
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condemnation award, and in such event, Seller shall have no further
liability with respect to the condition of the Acquired Assets directly
attributable to the loss, damage, impairment, confiscation, or
condemnation; provided, that the Purchase Price may not be reduced by
more than $1,000,000 without Seller's consent.
(d) Buyer will notify Seller of a decision under the options described
in Section 4.9(c) above within ten business days after Seller's notice to
Buyer of the damage or destruction of Acquired Assets; provided, however,
that if Seller states that it intends to restore the damaged Acquired
Assets and if Seller has not restored such damaged Acquired Assets
immediately prior to the Closing Date, notwithstanding Buyer's prior
delivery of a notice to proceed pursuant to this Section 4.9(d), Buyer
shall have the right to either postpone the Closing or terminate this
Agreement by notice forthwith.
4.10 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all commercially reasonable
efforts to do, or cause to be taken all action and to do, or cause to be done,
all things necessary, proper, or advisable under Applicable Laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement. If at any time after the Closing Date, any further action is
necessary or desirable to carry out the purposes of this Agreement, the parties
to this Agreement and their duly authorized representatives shall take all such
action. Without limiting the generality of the foregoing, if, after the Closing
Date, Buyer seeks indemnification or recovery from one or more other parties to
an Assumed Contract or otherwise seeks to enforce such Assumed Contract and, in
order to obtain such indemnification, recovery or enforcement, it is necessary
for Seller to initiate a suit, participate in any enforcement proceeding or
otherwise provide assistance to Buyer, then, at the request and the sole expense
of Buyer, and at no cost, expense or liability to Seller, Seller shall take such
action as Buyer may reasonably request in connection with Buyer's efforts to
obtain such indemnification, recovery or enforcement. Seller agrees to assist
Buyer in establishing any facts regarding the Acquired Assets or Seller that
would provide an exemption from sales and/or use taxes for the Acquired Assets.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation. The respective obligations of
Buyer and Seller to effect the transactions contemplated hereby are subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Consents and Approvals. All authorizations, consents, orders, or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity necessary for the consummation
of the transactions contemplated by this Agreement shall have been filed,
occurred, or been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated hereby shall be in
effect.
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(c) No Action. No action shall have been taken nor any statute, rule,
or regulation shall have been enacted by any Governmental Entity that makes
the consummation of the transactions contemplated hereby illegal.
5.2 Conditions to Obligation of Buyer. The obligation of Buyer to effect
the transactions contemplated hereby is subject to the satisfaction of the
following conditions unless waived, in whole or in part, by Buyer:
(a) Representations and Warranties. The representations and warranties
of Seller set forth in this Agreement shall be true and correct in all
material respects (provided that any representation or warranty of Seller
contained herein that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified hereby) as of
the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date.
(b) Performance of Obligations. Seller shall have performed in all
material respects (provided that any covenant or agreement of Seller
contained herein that is qualified by a materiality standard shall not be
further qualified hereby) all obligations required to be performed by it
under this Agreement prior to the Closing Date.
(c) Material Adverse Effect. No events or conditions shall have
occurred since the date hereof and neither Seller nor Buyer shall be aware
of any event or condition reasonably likely to occur after the Closing Date
which, individually or in the aggregate, have or are expected to have a
Material Adverse Effect on the Business or the Acquired Assets.
(d) Consents Under Agreements. Buyer shall have been furnished with
evidence reasonably satisfactory to it of the consent or approval of each
person that is a party to each Assumed Contract listed on Exhibit 9 (the
"KEY ASSUMED CONTRACTS") (including evidence of the payment of any required
payments) whose consent or approval shall be required in order to permit
the consummation of the transactions contemplated hereby and such consent
or approval shall be in form and substance reasonably satisfactory to
Buyer.
(e) Wafer Supply Agreement. Buyer shall have entered into an agreement
with Fujitsu Limited for the supply of silicon wafers and cell license
rights on terms and conditions reasonably acceptable to Buyer.
(f) Legal Opinions. Buyer shall have received from Irell & Manella
LLP, counsel to Seller, an opinion dated the Closing Date, in substantially
the form attached as Exhibit D hereto, which opinion, if requested by
Buyer, shall expressly provide that it may be relied upon by Buyer's
lenders or other sources of financing with respect to the transactions
contemplated hereby.
(g) Closing Deliveries. All documents, instruments, certificates or
other items required to be delivered by Seller pursuant to Section 6.2(b)
shall have been delivered.
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(h) Financing. Buyer shall have obtained debt and equity financing in
at least the amount of $9,000,000 and upon terms and conditions reasonably
satisfactory to Buyer in light of the collateral provided, the interest,
fees and other costs charged, and the resulting leverage of Buyer.
5.3 Conditions to Obligations of the Seller. The obligation of Seller to
effect the transactions contemplated hereby is subject to the satisfaction of
the following conditions unless waived, in whole or in part, by Seller.
(a) Representations and Warranties. The representations and warranties
of Buyer set forth in this Agreement shall be true and correct in all
material respects (provided that any representation or warranty of Buyer
contained herein that is qualified by a materiality standard shall not be
further qualified hereby) as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date.
(b) Performance of Obligations of Buyer. Buyer shall have performed in
all material respects (provided that any covenant or agreement of Buyer
contained herein that is qualified by a materiality standard shall not be
further qualified hereby) the obligations required to be performed by it
under this Agreement prior to the Closing Date.
(c) Closing, Deliveries. All documents and instruments required to be
delivered by Buyer pursuant to Section 6.2(a) shall have been delivered.
(d) Approval. Seller shall have obtained a resolution of Seller's
board of directors and, if required by Applicable Law, of Seller's
shareholders approving this Agreement.
(e) Legal Opinion. Seller shall have received from Vinson & Elkins
L.L.P., counsel to Buyer, an opinion dated as of the Closing Date, in
substantially the form attached hereto as Exhibit E.
(f) Buyer's Capitalization. Seller shall have had a reasonable
opportunity to review Buyer's capitalization and the terms of its debt
financing, and Seller shall be reasonably satisfied with Buyer's ability to
perform its obligations hereunder (including the assumption by Buyer of the
Assumed Liabilities).
ARTICLE 6
CLOSING
6.1 Closing. Subject to the satisfaction or waiver of the conditions set
forth in Article 5, the Closing will take place at the offices of Vinson &
Elkins L.L.P., Austin, Texas, at 10:00 a.m., local time, on August 15, 1998, or
as soon thereafter as the satisfaction or waiver of all conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby shall have occurred (other than with respect to actions to be taken at
the Closing) or at such other place and time as Buyer and Seller may agree (the
"CLOSING DATE").
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6.2 Actions to Occur at Closing.
(a) At the Closing, Buyer shall deliver to Seller (or to the Escrow
Agent, as indicated), unless delivery thereof has been waived by Buyer, the
following:
(i) Purchase Price. The Purchase Price (less the Indemnification
Holdback Amount, the Tax Holdback Amount and subject to any proration
pursuant to Section 2.6) by wire transfer of immediately available
funds;
(ii) Holdback Amount. The Indemnification Holdback Amount to the
Escrow Agent by wire transfer of immediately available funds;
(iii) Assumption Agreement. A counterpart of the Assumption
Agreement executed by Buyer;
(iv) Indemnification Escrow Agreement. A counterpart of the
Indemnification Escrow Agreement executed by Buyer; and
(v) Legal Opinions. The opinions of counsel referred to in Section
5.3.
(vi) Intellectual Property License Agreement. A counterpart of the
Intellectual Property License Agreement executed by Buyer.
(b) At the Closing, Seller shall deliver to Buyer the following:
(i) Assumption Payment. The Assumption Payment by wire transfer of
immediately available funds.
(ii) Assumption Agreement. A counterpart of the Assumption
Agreement executed by Seller;
(iii) Bill of Sale and Assignment. A counterpart of the Bill of
Sale and Assignment executed by Seller, together with any other
assignments and other transfer documents as requested by Buyer;
(iv) Indemnification Escrow Agreement. A counterpart of the
Indemnification Escrow Agreement executed by Seller;
(v) Legal Opinions. The opinions of counsel referred to in Section
5.2;
(vi) Tax Certificate. A properly executed receipt or certificate
from the Texas comptroller of public accounts (as described in
"sec.sec. 31.08 and 111.020 of the Texas Tax Code) stating the amount,
if any, of Texas Taxes that Seller owes for any period up to and
including the Closing Date (the "TAX CERTIFICATE");
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(vii) Intellectual Property License Agreement. A counterpart of the
Intellectual Property License Agreement executed by Seller and Fujitsu
Limited;
(viii) Consents; Acknowledgments. The original or, if no original
is reasonably available, a copy of each Consent described in Section
5.2; and
(ix) Estoppel Certificates. Estoppel certificates from the
lessor(s) of the Leased Real Property in a form and substance reasonably
satisfactory to Buyer and its lenders or other financing sources.
(c) At the Closing, Buyer shall receive from the chief executive
officer or chief financial officer of Seller a non-foreign affidavit within
the meaning of section 1445(b)(2) of the Code.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated prior to the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by either Seller or Buyer:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Article 5, as applicable, and (B) cannot be or has not been
cured within 20 days (the "CURE PERIOD") following receipt by the
breaching party of written notice of such breach;
(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree, or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining,
or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling, or other action shall have
become final and nonappealable; or
(iii) if the Closing shall not have occurred by the later of (x)
August 15, 1998, (y) fifteen days after the receipt of all required
Consents of Governmental Entities, or (z) fifteen days after the date
Seller is first permitted under Applicable Law to act upon the vote of
Seller's shareholders necessary to consummate the transactions
hereunder; provided, however, that the right to terminate this Agreement
under this clause (iii) shall not be available to any party whose breach
of this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date; or
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(c) by Buyer pursuant to the provisions of Section 4.9; or
(d) subject to Section 9.7, by Seller, if Seller enters into a binding
agreement for the acquisition, merger or combination of Seller as a whole
or the sale of all of Seller's assets as a whole.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
employees, accountants, consultants, legal counsel, agents, or other
representatives whether prior to or after the execution of this Agreement.
Notwithstanding anything in the foregoing to the contrary, no party that is in
material breach of this Agreement shall be entitled to terminate this Agreement
except with the consent of the other party.
7.2 Effect of Termination. In the event of a termination of this Agreement
by either Seller or Buyer as provided above, there shall be no liability on the
part of either Buyer or Seller, except as set forth in Section 9.7 and for
liability arising out of a breach of this Agreement. Article 1, Section 4.9 and
this Article 7 shall survive the termination of this Agreement. Except as set
forth in Section 9.7, each of the parties hereto shall be responsible for its
own expenses and those of its advisors, and no party hereto, nor any of their
Affiliates, shall be responsible to the other parties, or any of their
Affiliates, for any expenses relating to the transactions contemplated by this
Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Buyer. Subject to the provisions of this Article 8
and Section 9.6, Seller agrees to indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all Buyer Indemnified Costs.
8.2 Indemnification of Seller. Subject to the provisions of this Article 8
and Section 9.6, Buyer agrees to indemnify and hold harmless the Seller
Indemnified Parties from and against any and all Seller Indemnified Costs.
8.3 Defense of Third-Party Claims. An Indemnified Party shall give prompt
written notice to any person who is obligated to provide indemnification
hereunder (an "INDEMNIFYING PARTY") of the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a
"THIRD-PARTY ACTION") in respect of which such Indemnified Party shall seek
indemnification hereunder. Any failure so to notify an Indemnifying Party shall
not relieve such Indemnifying Party from any liability that it, he, or she may
have to such Indemnified Party under this Article 8 unless the failure to give
such notice materially and adversely prejudices such
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Indemnifying Party. The Indemnifying Party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, however,
that the Indemnifying Party shall pay the attorneys' fees of the
Indemnified Party if (i) the employment of separate counsel shall have been
authorized in writing by such Indemnifying Party in connection with the
defense of such third-party action, (ii) the Indemnifying Party shall not
have employed counsel reasonably satisfactory to the Indemnified Party to
have charge of such third-party action, or (iii) the Indemnified Party's
counsel shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a conflict of interest
that could make it inappropriate under applicable standards of professional
conduct to have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such
third-party action or any liability in respect thereof if, pursuant to or
as a result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party or if, in the opinion of the Indemnified Party, such
settlement, compromise, admission, or acknowledgment could have an adverse
effect on its business;
(c) No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party
of a release from all liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense
or settlement, compromise, admission, or acknowledgment of any third-party
action (i) as to which the Indemnifying Party fails to assume the defense
within a reasonable length of time or (ii) to the extent the third-party
action seeks an order, injunction, or other equitable relief against the
Indemnified Party which, if successful, would materially adversely affect
the business, operations, assets, or financial condition of the Indemnified
Party; provided, however, that the Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment that would give rise
to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article 8 and, in connection
therewith, shall furnish such records, information, and testimony and attend
such conferences, discovery proceedings, hearings, trials, and appeals as may be
reasonably requested.
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8.4 Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 8.3 because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which such Indemnified
Party claims are subject to indemnification under the terms hereof. Subject to
the limitations set forth in Section 8.5(a), the failure of the Indemnified
Party to exercise promptness in such notification shall not amount to a waiver
of such claim except to the extent the resulting delay materially prejudices the
position of the Indemnifying Party with respect to such claim.
8.5 Limitation as to Time. No Indemnifying Party shall be liable for any
Indemnified Costs pursuant to this Article 8 unless a written claim for
indemnification in accordance with Section 8.3 or 8.4 is given by the
Indemnified Party to the Indemnifying Party with respect thereto on or before
the date which is 12 months after the Closing Date, except that this time
limitation shall not apply to any claims at law or equity based on a party's
fraudulent acts or omissions, which shall survive until the expiration of the
applicable statute of limitations.
8.6 Dispute Resolution. Any controversy, dispute or claim for
indemnification arising pursuant to this Article 8 (a "DISPUTE") shall be
resolved by binding arbitration administered by the American Arbitration
Association (the "AAA") in accordance with the terms of this Section 8.6, the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the United States Arbitration Act. Judgment on any matter rendered by
arbitrators may be entered in any court having jurisdiction. Any arbitration
shall be conducted before three arbitrators. The arbitrators shall be
individuals knowledgeable in the subject matter of the Dispute. Each of Buyer
and Seller shall select one arbitrator by written notice to the other party
within fifteen (15) days after a request by one party for arbitration and the
two arbitrators so selected shall select the third arbitrator. If the third
arbitrator is not selected within thirty (30) days after the request for an
arbitration, then any party may request the AAA to select the third arbitrator.
The arbitrators may engage engineers, accountants or other consultants they deem
necessary to render a conclusion in the arbitration proceeding. To the maximum
extent practicable, an arbitration proceeding hereunder shall be concluded
within 90 days of the filing of the Dispute with the AAA. Arbitration
proceedings shall be conducted in Austin, Texas. Arbitrators shall be empowered
to impose sanctions and to take such other actions as the arbitrators deem
necessary to the same extent a judge could impose sanctions or take such other
actions pursuant to the Federal Rules of Civil Procedure and applicable law. At
the conclusion of any arbitration proceeding, the arbitrators shall make
specific written findings of fact and conclusions of law. Subject to the
limitations set forth in this Agreement, the arbitrators shall have the power to
award recovery of all costs and fees to the prevailing party. All fees of the
arbitrators and any engineer, accountant or other consultant engaged by the
arbitrators, shall be shared equally between the parties unless otherwise
awarded by the arbitrators.
8.7 Instructions to Escrow Agent. Seller hereby covenants and agrees that
at any time prior to the expiration of the Indemnification Escrow Agreement
Seller is or becomes obligated to indemnify a Buyer Indemnified Party for Buyer
Indemnified Costs under this Article 8, at Buyer's request, Seller will execute
and deliver to the Escrow Agent written instructions to release to the Buyer
Indemnified Party such portion of the Indemnification Holdback Amount as is
necessary to indemnify the Buyer Indemnified Party for such Buyer Indemnified
Costs.
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ARTICLE 9
GENERAL PROVISIONS
9.1 Survival of Representations, Warranties, and Covenants; Limitation of
Liability. Except as otherwise provided in the next two sentences, the
representations and warranties set forth in this Agreement shall terminate on
the date which is 12 months after the Closing Date, except that this time
limitation shall not apply to any claims at law or in equity based on a party's
fraudulent acts or omissions, which shall survive until the expiration of the
applicable statute of limitations. Following the date of termination of a
representation or warranty, no claim can be brought with respect to a breach of
such representation or warranty, but such termination shall not affect any
claim for a breach of a representation or warranty that was asserted before the
date of termination. To the extent that such are performable after the Closing,
each of the covenants and agreements contained in this Agreement shall survive
the Closing indefinitely. Notwithstanding any other provision hereof or any
applicable law, (i) no claim based on the breach of any representation of
Seller herein may be asserted by Buyer under this Agreement if Buyer had
Knowledge of the facts and circumstances giving rise to such breach prior to
the date hereof and (ii) no claim based on the breach of any representation or
warranty of Buyer in Section 3.2(d) may be asserted by Seller. Any specific
disclosure on the Schedules hereto made with reference to one or more
subsections of Section 3.1 shall be deemed disclosed with respect to each other
subsection of such Section as to which such disclosure is relevant; provided,
that such relevance is reasonably apparent. Notwithstanding any other provision
of this Agreement, in the event that the Closing occurs, Buyer's sole and
exclusive remedy for any breach by Seller of any representation, warranty or
covenant in this Agreement shall be indemnification pursuant to Section 8.1,
and in no event shall Seller's aggregate liability for all such breaches exceed
the amounts held pursuant to the Indemnification Escrow Agreement. In the event
the Closing does not occur, Seller's sole liability for breach of any
representation or warranty hereunder shall be limited to payment of the
reasonable and documented costs and expenses incurred by Buyer in connection
with the preparation, negotiation and attempted consummation of the
transactions contemplated by this Agreement up to $100,000 and, if the failure
of the Closing to occur is a result of Seller's breach of this Agreement,
Seller shall pay such costs and expenses up to such amount.
9.2 Further Actions. After the Closing Date, Seller shall execute and
deliver such other certificates, agreements, conveyances, and other documents,
and take such other action, as may be reasonably requested by Buyer in order to
transfer and assign to, and vest in, Buyer the Acquired Assets pursuant to the
terms of this Agreement.
9.3 Amendment and Modification. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto.
9.4 Waiver of Compliance. Any failure of Buyer on the one hand, or Seller,
on the other hand, to comply with any obligation, covenant, agreement, or
condition contained herein may be waived only if set forth in an instrument in
writing signed by the party or parties to be bound thereby, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any other failure.
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9.5 Specific Performance. The parties recognize that in the event Seller
should refuse to perform under the provisions of this Agreement (excluding
Sections 4.2 and 9.7), monetary damages alone will not be adequate. Buyer shall
therefore be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically,
Seller hereby waives the defense that there is an adequate remedy at law.
9.6 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of Applicable Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated herein are
consummated as originally contemplated to the fullest extent possible.
9.7 Expenses and Obligations. Except as otherwise expressly provided in
this Section 9.7, all costs and expenses incurred by the parties hereto in
connection with the consummation of the transactions contemplated hereby shall
be borne solely and entirely by the party which has incurred such expenses.
Notwithstanding the foregoing, (a) the fee payable to the Escrow Agent shall be
borne as provided in the Indemnification Escrow Agreement, and (b) all sales
taxes, if any, arising out of the transactions contemplated by this Agreement
shall be paid by Seller. If the transactions contemplated by this Agreement are
not consummated as a result of (x) a termination by Buyer pursuant to Section
7.1(b)(i) or (y) Seller entering into any agreement or letter of intent with
respect to an Acquisition Proposal or any proposal, agreement or letter of
intent for the acquisition, merger or combination of Seller as a whole, then
Seller agrees to pay the reasonable and documented costs and expenses incurred
by Buyer in connection with the preparation, negotiation and consummation of
such transactions up to $100,000 within ten (10) days after receipt of Buyer's
request for reimbursement. In the event of a dispute between the parties in
connection with this Agreement and the transactions contemplated hereby, each
of the parties hereto hereby agrees that the prevailing party shall be entitled
to reimbursement by the other party of reasonable legal fees and expenses
incurred in connection with any action or proceeding.
9.8 Parties in Interest. This Agreement shall be binding upon and, except
as provided below, inure solely to the benefit of each party hereto and their
permitted successors and assigns, and nothing in this Agreement, except as set
forth below, express or implied, is intended to confer upon any other person
(other than the Indemnified Parties as provided in Article 8) any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
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9.9 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Buyer, to
BridgePoint Technical Manufacturing Corporation
4007 Commercial Center Drive
Austin, Texas 78744
Attn: Joe David Jones
Telephone: (512) 436-2501
Facsimile: (512) 434-4750
with copies to
Vinson & Elkins L.L.P.
One American Center
600 Congress Avenue
Suite 2700
Austin, Texas 78701-3200
Attn: Kyle K. Fox, Esq.
Telephone: (512) 495-8539
Facsimile: (512) 236-3340
(b) If to Seller, to
Ross Technology, Inc.
5316 Highway 290 West
Austin, Texas 78735
Attn: Francis S. ("Kit") Webster III
Telephone: (512) 436-2578
Facsimile: (512) 892-3402
with a copy to
Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Attn: Andrew W. Gross, Esq.
Telephone: (310) 203-7032
Facsimile: (310) 203-7199
All notices, requests or instructions given in accordance herewith shall be
deemed given (i) on the date of delivery, if hand delivered, (ii) on the date of
receipt, if telecopied, (iii) three business days
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after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and (iv) one business day after the date of sending, if sent
by Federal Express or other recognized overnight courier.
9.10 Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.11 Entire Agreement. This Agreement (which term shall be deemed to
include the exhibits and schedules hereto and the other certificates, documents
and instruments delivered hereunder) constitutes the entire agreement of the
parties hereto and supersedes all prior agreements, letters of intent and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. There are no representations or warranties, agreements,
or covenants other than those expressly set forth in this Agreement.
9.12 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
9.13 Public Announcements. Except for statements made or press releases
issued (i) pursuant to the Securities Act of 1933 or the Securities Exchange Act
of 1934, (ii) pursuant to any listing agreement with any national securities
exchange or the National Association of Securities Dealers, Inc., or (iii) as
otherwise required by law, Seller and Buyer shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement or the transactions contemplated hereby. Prior to the Closing,
Seller will not issue any other press release or otherwise make any public
statements regarding its business, except as may be required by Applicable Law
or in a letter to be mutually agreed upon and jointly sent by Buyer and Seller
to Seller's employees, landlords, suppliers or customers.
9.14 Assignment. Neither this Agreement nor any of the rights, interests,
or obligations hereunder shall be assigned by any of the parties hereto, whether
by operation of law or otherwise; provided, however, that nothing in this
Agreement shall limit Buyer's ability to make a collateral assignment of its
rights under this Agreement to any institutional lender that provides funds to
Buyer without the consent of Seller. Seller shall execute an acknowledgment of
such assignment(s) and collateral assignments in such forms as Buyer or its
institutional lenders may from time to time reasonably request; provided,
further, however, that unless written notice is given to Seller that any such
collateral assignment has been foreclosed upon, Seller shall be entitled to deal
exclusively with Buyer as to any matters arising under this Agreement or any of
the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding on Buyer's assigns.
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IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed as of the date first written above.
SELLER:
ROSS TECHNOLOGY, INC.
By: /s/ FRANCIS S. (KIT) WEBSTER III
----------------------------------
Francis S. (Kit) Webster III
Chief Financial Officer
BUYER:
BRIDGEPOINT TECHNICAL
MANUFACTURING CORPORATION
By: /s/ JOE DAVID JONES
----------------------------------
Joe David Jones
President and Chief Executive
Officer
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EXHIBIT A
FORM OF
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (the "AGREEMENT") is made and entered into as of
this day of July, 1998, by and between BridgePoint Technical
Manufacturing Corporation, a Texas corporation ("BUYER"), and Ross Technology,
Inc., a Delaware corporation ("SELLER").
WITNESSETH
WHEREAS, concurrently with the execution and delivery hereof, Seller has
sold to Buyer substantially all of the assets and properties of Seller that are
used in the operation of Seller's manufacturing, failure analysis and
reliability testing, sale, distribution and customer service business pursuant
to that certain Asset Purchase Agreement, dated as of July 23, 1998 (the
"PURCHASE AGREEMENT"), by and between Buyer and Seller; and
WHEREAS, pursuant to the Purchase Agreement, Buyer has agreed to assume
certain liabilities and obligations of Seller.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Buyer hereby covenants and agrees
with Seller as follows:
1. Effective as of the date hereof, Buyer hereby agrees to assume and
be solely responsible for the payment, performance and discharge of all of
the Assumed Contracts (as defined in the Purchase Agreement), other than
the Assumed Contracts for which a Consent is required but has not been
obtained except to the extent assumed by Buyer pursuant to Section 4.6 of
the Purchase Agreement, and the Assumed Liabilities (as defined in the
Purchase Agreement), subject, however, to the terms and conditions of the
Purchase Agreement.
2. Except as specifically provided in this Agreement and the Purchase
Agreement, Buyer shall not be liable for and shall not assume any other
obligations or liabilities of Seller (whether known or unknown, matured or
unmatured, or fixed or contingent).
3. The Buyer and Seller hereby agree to execute and deliver any and
all additional documents that the other may reasonably request in order to
more fully effect the agreements set forth in this Agreement.
4. The undertakings, covenants, and agreements set forth herein shall
be binding upon and inure to the benefit of Buyer and Seller and their
respective successors and assigns.
5. This Agreement, being further documentation of the assumptions
provided for in and by the Purchase Agreement, neither expands upon nor
limits the rights, obligations or warranties of the parties under the
Purchase Agreement. In the event of a conflict or ambiguity between the
provisions of this Agreement and the Purchase Agreement, the provisions of
the Purchase Agreement
A-1
<PAGE> 42
shall be controlling. The terms and conditions of this Agreement shall be
governed and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
BRIDGEPOINT TECHNICAL
MANUFACTURING CORPORATION
By:
------------------------------------
Joe David Jones
President and Chief Executive
Officer
ROSS TECHNOLOGY, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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<PAGE> 43
EXHIBIT B
FORM OF
BILL OF SALE AND ASSIGNMENT
STATE OF [ ]
COUNTY OF [ ]
KNOW ALL MEN BY THESE PRESENTS:
THAT Ross Technology, Inc., a Delaware corporation ("Grantor"), in
consideration of the payment by BridgePoint Technical Manufacturing Corporation,
a Texas corporation ("Grantee"), of the consideration specified in the Purchase
Agreement (as hereinafter defined), the receipt and sufficiency of which are
hereby acknowledged, does hereby sell, convey, transfer, assign and deliver unto
Grantee, pursuant to that certain Asset Purchase Agreement, dated as of July 23,
1998 (the "PURCHASE AGREEMENT"), by and between Grantor and Grantee, all of
Grantor's rights, titles, and interests in and to all of the assets, properties,
contracts, leases (including, but not limited to, all of Grantor's interests as
"tenant" or "lessee" under all real property leases), and agreements which are
part of the Acquired Assets, but excluding the Excluded Assets and the items set
forth on Schedule I hereto, which require a Consent to assignment and which
shall be treated as set forth in Section 4.6 of the Purchase Agreement. Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
assigned to them in the Purchase Agreement.
TO HAVE AND TO HOLD the Acquired Assets unto Grantee and its successors and
assigns forever.
Grantor covenants and agrees, for the benefit of Grantee and its successors
and assigns, without further consideration, and whenever and as often as
required so to do by Grantee and its successors and assigns, to execute and
deliver to Grantee such other instruments of conveyance, transfer, and
assignment and take such other action as Grantee may reasonably require to more
fully and effectively to transfer, assign and convey to and vest in Grantee and
its successors and assigns, the Acquired Assets.
Grantor hereby constitutes and appoints Grantee and its successors and
assigns Grantor's true and lawful attorneys, with full power of substitution, in
Grantor's name and stead but on behalf and for the benefit of Grantee and its
successors and assigns, to demand and receive any and all of the Acquired Assets
and to give receipts and releases for and in respect of the same, and any part
thereof, and from time to time to institute and prosecute, at the expense and
for the benefit of Grantee and its successors and assigns, any and all
proceedings at law, in equity or otherwise which Grantee or its successors or
assigns may deem proper for the collection or reduction to possession of any of
the Acquired Assets or for the collection and enforcement of any claim or right
of any kind hereby sold, conveyed, transferred and assigned, or intended so to
be, and to do all acts and things in relation to the Acquired Assets which
Grantee or its successors or assigns shall deem desirable. The foregoing powers
are coupled with an interest and are and shall be irrevocable by Grantor or by
its dissolution or in any manner or for any reason whatsoever.
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Grantor further authorizes Grantee and its successors and assigns to
receive and open all mail, telegrams and other communications, and all express
or other packages, addressed to Grantor and sent to the Lease Real Property (as
defined in the Purchase Agreement) or to any of its officers, to retain the same
insofar as they relate to the Business or the Acquired Assets, and to return and
deliver the remainder of same to Grantor. To the extent such communications
retained by Grantee relate to matters other than the Business or the Acquired
Assets, Grantee agrees to deliver copies of such communications to Grantor in a
reasonably prompt manner.
Nothing in this Bill of Sale and Assignment, express or implied, is
intended or shall be construed to confer upon, or to give to, any person, firm,
corporation or other entity other than the Grantor, the Grantee, and their
respective successors and assigns, any right or remedy under or by reason of
this Bill of Sale and Assignment or any term, covenant or condition hereof, and
all the terms, covenants, conditions, promises and agreements contained in this
Bill of Sale and Assignment shall be for the sole and exclusive benefit of the
Grantor, the Grantee and their respective successors and assigns.
This Bill of Sale and Assignment, being further documentation of the
conveyances, transfers and assignments provided for in and by the Purchase
Agreement, neither expands upon nor limits the rights, obligations or warranties
of the parties under the Purchase Agreement. In the event of a conflict or
ambiguity between the provisions of this Bill of Sale and Assignment and the
Purchase Agreement, the provisions of the Purchase Agreement shall be
controlling. The terms and conditions of this Bill of Sale and Assignment shall
be governed and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the undersigned has executed this Bill of Sale of
Assignment as of this day of July, 1998.
ROSS TECHNOLOGY, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE> 45
EXHIBIT C
FORM OF
INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT (this "AGREEMENT") is made and
entered into as of July , 1998, by and among BridgePoint Technical
Manufacturing Corporation, a Texas corporation ("BUYER"), Ross Technology, Inc.,
a Delaware corporation ("SELLER"), and [Bank], a national banking association
with its headquarters in (the "ESCROW AGENT").
RECITALS
A. Pursuant to the Asset Purchase Agreement, dated as of July 23, 1998 (the
"PURCHASE AGREEMENT"), between Buyer and Seller, Buyer has agreed to purchase
from Seller substantially all of the assets of Seller used in Seller's
manufacturing, failure analysis and reliability testing, sale, distribution and
customer service business (the "ACQUISITION"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to them in the
Purchase Agreement.
B. It is a condition precedent to the consummation of the Acquisition that
Buyer, Seller and the Escrow Agent execute and deliver this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and of the respective
agreements and covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
SECTION 1. Establishment of Escrow Account. Concurrently with the
execution hereof and pursuant to the Purchase Agreement, Buyer will deliver to
the Escrow Agent $250,000 in cash (the "ESCROWED PROPERTY") by wire transfer of
immediately available funds to an account designated by the Escrow Agent as the
"Ross Technology Escrow Account" (the "ESCROW ACCOUNT"). The Escrowed Property
and any interest, dividends, income, or other proceeds earned thereon from and
after the Closing Date (the "INTEREST") shall be held, administered and disposed
of by the Escrow Agent in accordance with the terms and conditions hereinafter
set forth.
SECTION 2. Investment of Proceeds of Escrowed Property.
(a) The Escrow Agent shall from time to time invest and reinvest the
Escrowed Property, if any, in such of the following investments as Buyer
and Seller may from time to time elect by joint notice in writing
("PERMITTED INVESTMENTS"):
(i) Any U.S. Government or U.S. Government Agency security;
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(ii) Any commercial paper rated A1/P1 or better;
(iii) Any certificate of deposit or time deposit in any bank with a
long-term debt rating of A or better from Moody's Investors Services,
Inc. or Standard & Poor's Corporation;
(iv) The [ ] Treasury Fund; or
(v) The following institutional money market funds:
(1) Dreyfus Treasury Cash Management Fund
(2) Provident T-Fund Dollar Account
(3) Federated Treasury Obligations Fund
(4) AIM Treasury Portfolio
In the absence of written instructions to the contrary from Buyer and
Seller, the Escrow Agent shall invest the Escrowed Property in Permitted
Investments set forth in clause (iv) of this Section 2(a).
(b) Any Interest shall be set aside and distributed as provided in
Section 2(d).
(c) The Escrow Agent will act upon investment instructions the
business day after such instructions are received, provided the requests
are communicated within a sufficient amount of time to allow the Escrow
Agent to make the specified investment. Instructions received after an
applicable investment cutoff deadline will be treated as being received by
the Escrow Agent on the next business day, and the Escrow Agent shall not
be liable for any loss arising directly or indirectly, in whole or in part,
from the inability to invest Escrowed Property on the day the instructions
are received. The Escrow Agent shall not be liable for any loss incurred by
the actions of third parties or by any loss arising by error, failure or
delay in the making of an investment or reinvestment, unless such error,
failure or delay results from the Escrow Agent's gross negligence or
willful misconduct, and the Escrow Agent shall not be liable for any loss
of principal or income in connection therewith. As and when the Escrowed
Property or any Interest or any portion thereof is to be released under
this Agreement, the Escrow Agent shall cause the Permitted Investments to
be converted into cash, and the Escrow Agent shall not be liable for any
loss of principal or income in connection therewith. None of the parties
hereto shall be liable for any loss of principal or income due to the
choice of Permitted Investments in which the Escrowed Property is invested
or the choice of Permitted Investments that are converted into cash
pursuant to this Section 2(c).
(d) Except as otherwise provided herein, all Interest shall be
distributed to Seller upon the termination of this Agreement pursuant to
Section 15. Subject to Section 2(e) and the last sentence of Section 5(b),
the Escrow Agent shall distribute to Seller, solely out of Interest, on a
quarterly basis as of the last day of March, June, September and December,
upon written demand of Seller, an amount equal to the product of the
Effective Tax Rate (as defined below) times the taxable Interest for the
quarter. For purposes of determining taxable interest, dividends and other
income, the Escrow Agent shall provide an itemized report of all Interest
for the quarter to Buyer and Seller at the close of business of the last
day of the end of each such quarter, and Seller shall provide
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a summary to the Escrow Agent of all such income that is taxable. For this
purpose, the "EFFECTIVE TAX RATE" shall mean the highest marginal
effective combined federal, state and local income tax rate applicable to
a corporate taxpayer as reasonably computed and provided to the Escrow
Agent by Seller.
(e) For tax purposes, the Escrowed Property shall be deemed property
of Seller and all Interest shall be the income of Seller. Buyer and Seller
shall file Tax Returns and the Escrow Agent shall file a Form 1099
consistent with such treatment. In the event that the Internal Revenue
Service or any other governmental authority successfully claims that the
Interest is taxable to Buyer for a taxable period, Seller shall promptly
pay to Buyer all amounts paid by the Escrow Agent to Seller pursuant to
Section 2(d) for such taxable period plus interest on such amounts at the
rate specified by section 6621(a)(1) of the Code and corresponding
provisions of applicable state and local laws to the extent such interest
has been received by or credited to Seller, and Seller shall thereafter no
longer have any right to receive payments under Section 2(d).
SECTION 3. Release of the Escrowed Property to Indemnitees. The Escrow
Agent shall disburse to Buyer (for its own account or for the account of any
Indemnitee, as defined in Section 8) such portion of the Escrowed Property as
instructed pursuant to this Section 3 to pay Buyer Indemnified Costs for which
the Indemnitee is entitled to reimbursement pursuant to Article 8 of the
Purchase Agreement. Payment shall be made not more than three business days
after: (a) the delivery to the Escrow Agent of joint written instructions signed
by Buyer and Seller specifying an amount to be paid to an Indemnitee or (b) the
delivery to the Escrow Agent and Seller of a copy of a Final Determination (as
defined below) establishing the Indemnitee's right to reimbursement under this
Agreement and Article 8 of the Purchase Agreement with respect to such Buyer
Indemnified Costs. A "FINAL DETERMINATION" shall mean a final, written findings
of fact and conclusions of law by an arbitration panel pursuant to Section 8.6
of the Purchase Agreement.
SECTION 4. No Distribution of Expenses. Except as provided in Section 8 of
this Agreement with respect to Buyer, neither Seller nor Buyer shall be entitled
to reimbursement out of the Escrowed Property for any costs and expenses
incurred by them in connection with exercising their rights or performing their
duties under this Agreement.
SECTION 5. Segregation of the Fund. (a) The Escrow Agent shall segregate
from the Escrow Account and transfer into a separate account (the "PENDING
CLAIMS ACCOUNT") maintained by the Escrow Agent for the benefit of Buyer and
Seller the portion of the Escrowed Property (together with the Interest) that
may be necessary to satisfy in full all Pending Claims (as defined below), and
shall hold such portion in accordance with this Section 5. "PENDING CLAIMS"
shall mean unresolved Claims (as defined in Section 8) that are the subject of
Claims Notices delivered under Section 8(b). Such segregated Escrowed Property
(together with the Interest) will be invested pursuant to Section 2.
(b) Any portion of the Escrowed Property segregated under Section 5(a)
shall continue to be segregated (together with the interest, dividends, and
other income earned thereon) by the Escrow Agent until the Escrow Agent is
directed to release such Escrowed Property by (i) written instructions signed by
Buyer and Seller instructing the Escrow Agent how to pay all or any portion of
such segregated Escrowed Property (together with the Interest) or (ii) a copy of
a Final
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Determination establishing or denying the Indemnitee's right to reimbursement
under Section 8. Notwithstanding the provisions of Section 2, if there is no
Escrowed Property remaining except the Escrowed Property (together with the
Interest) held in the Pending Claims Account, the Escrow Agent shall not
release from the Pending Claims Account any amount in order to make a payment
otherwise required under Section 2.
SECTION 6. Distribution of Escrowed Property to Seller. Not later than the
second business day after the date which is 12 months from the execution of this
Agreement (the "RELEASE DATE"), the Escrow Agent shall distribute to Seller the
remainder of the Escrowed Property (plus accrued and undistributed earnings on
the Escrowed Property) minus the sum of the total amount of Escrowed Property
that is then being segregated with respect to Pending Claims under Section 5.
Any amounts segregated with respect to Pending Claims shall be released as
provided in Section 5(b). Notwithstanding anything to the contrary contained
herein, any provision hereof requiring the disbursement of Interest by the
Escrow Agent shall be construed to refer only to Interest which has accrued and
been paid to the Escrow Agent. Any Interest which has accrued and, except for
the fact that it has not been paid to the Escrow Agent, would be required to be
disbursed, shall be disbursed within two business days of being paid.
SECTION 7. Taxpayer Identification Numbers. The parties acknowledge that
payment of any Interest earned on the Escrowed Property invested in this escrow,
or the distribution of any other amounts under this escrow, will be subject to
backup withholding penalties unless a properly completed Internal Revenue
Service Form W-8 or W-9 certification is submitted to the Escrow Agent by the
party entitled to receive such payment. Any Form W-8 or W-9 certification shall
be submitted to the Escrow Agent on or before the date hereof.
SECTION 8. Claims Against the Escrowed Property. From and after the
Closing, but subject to the conditions and limitations set forth in this
Agreement and the Purchase Agreement, the Buyer Indemnified Parties and their
respective successors and assigns (collectively, the "INDEMNITEES") shall be
entitled to reimbursement out of the Escrowed Property for any and all Buyer
Indemnified Costs pursuant to and as provided in Article 8 of the Purchase
Agreement (the "CLAIMS"). Notwithstanding any of the provisions of the Purchase
Agreement, the Escrow Agent shall be entitled to conclusively rely upon the
provisions of Sections 8(a)-(d) hereof in determining whether a Claim for
indemnification shall be paid out of the Escrowed Property.
(a) Claims against the Escrowed Property may be made by Buyer, on its
own behalf or on behalf of any other Buyer Indemnified Party, for
indemnification of any Buyer Indemnified Cost. No person other than Buyer
shall be permitted to make a claim on behalf of the Buyer Indemnified
Parties against the Escrowed Property for Buyer Indemnified Costs under
this Section 8 unless Buyer provides written notice to Escrow Agent and
Seller that Buyer has authorized another Buyer Indemnified Party to make
such claims.
(b) Buyer shall promptly notify Seller and the Escrow Agent in writing
of any sums which Buyer claims are subject to indemnification ("CLAIMS
NOTICE"). Failure of Buyer to exercise promptness in such notification
shall not amount to a waiver of such claim unless the resulting delay
materially and adversely prejudices Seller. Such notice shall consist of a
description
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of the claim and specify each Buyer Indemnified Party and the amount
(which may be estimated) of the claim in United States dollars.
(c) Seller may contest the claims specified in Section 8(b) (or any
portion thereof) by giving the Escrow Agent and Buyer written notice of
such contest within ten days after receipt by Seller and Escrow Agent of a
notice from Buyer under Section 8(b), which notice of contest shall include
a statement of the grounds of such contest and shall state the amount of
any such claim by Buyer that Seller does not dispute.
(d) Payment of any claim for indemnification (or portion thereof)
shall become due and payable as follows:
(i) If, notwithstanding Section 3 of this Agreement, at 5:00 p.m.
(New York City time) on the 30th business day after receipt by Seller
and the Escrow Agent of a notice of claim for indemnification pursuant
to Section 8(b) above, the Escrow Agent has not received written notice
from Seller that Seller contests the claim (or portion thereof) pursuant
to Section 8(c) above, the claim (or the uncontested portion thereof)
shall be promptly paid by the Escrow Agent to Buyer;
(ii) If Seller contests the claim (or portion thereof) pursuant to
Section 8(c) and the claim (or portion thereof) is settled by written
agreement of Seller and Buyer, the amount provided in such written
agreement shall, upon receipt by the Escrow Agent of a copy of such
written agreement, be promptly paid by the Escrow Agent pursuant to the
terms of such written agreement; and
(iii) If Seller contests the claim (or portion thereof) pursuant to
Section 8(c) hereof and a Final Determination has been obtained, the
amount set forth in such Final Determination shall be promptly paid by
the Escrow Agent pursuant to the terms of such Final Determination.
SECTION 9. Expiration of Indemnification Claims. Any claim for
reimbursement from the Escrow Account must be asserted in writing by Buyer or
any Buyer Indemnified Party designated pursuant to Section 8(a) in accordance
with Section 8 by a writing received by Seller and the Escrow Agent prior to
5:00 p.m. (New York City time) on the Release Date.
SECTION 10. The Escrow Agent. To induce the Escrow Agent to act hereunder,
it is further agreed by Buyer and Seller that:
(a) The Escrow Agent shall not be under any duty to give the Escrowed
Property held by it hereunder any greater degree of care than it gives its
own similar property and shall not be required to invest any Escrowed
Property held hereunder except as directed in this Agreement. Uninvested
Escrowed Property held hereunder shall not earn or accrue interest.
(b) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into
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this Agreement against the Escrow Agent. The Escrow Agent shall not be
bound by the provisions of any agreement among the other parties hereto
except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, Buyer and Seller shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
escrow agent) from and against any and all losses, liabilities, claims,
actions, damages and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this Agreement.
Without limiting the foregoing, the Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of any cash held
by it hereunder in good faith, in accordance with the terms hereof,
including without limitation, any liability for any delays (not resulting
from its gross negligence or willful misconduct) in the investment or
reinvestment of the Escrowed Property or any loss of interest incident to
any such delays. This Section 10(c) shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
(d) The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety
or validity or the service thereof. The Escrow Agent may act in reliance
upon any instrument or signature believed by it in good faith to be genuine
and may assume that any person purporting to give receipt or advice or make
any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted in good faith in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder but is serving as escrow holder only and
having only possession thereof. Seller shall pay or reimburse the Escrow
Agent upon request for any transfer taxes or other taxes relating to the
Escrowed Property incurred in connection herewith and shall indemnify and
hold harmless the Escrow Agent from any amounts that it is obligated to pay
in the way of such taxes. Any payments of income from the Escrow Account
shall be subject to withholding regulations then in force with respect to
United States taxes. It is understood that the Escrow Agent shall be
responsible for income reporting only with respect to income earned on
investment of the Escrowed Property and is not responsible for any other
reporting. This Section 10(f) shall survive notwithstanding any termination
of this Agreement or the resignation of the Escrow Agent.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other document
or instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited
hereunder.
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(i) The Escrow Agent (and any successor escrow agent) may at any time
resign as such by delivering the Escrowed Property to any successor escrow
agent jointly designated by the other parties hereto in writing or to any
court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of the Escrow Agent will
take effect on the earlier of (the "RESIGNATION DATE"): (i) the appointment
of a successor (including a court of competent jurisdiction) or (ii) the
date which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. Upon the appointment of a
successor escrow agent, such successor escrow agent shall deliver written
notice to Buyer and Seller on the appointment of such successor escrow
agent. If at the Resignation Date the Escrow Agent has not received a
designation of a successor escrow agent, the Escrow Agent's sole
responsibility after the Resignation Date shall be to safekeep the Escrowed
Property until receipt of a designation of successor escrow agent or a
joint written disposition instruction by the other parties hereto or a
Final Determination.
(j) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement between Buyer and Seller
resulting in adverse claims or demands being made in connection with the
Escrowed Property, or in the event that the Escrow Agent in good faith is
in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrowed Property until the Escrow Agent shall
have received (i) a Final Determination (accompanied by the opinion of
counsel referred to in Section 3) directing delivery of the Escrowed
Property or (ii) a written agreement executed by Buyer and Seller directing
delivery of the Escrowed Property, in which event the Escrow Agent shall
disburse the Escrowed Property in accordance with such Final Determination
or agreement. The Escrow Agent shall act on such Final Determination or
agreement without further question.
(l) The compensation of the Escrow Agent (as payment in full) for the
services to be rendered by the Escrow Agent hereunder shall be the amount
of $250 paid by Seller at the time of execution of this Agreement and
$ annually thereafter, together with reimbursement for all
reasonable expenses, disbursements and advances incurred or made by the
Escrow Agent in performance of its duties hereunder (including reasonable
fees, expenses and disbursements of its counsel) not to exceed $1,000
absent any litigation or other dispute arising under this Agreement. All
fees and expenses of the Escrow Agent hereunder shall be paid by Seller.
Any fees or expenses of the Escrow Agent or its counsel which are not paid
as provided for herein may be taken from any property held by the Escrow
Agent hereunder. The Escrow Agent's fee may be adjusted from time to time
to conform to its then current guidelines.
(m) No prospectuses, press releases, reports and promotional material,
or other similar materials which mention in any language the Escrow Agent's
name or the rights, powers, or duties of the Escrow Agent shall be issued
by the other parties hereto or on such parties' behalf unless the Escrow
Agent shall first have given its specific written consent thereto.
(n) The other parties hereto authorize the Escrow Agent, for any
securities held hereunder, to use the services of any United States central
securities depository it deems appropriate,
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including, but not limited to, the Depositary Trust Company and the
Federal Reserve Book Entry System.
SECTION 11. Notices. All notices, requests, consents, waivers, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given (a) if transmitted by facsimile,
upon acknowledgment of receipt thereof in writing by facsimile or otherwise; (b)
if personally delivered, upon delivery or refusal of delivery; (c) if mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, upon delivery or refusal of delivery; or (d) if sent by a nationally
recognized overnight delivery service, upon delivery or refusal of delivery. All
notices, consents, waivers, or other communications required or permitted to be
given hereunder shall be addressed to the respective party to whom such notice,
consent, waiver, or other communication relates at the following addresses:
(i) if to Buyer or to any Buyer Indemnified Party:
BridgePoint Technical Manufacturing
4007 Commercial Center Drive
Austin, Texas 78744
Attn: Joe David Jones
Facsimile: (512) 436-2501
Telephone: (512) 892-3317
with a copy to:
Vinson & Elkins L.L.P.
One American Center
600 Congress Avenue, Suite 2700
Austin, Texas 78701-3200
Attn: Kyle K. Fox
Facsimile: (512) 236-3340
Telephone: (512) 495-8539
(ii) if to Seller, to:
Ross Technology, Inc.
5316 Highway 290 West
Austin, Texas 78735
Attn: Francis S. ("Kit") Webster III
Telephone: (512) 436-2578
Facsimile: (512) 892-3402
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with a copy to
Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067-4276
Attn: Andrew W. Gross, Esq.
Telephone: (310) 203-7032
Facsimile: (310) 203-7199
(iii) if to the Escrow Agent, to:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Attn:
--------------------------------------
Facsimile:
---------------------------------
Any party by written notice to the other parties pursuant to this Section 11 may
change the address or the persons to whom notices or copies thereof shall be
directed.
SECTION 12. Waivers; Amendments. Any waiver by any party hereto of any
breach of or failure to comply with any provision of this Agreement by any other
party hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement. This Agreement
may only be modified by a writing signed by all of the parties hereto.
SECTION 13. Construction. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement. Unless otherwise stated, references to
Sections are references to Sections of this Agreement.
SECTION 14. Assignment; Third Parties. Seller may not assign this
Agreement without the consent of the other parties; provided, that Seller may
assign its right to receive payment of the Escrow Funds without the consent of
the other parties hereto upon written notice to Escrow Agent. In connection with
an assignment by Buyer of the Purchase Agreement, Buyer may assign this
Agreement and its rights and obligations hereunder to an Affiliate upon 10 days'
prior written notice to the Escrow Agent and may assign its rights and
obligations hereunder to a person who is not an Affiliate upon 30 days' prior
written notice to the Escrow Agent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their respective successors and assigns, heirs, administrators and
representatives and shall not be enforceable by or inure to the benefit of any
third party, except as provided in Section 10(i) with respect to a resignation
by the Escrow Agent and except that this Agreement is also for the benefit of
Buyer Indemnified Parties, who shall have the rights specified herein.
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SECTION 15. Termination. This Agreement shall terminate at the time of the
final distribution by the Escrow Agent of all Escrowed Property in accordance
with the provisions of this Agreement.
SECTION 16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
SECTION 17. Governing Law; Severability. This Agreement shall be construed
in accordance with and governed by the internal law of the State of Texas. The
invalidity, legality or enforceability of any provisions of this Agreement shall
in no way affect the validity, legality or enforceability of any other
provision; and if any provision is held to be unenforceable as a matter of law,
the other provisions shall not be affected thereby and shall remain in full
force and effect.
SECTION 18. Waiver of Offset Rights. The Escrow Agent hereby waives any
and all rights to offset that it may have against the Escrowed Property
including, without limitation, claims arising as a result of any claims,
amounts, liabilities, costs, expenses, Buyer Indemnified Costs, or other losses
(collectively "ESCROW AGENT CLAIMS") that the Escrow Agent may be otherwise
entitled to collect from any party to this Agreement or any Indemnitee, other
than Escrow Agent Claims arising under this Agreement.
C-10
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
BRIDGEPOINT TECHNICAL
MANUFACTURING CORPORATION
By:
----------------------------------
Joe David Jones
President and Chief Executive
Officer
ROSS TECHNOLOGY, INC.
By:
----------------------------------
Name:
-------------------------------
Title:
------------------------------
[BANK]
By:
----------------------------------
Name:
-------------------------------
Title:
------------------------------
C-11
<PAGE> 56
EXHIBIT D
FORM OF OPINION OF
SELLER'S COUNSEL
The opinion shall be substantially to the following effect:
1. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
2. Seller has full corporate power and authority to execute and
deliver the Seller's Agreements and to perform the obligations contemplated
thereby. The execution and delivery by Seller of each of the Seller's
Agreements has been duly authorized by all necessary corporate action on
the part of Seller. Each of the Seller's Agreements has been duly executed
and delivered by Seller and constitutes the valid and binding obligation of
Seller and is enforceable in accordance with its terms.
3. Neither the execution and delivery by Seller of the Seller's
Agreements, nor the performance by Seller of its obligations thereunder,
violates or conflicts with, results in a breach of, or constitutes a
default under its Articles or Certificate of Incorporation or Bylaws or any
provision of statutory law or regulations.
4. The Seller Agreements are sufficient in form collectively to convey
to Buyer all of Seller's right, title and interest in and to the Acquired
Assets, subject to the filing of necessary documents with appropriate
governmental entities, where required.
D-1
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EXHIBIT E
FORM OF OPINION OF
SELLER'S COUNSEL
The opinion shall be substantially to the following effect:
1. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
2. Seller has full corporate power and authority to execute and
deliver the Seller's Agreements and to perform the obligations contemplated
thereby. The execution and delivery by Seller of each of the Seller's
Agreements has been duly authorized by all necessary corporate action on
the part of Seller. Each of the Seller's Agreements (i) is a proper and
enforceable instrument of conveyance, which collectively conveys all of
Seller's rights, title and interest in the Acquired Assets and (ii) has
been duly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller and is enforceable in accordance with its
terms.
3. Neither the execution and delivery by Seller of the Seller's
Agreements, nor the performance by Seller of its obligations thereunder,
violates or conflicts with, results in a breach of, or constitutes a
default under its Articles or Certificate of Incorporation or Bylaws or any
provision of statutory law or regulations.
E-1
<PAGE> 1
EXHIBIT 10.2
SHARE ACQUISITION AGREEMENT
THIS SHARE ACQUISITION AGREEMENT (this "Agreement") is made as of
August 6, 1998 by and between ROSS Technology, Inc. (the "Seller") and Fujitsu
Limited ("Buyer"; and together with the Seller, the "Parties").
WITNESSETH:
WHEREAS, the Seller is the beneficial owner of all of the issued and
outstanding shares of ROSS SEMICONDUCTORS (ISRAEL) LTD., a corporation
organized and existing under the laws of Israel ("RIL"); and
WHEREAS, the Seller is willing to sell to the Buyer, and the Buyer, in
reliance upon the representations and warranties of the Seller contained
herein, is willing to purchase from the Seller, all of the shares of RIL, on
the terms and subject to the conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Seller and the Buyer hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, and unless the
context otherwise requires:
(a) "Additional Share" means one Ordinary Share of RIL to
be issued by RIL to the Seller on or prior to the Closing Date in
connection with the conversion into equity of all outstanding
indebtedness, in the aggregate principal amount of $2,897,000, owed by
RIL to the Seller under the 1995 Note.
(b) "Audited Financial Statements" means the audited
balance sheets of RIL as of March 31, 1997 and 1998 and the audited
statements of income of RIL for the years then ended including all
notes thereto.
(c) "Benefits" means benefits of every description,
including, without limitation, salaries, directors' fees, vacation,
bonuses, commissions, profit sharing, pension, deferred compensation,
under any incentive scheme, automobile, reimbursement of expenses and
benefits in kind.
(d) "Closing" means the completion of the sale and
purchase of the Shares pursuant to Article 2.2 Closing. The purchase
and sale of the Shares shall take place at the offices of Morrison &
Foerster, 555 West Fifth Street, Suite 3500, Los Angeles, California
90013-1024, at 9:00 a.m. (California time) on the Closing Date or at
such other place, time and/or date as the Parties may mutually agree
in writing. At the Closing, the Seller shall (1) deliver to the Buyer
a certificate or certificates representing the 10,000 Shares
currently held by the Seller plus the Additional Share to be issued
by RIL to the Seller on or prior to the Closing, and (2) deliver to
Mr. Hoshikawa, to be held in trust for the benefit of the Buyer, a
certificate representing the 1 Share currently held by Jack Simpson,
in each case together with duly executed stock transfer deeds,
against delivery by the Buyer to the Seller of the Purchase Price.
hereof.
(e) "Closing Date" shall be August 10, 1998, or such
other date as the Seller and the Buyer may agree upon in writing.
(f) "Dollars" or the sign "$" means the lawful currency
of the United States of America.
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<PAGE> 2
(g) "Employees" mean the employees of RIL whose names are
set forth in Exhibit A attached hereto.
(h) "Financial Statements" means the Audited Financial
Statements and the Unaudited Financial Statements, copies of which are
attached hereto as Exhibit B.
(i) "Material Adverse Effect" means any change or effect
that is reasonably likely to be materially adverse to the business,
assets, financial condition or results of operations of RIL or
reasonably likely to materially affect the ability of the Seller to
consummate the transactions contemplated hereby.
(j) "1995 Note" means the Secured Promissory Note, dated
_______, 1995, made by RIL in favor of the Seller.
(k) "Purchase Price" means the consideration specified in
Article 2.1 Sale and Purchase hereof payable by the Buyer to the
Seller for the sale by the Seller to the Buyer of the Shares.
(l) "RIL Agreements" means, collectively, any material
agreement, contract, understanding, arrangement, instrument (including
any note, guaranty, indemnity, power of attorney, or purchase or work
order), benefit plan or other undertaking, written or oral, to which
RIL is a party or by which its properties or assets are bound.
(m) "Security Interest" means, with respect to any asset,
any lien, pledge, hypothecation, charge, mortgage, security interest
or encumbrance of any kind or nature whatsoever in respect of such
asset.
(n) "Shares" means (i) the 10,001 issued and outstanding
Ordinary Shares of RIL and (ii) the Additional Share.
(o) "Unaudited Financial Statements" means the unaudited
balance sheet of RIL as of June 30, 1998 and the unaudited statement
of income of RIL for the one- (1-) month period then ended, including
all notes thereto.
ARTICLE 2. SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase. Subject to the terms and conditions set
forth herein, the Seller agrees to sell to the Buyer and the Buyer agrees to
purchase from the Seller the Shares on the Closing Date for the aggregate sum
of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000), in immediately
available funds. Such payment shall be made on the Closing Date in Dollars by
wire transfer to the bank account designated by the Seller in writing not less
than five (5) days prior to the Closing Date.
2.2 Closing. The purchase and sale of the Shares shall take place
at the offices of Morrison & Foerster, 555 West Fifth Street, Suite 3500, Los
Angeles, California 90013-1024, at 9:00 a.m. (California time) on the Closing
Date or at such other place, time and/or date as the Parties may mutually agree
in writing. At the Closing, the Seller shall (1) deliver to the Buyer a
certificate or certificates representing the 10,000 Shares currently held by
the Seller plus the Additional Share to be issued by RIL to the Seller on or
prior to the Closing, and (2) deliver to
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<PAGE> 3
Mr. Hoshikawa, to be held in trust for the benefit of the Buyer, a certificate
representing the 1 Share currently held by Jack Simpson, in each case together
with duly executed stock transfer deeds, against delivery by the Buyer to the
Seller of the Purchase Price.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Seller. The Seller,
being aware that the Buyer has agreed to enter into this Agreement in reliance
on the representations and warranties contained in this Article 3.1
Representations and Warranties of the Seller, hereby represents and warrants to
the Buyer as of the date hereof and the Closing Date, subject to any exceptions
set forth in the Statement of Exceptions attached hereto as Exhibit 3.1, as
follows:
(a) Organization; Power and Authority.
(i) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and
authority to transact the business in which it is presently
engaged, to own, lease and operate all of the assets and
properties owned, leased or operated by it, to enter into and
perform its obligations under this Agreement and will have, at
the Closing, all requisite corporate power and authority to
sell the Shares and to otherwise perform and comply with all
of its obligations arising under this Agreement, except where
the failure of such would not have a Material Adverse Effect.
(ii) RIL is a corporation duly organized and
validly existing under the laws of Israel and has all
requisite corporate power and authority to transact the
business in which it is presently engaged, to own, lease and
operate all of the assets and properties owned, leased or
operated by it, and will have, at the Closing, all requisite
corporate power and authority to perform and comply with all
actions and agreements arising under this Agreement, except
where the failure of such would not have a Material Adverse
Effect. RIL does not own or lease any property or, to the
knowledge of the Seller, engage in any activity in any
jurisdiction which might require its qualification to do
business as a foreign corporation in any such jurisdiction
except where the failure of such would not have a Material
Adverse Effect. The Seller has furnished the Buyer or its
counsel with true, correct and complete copies (certified by
the Secretary or Assistant Secretary of the Seller) of (a)
RIL's Memorandum of Association, (b) RIL's Articles of
Association, (c) the minute books of RIL (containing records
of all meetings and consents in lieu of meetings of its
shareholders and the Board of Directors of RIL (and any
committees thereof) since the date of its incorporation and
(d) the stock transfer books of RIL. A copy of each of the
Memorandum of Association and the Articles of Association of
RIL is attached hereto as Exhibit 3.1(a)(ii).
(iii) The names of the officers and directors of
RIL are set forth in attached Exhibit 3.1(a)(iv).
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<PAGE> 4
(iv) All proper and necessary books of account,
minute books, registers and records have been maintained by
RIL and are in its possession, and each such book, register
and record contains materially accurate information relating
to all transactions to which RIL has been a party and which
should have been recorded therein, except where the failure of
such would not have a Material Adverse Effect.
(v) All returns, particulars, resolutions and
other documents required to be filed with or delivered to the
Registrar of Companies in respect of RIL have been properly
filed or delivered in a timely manner, except where the
failure of such would not have a Material Adverse Effect.
(b) Subsidiaries. RIL has no subsidiaries and does not
own (of record or beneficially) and has made no commitment to purchase
any shares or securities of, or otherwise make any investment in, any
other corporation, association, partnership or other entity and is not
a participant in any joint venture.
(c) Capitalization.
(i) The authorized capital stock of RIL consists
of 28,000 Ordinary Shares, of which 10,001 Ordinary Shares are
issued and outstanding. All of the outstanding Shares are duly
authorized and validly issued, fully paid and non-assessable
and the Additional Share, when issued, will be duly authorized
and validly issued, fully paid and non-assessable. No other
classes of capital stock of RIL are authorized or outstanding.
(ii) Except as set forth in attached Exhibit
3.1(c)(ii) and except for the Additional Share, there are no
outstanding rights, subscriptions, warrants, calls, preemptive
rights, options or other agreements of any kind to purchase or
otherwise to receive from or sell to RIL any of the
outstanding, authorized but unissued, unauthorized or treasury
shares of the capital stock or any other security of RIL, and
there is no security of any kind convertible into such capital
stock. Except as provided in this Agreement with respect to
the Additional Share, RIL has no obligation or agreement
under any contingency whatsoever to issue any equity, debt or
other security, or to pay, perform, guaranty, be responsible
for, or satisfy in whole or in part any debt, security,
obligation or agreement incurred or made by an individual or
entity other than RIL. RIL has no obligation under any
condition or contingency whatsoever to share its income with
anyone, or to make, accrue or set aside any payment or amount
measured in any way by any part or all of its sales or income
that would have a Material Adverse Effect. RIL is not
indebted to any of its employees in any amount other than for
accrued but unpaid compensation and benefits.
(iii) Subject to compliance with the terms of this
Agreement, upon the consummation of the transactions
contemplated hereby, the Shares will be freely transferable
and free and clear of all Security Interests, other than
Security
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<PAGE> 5
Interests arising hereunder or under agreements entered into
or actions taken by the Buyer, whenever taken.
(d) Compliance with Laws. RIL is not in violation of (a)
any applicable order, judgment, injunction, award or decree, or (b)
any law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable to the
business of RIL except for violations which would not have a Material
Adverse Effect. RIL has obtained all licenses, permits, orders and
approvals of any governmental or regulatory body (collectively,
"Permits") that are material to or necessary for the conduct of the
business of RIL, except where the failure of such would not have a
Material Adverse Effect. All of such Permits are in full force and
effect, no violations are or have been recorded in respect of any
Permit and no proceeding is pending or, to the best of each of the
Seller's knowledge, threatened to revoke or limit any such Permit that
would have a Material Adverse Effect. RIL has at all times carried on
its business and affairs in all material respects in accordance with
its Memorandum of Association and Articles of Association.
(e) Governmental Consents; Validity of Agreement; Binding
Effect.
(i) Except as provided in attached Exhibit
3.1(e)(i), no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or
filing with any governmental authority on the part of the
Seller or RIL is required in connection with the consummation
of the transactions contemplated by this Agreement. As of the
date hereof, all such filings have been duly made and are in
full force and effect, other than those which by their nature
are not required to be made prior to the Closing, all of which
shall be made within the time required therefor, and other
than those which the failure to make would not have a Material
Adverse Effect on the sale of the Shares contemplated by this
Agreement.
(ii) The execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby by the Seller have been duly authorized by
all necessary corporate action on the part of each of the
Seller and RIL, including any action which may have been
required to be taken by the Board of Directors of the Seller
or RIL, and this Agreement, when executed, will constitute the
legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except
insofar as the enforcement hereof may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights generally from time to time
in effect and subject to equitable principles of general
application (regardless of whether such enforcement is
considered in a proceeding at law or at equity).
(f) No Breach; Consents.
(i) Except as provided in attached Exhibit
3.1(f)(i), the execution and delivery of this Agreement does
not, and consummation of and compliance with the transactions
and agreements contemplated hereby will not, conflict with or
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constitute a violation or breach of (a) the Certificate of
Incorporation or By-laws of the Seller, (b) the Memorandum of
Association or Articles of Association of RIL, (c) any
material contract or other instrument to which either the
Seller or RIL is a party or by which either the Seller or RIL
may be bound or by which the business, assets or properties of
RIL may be affected or secured, (d) any order, writ,
injunction, award or decree of any court, arbitrator or
governmental or regulatory body against or binding upon either
the Seller or RIL or upon the securities, properties or
business of RIL or (e) any statute, law, rule, permit or
regulation of any jurisdiction to which either the Seller or
RIL is subject the result of which would have a Material
Adverse Effect.
(ii) Except as provided in attached Exhibit
3.1(f)(ii), compliance with the terms of this Agreement does
not require the consent or agreement of any person who is not
a party of this Agreement, will not cause RIL to lose any
interest in or the benefit of any material asset, right,
license or privilege it presently owns or enjoys, will not
result in any indebtedness of RIL becoming due prior to its
stated maturity, and will not give rise to or cause to become
exercisable any option or similar rights.
(g) Financial Statements.
(i) The Audited Financial Statements and the
Unaudited Financial Statements are complete and correct and
fairly present the financial condition of RIL at the dates,
and the results of its operations for the periods, indicated
therein, have been prepared in accordance with Israeli
generally accepted accounting principles consistently applied,
and, except as stated therein, were not affected by any
extraordinary, exceptional or non-recurring item.
(ii) Since the date of the Unaudited Financial
Statements:
(A) RIL has not entered into any
material transaction which was not in the ordinary
course of its business;
(B) There has been no material adverse
change in the business, operations, assets,
liabilities, or condition (financial or otherwise) of
RIL;
(C) RIL has not (i) declared, accrued,
set aside or paid any dividend or made any other
distribution in respect of its shares, (ii)
repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities or (iii)
effected or been a party to any acquisition
transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar
transaction;
(D) RIL has not increased the
compensation of any of its officers, or the rate of
pay of its employees as a group, except as part of
regular compensation increases in the ordinary course
of its business and except as agreed by Fujitsu;
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(E) Except in the ordinary course of
RIL's business, there has not been any sale,
assignment, transfer or license of any of RIL's
right, title and interest in, to and under any of its
Intellectual Property (as defined below); and
(F) There has not been any damage,
destruction or loss, whether or not covered by
insurance, materially and adversely affecting the
assets, properties, financial condition, operating
results or business of RIL (as presently conducted).
(h) Properties and Assets. A list of RIL's material
properties and assets is contained in attached Exhibit 3.1 (h) or in
the notes to the Financial Statements, RIL has good and marketable
title to its assets, including, without limitation, those reflected in
the Financial Statements (other than those since disposed of in the
ordinary course of business), free and clear of all Security
Interests, except for (i) liens for taxes not yet due and payable or
being contested in good faith in appropriate proceedings, and (ii)
mechanic's, carrier's, worker's or other statutory liens arising or
incurred in the ordinary course of business and (iii) Security
Interests that are incidental to the conduct of its business or its
ownership of property which do not materially detract from the value
of the assets affected thereby or materially impair the use thereof by
RIL. With respect to the assets that are leased, to the Seller's
knowledge, RIL is in compliance with all material provisions of such
leases, such leases are valid and binding, and RIL holds leasehold
interests in such assets free and clear of all Security Interests,
except encumbrances which do not materially detract from the value of
the leased assets affected thereby or materially impair the use
thereof by RIL.
(i) Taxation.
(i) RIL has not received any final audits of its
Israeli tax returns.
(ii) RIL has timely filed all tax returns and
reports required by law. Such returns and reports reflect
RIL's good faith calculation of the amount of tax due, and RIL
has timely paid all amounts shown as due on such returns and
reports and whose due date has passed.
(iii) RIL is not engaged in a dispute with any
relevant taxation authority in relation to RIL's liability or
accountability for taxation, any claim made by it, any relief,
deduction or allowance afforded to it, or in relation to the
status or character of RIL under or for the purpose of any
provision of any legislation relating to taxation. The Seller
is not aware of any specific circumstances that it expects to
give rise to any dispute with any relevant taxation authority
in relation to RIL's liability or accountability for taxation,
any claim made by it, any relief, deduction or allowance
afforded to it, or in relation to the status of character of
RIL under or for the purpose of any provision of any
legislation relating to taxation, in each case where any such
dispute could have a material adverse effect on the assets or
business of RIL.
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(j) Agreements.
(i) All the material RIL Agreements are listed in
attached Exhibit 3.1 (j)(i). RIL has provided the Buyer with
true, correct and complete copies of all of the written RIL
Agreements.
(ii) All of the RIL Agreements are in full force
and effect (except for (A) the Founders' Agreement, dated
August 1, 1995 (the "Founders' Agreement"), between the Seller
and Yoav Talgam ("Talgam") and (B) the 1995 Note, which will
be terminated on or before the Closing Date); and neither the
Seller nor RIL has received any notice of any intention to
terminate, repudiate or disclaim any RIL Agreement that would
have a Material Adverse Effect.
(iii) To the Seller's knowledge, neither RIL nor
any other party to any of the RIL Agreements is in breach or
in default in any material respect of its obligations
thereunder. No party to any of the RIL Agreements has
provided notice to the Seller or RIL to the effect that RIL
has failed to perform any of its obligations thereunder where
such failure would have a Material Adverse Effect.
(iv) Neither the Seller nor RIL has an agreement
(x) with any person regarding the consolidation or merger of
RIL with or into any such or another person, (y) with any
person regarding the sale, conveyance or disposition of all or
substantially all of the assets of RIL in a transaction or a
series of related transactions or (z) regarding any other form
of acquisition, liquidation, dissolution or winding up of RIL.
(v) RIL has not waived any of its material rights
or debts owed to it under any of the RIL Agreements.
(vi) Attached Exhibit (vi) Attached Exhibit
provides an accurate and complete breakdown and aging of all
accounts receivable, notes receivable and other receivables of
RIL as of June 29, 1998.
(k) Capital Expenditures and Commitments. Except as
disclosed in Exhibit 3.1(k) attached hereto or the Financial
Statements:
(i) RIL has not undertaken to make any capital
commitment, expenditure, or purchase in excess of $25,000.
(ii) RIL is not a party to any material hire, hire
purchase, credit sale or conditional sale agreement or any
contract providing for payment on deferred terms in respect of
assets purchased by RIL.
(iii) RIL has not given any guarantee, indemnity or
security for or otherwise agreed to become directly or
continently liable for any obligation of any other person.
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(iv) Except for signature rights granted in the
ordinary course of RIL's business, RIL has not authorized any
person to bind or commit it to any material obligation.
(v) RIL has not applied for or received any grant
or allowance.
(vi) Litigation. RIL is not involved in any
civil, criminal or arbitration proceedings. To the Seller's
knowledge, no such proceedings and no claims of any nature are
pending or threatened by or against RIL or the directors of
RIL in respect whereof RIL is liable to indemnify such
director and there are no facts likely to give rise to any
such proceedings. In addition, there is no civil, criminal or
arbitration proceeding pending against the Seller or, to the
Seller's knowledge, threatened by or against the Seller that
challenges or may have the effect of preventing, delaying,
making illegal or otherwise interfering with the consummation
of the transactions contemplated by this Agreement and, to the
knowledge of the Seller, there are no facts likely to give
rise to any such proceedings.
(l) Employees.
(i) A list of the employment agreements with all
of the officers, employees (including the Employees) and
consultants of RIL is set forth in attached Exhibit 3.1(l)(i),
which agreements set forth all Benefits payable or which RIL
is bound to provide (whether now or in the future) to each
officer, employee and consultant of RIL. True, correct and
complete copies of each such agreement have been delivered to
the Buyer.
(ii) No Employee has been dismissed or has given
notice of termination of his or her employment.
(iii) The form of contracts delivered to the Buyer
are the contracts under which substantially all the officers,
employees and consultants of RIL at the date hereof are
engaged and include provisions relating to non-disclosure and
non-competition.
(iv) Except as disclosed in attached Exhibit
3.1(l)(iv), there are no agreements or arrangements for the
payment of any pensions, allowances, lump sums or other like
benefits on retirement or on death or termination or during
periods of sickness or disablement for the benefit of RIL or
for the benefit of the dependents of any such person in
operation at the date hereof that are payable by or the
obligation of RIL.
(v) The full amount of RIL's obligation to pay
severance to its employees is the subject of an appropriate
reservation in the Financial Statements.
(vi) There has been no labor dispute involving RIL
or its employees and none is pending or, to the Seller's
knowledge, threatened.
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(vii) The total amount necessary to fund (a) all of
RIL's obligations to its employees (including the Employees)
through the Closing Date and (b) all of RIL's obligations to
Talgam under the Supplemental Employment and Retention
Agreement to be entered into by RIL and Talgam on or prior to
the Closing Date (assuming that the Closing Date occurs no
later than August 15, 1998) and in form and substance mutually
satisfactory to the Buyer and Talgam (the "Employment
Agreement") (whether before, on or after the Closing Date)
does not exceed $300,000.
(m) Debts and Loan Facilities.
(i) Except as disclosed in the Financial
Statements and except for the indebtedness owed by RIL to the
Seller under the 1995 Note, RIL does not have any overdrafts,
loans, guarantees or other financial facilities and there are
no debts owing by RIL other than debts which have arisen in
the ordinary course of business and which have arisen in the
ordinary course of business and which do not, individually or
in the aggregate, exceed $50,000.
(ii) Except as disclosed in the Financial
Statements, there are no debts owed to RIL, nor has RIL lent
any money which has not yet been repaid, other than debts
which have arisen in the ordinary course of business and which
in the aggregate do not exceed $50,000 or debts which are
adequately disclosed or reserved on the Financial Statements.
The Seller is not aware of any bad or doubtful debts on RIL's
books at the date hereof, except as disclosed on an Exhibit
hereto or the Financial Statements.
(iii) RIL is not in default under any instrument
constituting any indebtedness or under any guarantee of any
indebtedness.
(n) Intellectual Property.
(i) For purposes of this Agreement, "Intellectual
Property" means the following items of intangible and tangible
property:
(A) All right, title and interest in
letters patent or equivalent rights (including
utility patents, design patents and utility model
rights) and applications, including any reissue,
extension, division, continuations, or
continuation-in-part applications throughout the
world ("Patents");
(B) Trademarks, trade names, service
marks, designs, logos, trade dress, and trade styles,
whether or not registered, and all pending
applications for registration of the same, throughout
the world ("Trademarks");
(C) Copyrights, whether or not
registered, and all pending applications for
registration of the same, throughout the world
("Copyrights");
10
<PAGE> 11
(D) Inventions, research records, trade
secrets (whether arising under common law, state law,
federal law or the laws of any foreign country),
confidential information, product designs,
engineering specifications and drawings, technical
information, formulae, customer lists, supplier
lists, market analyses, databases and other
industrial property ("Technical Information"); and
(E) Computer programs, including,
without limitation, computer programs embodied in
semiconductor chips ("Firmware") or otherwise
embodied, and related flow-charts, programmer notes,
updates and data, whether in object or source code
form ("Software").
(ii) The material Intellectual Property of RIL and
all pending patent applications of RIL are as listed in
attached Exhibit (n) Intellectual Property.
(iii) RIL either owns or has sufficient rights by
license or other grant of permission with respect to all
Intellectual Property necessary for its business as now
conducted. To the Seller's knowledge, RIL's use of the
Intellectual Property in its business as now conducted does
not infringe the rights of any third party. To the knowledge
of the Seller, there are no outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is RIL
bound by or a party to any options, licenses or agreements of
any kind with respect to the Intellectual Property.
(iv) To the knowledge of the Seller, no
Intellectual Property, used or proposed to be used in the
business of RIL as currently conducted or contemplated, has
infringed or will infringe upon any intellectual property
rights of others and the use of such Intellectual Property in
the business of RIL, as currently conducted or contemplated,
will not constitute an infringement, misappropriation or
misuse of any intellectual property rights of any third party.
Neither the Seller nor RIL has received any written
communication alleging that RIL has violated, or that by
conducting its business it would violate, any Intellectual
Property.
(v) RIL has taken reasonable security measures,
including measures against unauthorized disclosure, to protect
the secrecy, confidentiality, and value of its trade secrets
and other Intellectual Property. No employee, director or
shareholder of RIL or employer of any such employee of RIL has
any rights with respect to the Intellectual Property used or
contemplated to be used by RIL.
(o) Full Disclosure. The disclosure of the Seller
contained in this Agreement and any Exhibit hereto contains no untrue
or misleading statement of any material fact and does not omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they are made, accurate.
11
<PAGE> 12
(p) Finders and Brokers. Neither the Seller nor RIL has
entered into any contract, arrangement or understanding with any
person, firm or corporation which will result in the obligation of the
Buyer to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated
hereby.
3.2 Representations and Warranties of the Buyer. The Buyer, being
aware that the Seller has agreed to enter into this Agreement in reliance on
the representations and warranties contained in this Article 3.2, hereby
represents and warrants to the Seller as of the date hereof and the Closing
Date as follows:
(a) Organization and Validity of this Agreement. The
Buyer is a corporation duly organized and validly existing under the
laws of Japan and has full corporate power and authority to enter into
and perform its obligations under this Agreement; has taken all
necessary corporate action required to enter into and perform its
obligations under this Agreement; and this Agreement has been duly
executed and delivered by the Buyer and constitutes the legal, valid
and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally from
time to time in effect and subject to equitable principles of general
application (regardless of whether such enforcement is considered in a
proceeding at law or at equity). No other action by the Buyer will be
necessary to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein, except
where the failure to take any such action would not have a Material
Adverse Effect.
(b) Finders and Brokers. The Buyer has not entered into
any contract, arrangement or understanding with any person, firm or
corporation which will result in the obligation of the Seller to pay
any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
(c) Adequate Financing. The Buyer has funds sufficient
to pay the Purchase Price.
(d) Litigation. There is no civil, criminal or
arbitration proceeding pending against the Buyer or, to the Buyer's
knowledge, threatened by or against the Buyer that challenges or may
have the effect of preventing, delaying, making illegal or otherwise
interfering with the consummation of the transactions contemplated by
this Agreement and, to the knowledge of the Buyer, there are no facts
likely to give rise to any such proceedings.
3.3 NO OTHER WARRANTIES. EXCEPT AS PROVIDED IN THIS ARTICLE
ARTICLE 3 OR OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NEITHER PARTY IS
MAKING ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. NEITHER PARTY SHALL BE LIABLE FOR
12
<PAGE> 13
ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO LOSS OF PROFIT OR LOSS OF USE, WITH RESPECT TO ANY CLAIMS ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 4. COVENANTS
4.1 Covenants of the Seller. The Seller covenants and agrees with
the Buyer as follows:
(a) Non-Solicitation. For a period of one year from the
Closing Date, the Seller shall not directly or indirectly solicit,
encourage or take any other action which is intended to induce or
encourage, or has the effect of inducing or encouraging, any of the
Employees to terminate his or her employment with RIL.
(b) Operation of RIL. From the date of this Agreement
until the Closing Date, the Seller shall cause RIL to carry on its
business in the ordinary course and not to sell or dispose of any of
its assets or properties in excess of an aggregate of $25,000 (whether
or not in the ordinary course), except with the prior written consent
of the Buyer. From the date of this Agreement until the Closing Date,
the Seller shall cause RIL to refrain from making any commitments,
bids or binding offers, or entering into any contract involving a
payment by RIL in excess of an aggregate of $25,000 (whether or not in
the ordinary course), except with the prior written consent of the
Buyer. Prior to the Closing, no amendments shall be made to RIL's
Memorandum of Association and Articles of Association, except with the
prior written consent of the Buyer.
(c) Investigation by the Buyer. To the extent necessary
to permit the Buyer to conduct such investigation as the Buyer deems
necessary or advisable to familiarize itself with the business and
properties of RIL and its financial and legal condition, the Seller
shall permit the Buyer and its authorized representatives to have
reasonable access to RIL's premises, books and records, and shall
cause RIL's officers promptly to furnish the Buyer or its
representatives such financial and operating data and other
information, with respect to the business and properties of RIL, as
the Buyer may reasonably request.
(d) Further Assurances. After the Closing, the Seller,
upon the Buyer's reasonable request from time to time, shall take such
further actions and execute and deliver such further instruments of
conveyance and transfer as may be necessary or desirable to assure,
complete and evidence the full and effective conveyance and transfer
to the Buyer of the Shares and to effectuate the purposes of this
Agreement.
(e) Public Announcements. The Seller shall consult with
the Buyer regarding the wording and substance of all press releases,
announcements or other public statements to be made by the Seller with
respect to this Agreement or the transactions contemplated hereby.
(f) Loan. Prior to the Closing, (i) the Seller shall
make an additional loan to RIL pursuant to the 1995 Note in an amount
equal to $450,000, and (ii) the aggregate
13
<PAGE> 14
principal amount of indebtedness owed by RIL to the Seller pursuant to
the 1995 Note (including the amount advanced pursuant to the preceding
sentence) shall be converted into the Additional Share, any accrued
and unpaid interest on the 1995 Note shall be forgiven by the Seller,
and the 1995 Note shall be cancelled.
4.2 Covenants of the Buyer. The Buyer covenants and agrees with
the Seller as follows:
(a) Offer of Employment to Employees. On or promptly
following the Closing, the Buyer agrees to cause (i) the board of
directors of RIL to adopt resolutions authorizing (x) the granting of
increases by RIL to the base salary of those Employees who are
employed by RIL as engineers not exceeding twenty-five percent (25%)
of the base salary payable to such Employees prior to July 15, 1998
and (y) the change of the name of RIL to "Fujitsu Microelectronics
Israel Ltd." and (ii) RIL to offer to each Employee (other than
Talgam) at Closing the opportunity to continue his or her employment
with RIL on the terms set forth in the Employment Agreement between
RIL and each such Employee (as in effect immediately prior to the
Closing and in the form provided by the Seller to the Buyer) subject
to (x) in the case of those Employees who are employed by RIL as
engineers, the granting of increases, effective as of July 15, 1998,
to the base salary not exceeding twenty-five percent (25%) of the base
salary payable to each such Employee prior to July 15, 1998, (y) the
termination of RIL's General Employee Option Plan and all options
thereunder (whether vested or unvested) and (z) the implementation of
a long-term incentive plan on terms to be approved by RIL board of
directors. The Buyer also agrees to cause RIL to offer to Talgam at
Closing the opportunity to continue his employment with RIL on the
terms set forth in the Employment Agreement.
(b) Operation of RIL. The Buyer hereby confirms that it
is its intention to cause RIL to be operated after the Closing
substantially in accordance with the terms and conditions of the
Memorandum of Understanding attached as Exhibit C.
(c) Press Announcements. The Buyer shall consult with
the Seller regarding the wording and substance of all press releases,
announcements or other public statements to be made by the Buyer with
respect to this Agreement or the transactions contemplated hereby.
ARTICLE 5. CONDITIONS TO THE CLOSING
5.1 Conditions to the Seller's Obligation. The obligations of the
Seller under this Agreement shall be subject to the satisfaction (or written
waiver by the Seller) of each of the following conditions prior to Closing:
(a) Representations and Warranties. The representations
and warranties of the Buyer contained in this Agreement shall be true
and correct in all material respects as of the date of this Agreement
and the Closing Date;
(b) Performance of Obligations of the Buyer. All
obligations of the Buyer to be performed on or prior to Closing shall
have been duly performed;
14
<PAGE> 15
(c) Governmental Approvals. All governmental approvals
necessary for the performance of this Agreement shall have been
obtained, and such approvals shall be in full force and effect as of
the Closing Date, except the failure of which would not have a
Material Adverse Effect; and
(d) No Injunction. There shall not be in effect, as of
the Closing Date, any injunction or other order of any court or other
tribunal having jurisdiction over the Seller, RIL or the Buyer that
prohibits the sale of the Shares to the Buyer or the consummation of
any of the transactions contemplated by this Agreement.
5.2 Conditions to the Buyer's Obligation. The obligations of the
Buyer under this Agreement shall be subject to the satisfaction (or written
waiver by the Buyer) of each of the following conditions prior to Closing:
(a) Representations and Warranties. The representations
and warranties of the Seller contained in this Agreement shall be true
and correct in all material respects as of the date of this Agreement
and the Closing Date;
(b) Performance of Obligations of the Seller. All
obligations of the Seller to be performed on or prior to Closing shall
have been duly performed;
(c) Governmental Approvals. All governmental approvals
necessary for the performance of this Agreement shall have been
obtained, and such approvals shall be in full force and effect as of
the Closing Date, except the failure of which would not have a
Material Adverse Effect. RIL shall have sent a letter (in form and
substance satisfactory to Fujitsu) to the Israeli Investment Center
seeking the approval of the Investment Center of the sale of the
Shares by the Seller to the Buyer pursuant to this Agreement and
confirmation that RIL shall maintain its status, after the Closing, as
an "approved enterprise" under the Israeli Law for the Encouragement
of Capital Investments, 5719-1989;
(d) No Injunction. There shall not be in effect, as of
the Closing Date, any injunction or other order of any court or other
tribunal having jurisdiction over the Seller, RIL or the Buyer that
prohibits the sale of the Shares to the Buyer or the consummation of
any of the transactions contemplated by this Agreement;
(e) Share Certificates. Certificates representing all of
the Shares, together with duly executed stock transfer deeds, shall
have been delivered as provided in Section 2.2;
(f) Board Resolutions of the Seller. A certified copy of
the resolutions of the Board of Directors of each of the Seller and
RIL approving the execution and delivery of this Agreement by the
Seller and the performance by the Seller and RIL of its respective
obligations hereunder shall have been duly delivered to the Buyer;
(g) Founders' Agreement and 1995 Note. The Seller and
Talgam shall have terminated the Founders' Agreement, all outstanding
principal indebtedness owed by RIL to the Seller under the 1995 Note
shall have been converted into the Additional Share, all
15
<PAGE> 16
accrued but unpaid interest on the 1995 Note shall have been forgiven
by the Seller, and the 1995 Note shall have been cancelled, each in a
manner and on terms reasonably satisfactory to the Buyer;
(h) Employment Agreement. RIL and Talgam shall have
entered into an Employment Agreement;
(i) Employment of Employees. The Seller shall have
delivered to the Buyer a certificate substantially in the form of
either attached Exhibit D-1, D-2 or D-3 executed by each Employee
(other than Talgam) confirming his or her continued employment with
RIL after the Closing Date on substantially the same terms as
currently in effect (except for the availability of options to
purchase capital stock of the Seller and, in the case of those
Employees who are employed as engineers, the base salary);
(j) Consents. All consents and waivers of third parties
necessary or appropriate for the consummation of the transactions
contemplated by this Agreement shall have been obtained and such
consents shall be in full force and effect on the Closing Date, except
for those which would not have a Material Adverse Effect;
(k) Cash. The Seller shall have made the loan to RIL
contemplated by Section 4.1(f) of this Agreement and, as of July 31,
1998 (after giving effect to such loan), RIL shall have cash on hand
in an amount equal to at least $500,000 (after paying in full RIL's
payroll through that date);
(l) Board of Directors. The Buyer shall have received
written evidence that each director of RIL other than Talgam has
resigned, effective on the Closing Date;
(m) Recordation of Share Transfer Deed. All necessary
procedures shall have been taken by either RIL and/or the Seller to
duly record the Share Transfer Deed, dated March 6, 1998, made by
Roger Ross to Jack Simpson (in trust for the Seller) on the books and
records of RIL and to duly notify the Israeli Registrar of Companies
of such conveyance;
(n) Talgam Bonus. If signing of this Agreement occurs on
or before August 7, 1998, the Seller shall have paid to Talgam a bonus
in the amount of $185,000; and
(o) Compliance Certificate. An executive officer of the
Seller shall deliver to the Buyer a certificate certifying that each
of the conditions in this Article 5 has been fulfilled.
5.3 Best Efforts. The Parties shall use their best efforts to
cause the conditions within their respective control to be satisfied, as soon
as possible and no later than the Closing Date. If the foregoing conditions to
the Closing are not satisfied in full or waived on or prior to August 15, 1998,
this Agreement, except for Articles 4.1(e) and 7.1, shall terminate and be of
no further force and effect.
16
<PAGE> 17
ARTICLE 6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS,
INDEMNIFICATION AND TERMINATION
6.1 Indemnification. The Seller shall indemnify and hold the
Buyer and RIL harmless against, and shall reimburse the Buyer and RIL for any
loss or damage including, without limitation, attorneys fees reasonably
incurred, arising out of any misrepresentation of the Seller under this
Agreement, or any misrepresentation in, or omission from, any certificate or
other instrument furnished or to be furnished to the Buyer pursuant to this
Agreement.
6.2 Limitation of Liability. The representations and warranties
of the Parties in Article 3 shall expire six (6) months after the Closing Date
and shall thereafter be of no further force or effect. In addition, the
Seller's maximum liability to the Buyer for any breach of its representations
and warranties hereunder shall be the Purchase Price. In no event shall the
Seller be required to obtain a bond or other assurance of performance as to the
contingent liability represented by its obligation under the representations
and warranties set forth in Article 3.1.
6.3 Termination. In the event that a Party (the "defaulting
Party") should default in the performance of any of the covenants or
obligations to be performed by it hereunder, or any condition to the obligation
of a Party (the "non-defaulting Party") to consummate the sale or purchase of
the Shares hereunder is not performed or fulfilled to the reasonable
satisfaction of the non-defaulting Party, then the non-defaulting Party shall
have the right upon service on the defaulting Party of written notice to such
effect, to terminate this Agreement on or prior to Closing; provided, however,
that, if such default, non-performance or non-fulfillment is reasonably capable
of remedy, the defaulting Party shall have the right, during the ten (10) day
period after receipt of such written notice, to perform such covenant or
obligation or to correct or satisfy the condition precedent necessary to the
consummation of this Agreement, in all cases to the reasonable satisfaction of
the non-defaulting Party.
ARTICLE 7. MISCELLANEOUS PROVISIONS
7.1 Expenses. Each Party will bear its own costs and expenses,
including legal fees, in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby.
7.2 Tax. Any tax, duty, recordation expense or other charge
imposed in connection with the sale of the Shares, the conversion into equity
of the outstanding indebtedness owed by RIL to the Seller under the 1995 Note
or otherwise under or in connection with this Agreement, including, without
limitation, any stamp tax, shall be borne and paid by the Seller.
7.3 Assignment. Neither Party hereto may assign any right or
obligation hereunder to any third party without the prior written consent of
the other Party.
7.4 Notice. All notices required or permitted under this
Agreement will be in writing, will reference this Agreement and will be deemed
given: (a) when delivered personally; (b) when sent by confirmed facsimile;
(c) ten (10) days after having been sent by registered or certified air mail,
return receipt requested, postage prepaid; or (d) the third business day after
deposit with a commercial overnight carrier specifying next-day delivery, with
written verification of receipt. All communications will be sent to the
address set forth below (or to such
17
<PAGE> 18
other address as may be designated by a Party by giving written notice to the
other Party pursuant to this Article 7.4):
If to the Seller:
ROSS Technology, Inc.
5316 Highway 290W, Suite 500,
Austin, Texas 78735-8930
U.S.A.
Facsimile: (512) 892-3402
Attention: President
If to the Buyer:
Fujitsu Limited
1-1 Kamikodanaka 4-chome,
Nakahara-ku, Kawasaki-shi,
Kanagawa-ken, 211-88
Japan
Facsimile: (044) 754-3786
Attention: Mr. Hirohiko Kondo
7.5 Entire Agreement and Modification. This Agreement and the
Exhibits attached hereto constitute the entire agreement of the Parties, and
supersede any and all prior negotiations, correspondence, understandings and
agreements between the Parties, respecting the subject matter hereof. This
Agreement may only be amended, modified or supplemented by a written instrument
signed by both Parties.
7.6 No Implied Waivers. No purported waiver by either Party of
any default by the other Party of any term or provision contained herein shall
be deemed to be a waiver of such term or provision unless the waiver is in
writing and signed by the waiving party. No such waiver shall in any event be
deemed a waiver of any subsequent default under the same or any other term or
provision contained herein.
7.7 Governing Law. This Agreement is to be construed in
accordance with and governed by the internal laws of the State of California
(as permitted by Section 1646.5 of the California Civil Code or any similar
successor provision) without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the Parties.
7.8 Arbitration. Any dispute, controversy or claim arising our of
or relating to this Agreement or the subject matter hereof, or the
interpretation, enforceability, validity, performance, breach or termination
hereof or thereof, including, without limitation, this arbitration clause,
shall be solely and finally settled by arbitration in Los Angeles, California
in accordance with the commercial arbitration rules of the American Arbitration
Association, as modified by the provisions of this Article 7.8. Each Party
waives any rights to bring any such dispute, controversy or claim in any other
forum or proceeding, including, without limitation, the
18
<PAGE> 19
International Trade Commission of the United States or any other administrative
or judicial forum. The arbitration shall be conducted in accordance with such
rules by three arbitrators selected by the Parties (if the Parties are able to
agree within thirty (30) days) and otherwise selected in accordance with such
rules. Each of the arbitrators appointed shall have at least five (5) years'
experience in the field that is the principal subject matter of the dispute.
After soliciting the views of the Parties, the arbitrators shall order such
discovery as they may deem reasonable for a full and fair understanding of the
facts and issues raised in the arbitration. The arbitration, including the
proceeding, pleadings and evidence in connection therewith, shall be maintained
as confidential. An award rendered in connection with the arbitration shall be
final and binding on the Parties, and any judgment upon such an award may be
entered in any court of competent jurisdiction. The award shall be in writing
and shall provide written reasons in detail or the award unless the Parties
agree otherwise. The award shall also provide for the fees and expenses of the
arbitrators and for the reasonable attorneys' fees and expenses of the
prevailing Party, as determined by the arbitrators, all to be borne by the
non-prevailing Party.
7.9 No Third Party Benefits. Nothing in this Agreement shall be
construed to confer on any person or entity not a party hereto any right,
remedy or claim hereunder.
7.10 Interpretation. The headings appearing in this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation of this Agreement. References to Articles and Exhibits are,
unless otherwise stated, references to Articles of and Exhibits to this
Agreement, and references to this Agreement are references to this Agreement
including the Exhibits.
7.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original instrument but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
ROSS TECHNOLOGY, INC. FUJITSU LIMITED
By: /s/ JACK W. SIMPSON By: /s/ YOSHIRO YOSHIOKA
--------------------------- --------------------------
Name: Jack W. Simpson Name: Yoshiro Yoshioka
Title: President and Title: Senior Vice President
Chief Executive Officer
21
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