EX-2.2
AGREEMENT AND PLAN OF REORGANIZATION DATED FEBRUARY 10, 1999
AGREEMENT AND PLAN
OF
REORGANIZATION
___________________________________
By and Among
LINFINITY MICROELECTRONICS INC.,
SYMMETRICOM, INC.,
MICRO-LINFINITY ACQUISITION CORPORATION
and
MICROSEMI CORPORATION
___________________________________
February 10, 1999
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 1
SECTION 1.01 The Merger 1
SECTION 1.02 Effective Time; Closing 1
SECTION 1.03 Effects of the Merger; Subsequent Actions 2
SECTION 1.04 Certificate of Incorporation and By-Laws of the Surviving Corporation 2
SECTION 1.05 Directors 2
SECTION 1.06 Officers 2
SECTION 1.07 Conversion of Shares 3
SECTION 1.08 Conversion of Purchaser Sub Common Stock 3
SECTION 1.09 Company Option Plan 3
SECTION 1.10 Cash and Inter-Company Loan 4
SECTION 1.11 Assumption of Strategic Partner Bonus Plan 4
SECTION 1.12 The Company's Stockholders' Meeting 4
SECTION 1.13 Proxy Statement for the Stockholders' Meeting 4
ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES 5
SECTION 2.01 Dissenting Shares 5
SECTION 2.02 Exchange of Certificates; Escrow 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SYMMETRICOM AND LINFINITY 8
SECTION 3.01 Organization and Qualification 8
SECTION 3.02 Charter and By-laws 8
SECTION 3.03 Capitalization 8
SECTION 3.04 Authority Relative to this Agreement 9
SECTION 3.05 No Conflict; Required Filings and Consents 9
SECTION 3.06 Linfinity Financial Statements 10
SECTION 3.07 No Undisclosed Liabilities 11
SECTION 3.08 No Changes 11
SECTION 3.09 Contracts, Commitments and Proposals 13
SECTION 3.10 Litigation 14
SECTION 3.11 Employee Plans and Arrangements 14
SECTION 3.12 Assets 18
SECTION 3.13 Intellectual Property 18
SECTION 3.14 Taxes 19
SECTION 3.15 Environmental Laws and Regulations 20
SECTION 3.16 Inventory 21
SECTION 3.17 Receivables 21
SECTION 3.18 Bank Accounts 21
SECTION 3.19 Real Property 21
SECTION 3.20 Insurance 22
SECTION 3.21 Insider Interests 22
SECTION 3.22 Permits 22
SECTION 3.23 Disclosure 23
SECTION 3.24 Board Recommendation 23
SECTION 3.25 Brokers 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SYMMETRICOM 23
SECTION 4.01 Organization 23
SECTION 4.02 Title to Stock 23
SECTION 4.03 Authority Relative to this Agreement 23
SECTION 4.04 No Conflict; Required Filings and Consents 24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUB 25
SECTION 5.01 Organization and Qualification 25
SECTION 5.02 Authority Relative to this Agreement 25
SECTION 5.03 No Conflict; Required Filings and Consents 26
SECTION 5.04 Financing 26
SECTION 5.05 Brokers 26
ARTICLE VI COVENANTS 27
SECTION 6.01 Conduct of Business of the Company 27
SECTION 6.02 Access to Information 29
SECTION 6.03 Reasonable Best Efforts 29
SECTION 6.04 Consents 29
SECTION 6.05 Public Announcements 30
SECTION 6.06 Notification of Certain Matters 31
SECTION 6.07 Acquisition Proposals 31
SECTION 6.08 Additional SymmetriCom Obligations 31
SECTION 6.09 Certain Tax Matters 32
SECTION 6.10 Linfinity Audited Financials 36
ARTICLE VII CONDITIONS TO THE MERGER 37
SECTION 7.01 Conditions to Obligations of Each Party to Effect the Merger 37
SECTION 7.02 Additional Conditions to Obligations of Purchaser and Purchaser Sub 37
SECTION 7.03 Additional Conditions to the Obligations of the Company
and SymmetriCom 38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 39
SECTION 8.01 Termination 39
SECTION 8.02 Effect of Termination 40
SECTION 8.03 Amendment 40
SECTION 8.04 Extension; Waiver 40
SECTION 8.05 Fees and Expenses; Termination Fee 40
ARTICLE IX INDEMNIFICATION 41
SECTION 9.01 Survival of Representations and Warranties 41
SECTION 9.02 SymmetriCom Indemnity 41
SECTION 9.03 Notification and Defense of Claims 43
SECTION 9.04 Order of Payment; Exclusion and Limitation of Liability 46
SECTION 9.05 General 46
ARTICLE X MISCELLANEOUS 47
SECTION 10.01 Entire Agreement; Assignment 47
SECTION 10.02 Validity 48
SECTION 10.03 Notices 48
SECTION 10.04 Governing Law 49
SECTION 10.05 Consent to Jurisdiction; Waiver of Immunities 49
SECTION 10.06 Descriptive Headings 49
SECTION 10.07 Counterparts 49
SECTION 10.08 Parties in Interest 49
SECTION 10.09 Certain Definitions 49
SECTION 10.10 Specific Performance 50
SECTION 10.11 Arbitration 50
LIST OF SCHEDULES
Schedule 3.03 -- Capitalization
Schedule 3.05 -- Conflicts
Schedule 3.06 -- Linfinity Financials
Schedule 3.08 -- Changes
Schedule 3.09 -- Contracts, Commitments and Proposals
Schedule 3.10 -- Litigation
Schedule 3.11 -- Employee Plans and Arrangements
Schedule 3.13 -- Intellectual Property
Schedule 3.14 -- Tax
Schedule 3.15 -- Environmental Laws and Regulations
Schedule 3.17 -- Receivables
Schedule 3.18 -- Bank Accounts
Schedule 3.19 -- Real Property
Schedule 3.20 -- Insurance
Schedule 3.21 -- Insider Interests
Schedule 3.22 -- Permits
Schedule 5.01(e) -- Employee Benefit Arrangements
LIST OF EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Exhibit C Phase II Environmental Workplan
Exhibit D Opinion of Purchaser's Counsel
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is made and
entered into as of February 10, 1999 by and among SymmetriCom, Inc., a
California corporation ("SymmetriCom"), Linfinity Microelectronics Inc., a
Delaware corporation ("Linfinity" or the "Company"), Microsemi Corporation
("Purchaser"), a Delaware corporation and Micro-Linfinity Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Purchaser
("Purchaser Sub").
WHEREAS, the respective Boards of Directors of SymmetriCom, Linfinity, Purchaser
and Purchaser Sub deem it advisable and in the best interests of each company
and their stockholders to enter into this Agreement and to consummate the
transactions contemplated hereunder;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
SymmetriCom, Linfinity, Purchaser and Purchaser Sub agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the General Corporation Law of the State of
Delaware (the "GCL"), at the Effective Time, Purchaser Sub shall be merged with
and into Linfinity (the "Merger"). Following the Merger, the separate corporate
existence of Purchaser Sub shall cease and Linfinity shall continue as the
surviving corporation (the "Surviving Corporation").
SECTION 1.02 Effective Time; Closing. As soon as practicable after the
satisfaction or waiver (to the extent permitted hereunder) of the conditions set
forth in Article VII, Linfinity shall execute in the manner required by the GCL
and deliver to the Secretary of State of the State of Delaware a duly executed
certificate of merger, and the parties hereto shall take such other and further
actions as may be required by law to make the Merger effective. The time the
Merger becomes effective in accordance with applicable law is referred to as the
"Effective Time." Prior to such filing of the certificate of merger, a closing
(the "Closing") shall be held at the offices of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or such other place as
the parties hereto shall agree, for the purpose of confirming the satisfaction
or waiver of the conditions set forth in Article VII. The date on which the
Closing occurs is referred to herein as the "Closing Date."
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SECTION 1.03 Effects of the Merger; Subsequent Actions. The Merger shall
have the effects set forth in Section 259 of the GCL. Without limiting the
generality of the foregoing, and subject thereto, any other applicable laws and
as specifically provided in this Agreement, at the Effective Time, all
properties, rights, privileges, powers and franchises of Linfinity and Purchaser
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
restrictions, disabilities and duties of Linfinity and Purchaser Sub shall
become debts, liabilities, restrictions, disabilities and duties of the
Surviving Corporation.
SECTION 1.04 Certificate of Incorporation and By-Laws of the Surviving
Corporation. (a) The Certificate of Incorporation of Purchaser Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended in
accordance with the provisions thereof and applicable law.
(b) The By-Laws of Purchaser Sub in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation, until thereafter amended in accordance
with the provisions thereof and applicable law.
(c) The name of the Surviving Corporation shall be Linfinity
Microelectronics Inc., until thereafter amended in accordance with the
provisions of the Certificate of Incorporation, the By-laws of the Surviving
Corporation and applicable law.
SECTION 1.05 Directors. Subject to applicable law, the directors of
Purchaser Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 1.06 Officers. The officers of Purchaser Sub immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
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SECTION 1.07 Conversion of Shares. Subject to Section 2.01 below, at the
Effective Time, by virtue of the Merger and in accordance with the provisions of
the Company's Certificate of Incorporation and based on an aggregate purchase
price payable for all the capital stock of Linfinity in the Merger of
$24,125,001 (the "Purchase Price"), without any action on the part of
SymmetriCom, Linfinity, Purchaser, Purchaser Sub or the holders of the following
securities, each share of Linfinity Preferred Stock and each share of Linfinity
Common Stock issued and outstanding immediately prior to the Effective Time
(together the "Shares") (other than Dissenting Shares) shall be converted into
the right to receive $2.964569 (the "Preferred Price Per Share") and $1.464569
(the "Common Price Per Share") (assuming and to be adjusted on the basis that
there are 6,000,000 shares of Preferred Stock outstanding, 4,197,824 shares of
Common Stock outstanding, 121,449 options outstanding at an exercise price of
$0.50 and 109,000 options outstanding at an exercise price of $0.80),
respectively, without interest thereon, upon surrender of the certificate
formerly representing such Share. The Preferred Price Per Share and the Common
Price Per Share will be adjusted as provided in the Company's Certificate of
Incorporation in the event of a change in the number of outstanding shares of
Preferred Stock or Common Stock from that set forth in the preceding sentence.
The aggregate Preferred Price and the aggregate Common Price will be rounded
down to the nearest cent after aggregating all Shares held by such stockholder.
SECTION 1.08 Conversion of Purchaser Sub Common Stock. At the Effective
Time, each share of Common Stock, par value $.001 per share, of Purchaser Sub
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and become one validly issued, fully paid and non-assessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation.
SECTION 1.09 Company Option Plan.
(a) Linfinity shall (i) terminate its 1993 Stock Plan (the "Option Plan") as
of the Effective Time and (ii) grant no additional Options, restricted stock,
stock units, performance units, performance shares, fixed awards or similar
rights or awards under the Option Plan or otherwise on or after the date hereof.
As used hereafter in this Section 1.09, "Options" shall include each stock
option or other right to acquire Shares (whether or not then exercisable, and
regardless of the exercise price thereof) granted by Linfinity, whether pursuant
to the Option Plan or otherwise, to an employee, agent, consultant, advisor or
director of Linfinity.
(b) Linfinity shall cancel each Option as of the Effective Time pursuant to
the terms of the Option Plan and without limitation to the foregoing, after
having given at least fifteen (15) days notice to each holder of Options of the
material terms of this Agreement. In consideration for each cancellation of an
Option, the holder of such Option shall be entitled to be paid out of the
Purchase Price an amount equal to the product of (i) the excess of the Common
Price Per Share over the per Share exercise price of such Option (the "Option
Price Per Share"), and (ii) the number of Shares subject to such Option and
Linfinity will deliver to the holder of such Options an "Option Cancellation
Certificate." For the avoidance of doubt, Options with an exercise price of
$0.50 will
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be entitled to $0.964569 and Options with an exercise price of $0.80 will be
entitled to $0.664569 The aggregate price to be paid to the holder of any Option
will be rounded down to the nearest cent after aggregating all Options for which
payment will be made as held by such Optionholder. No consideration will be
paid to the holder of an Option the per share exercise price of which exceeds
the Common Price Per Share. Except for Purchaser's payment of the Purchase
Price as expressly provided in Section 1.07, SymmetriCom shall indemnify and
hold harmless Purchaser and the Company from and against any cost or liability
arising in connection with Options.
SECTION 1.10 Cash and Inter-Company Loan. Prior to the Effective Time,
Linfinity shall pay payables and collect receivables in the ordinary course,
consistent with past practice, and neither defer payables nor accelerate
collections. Immediately prior to the Effective Time, Linfinity shall use all
available cash to pay all of the outstanding principal and accrued interest on
that certain Inter-Company Revolving Loan Agreement (the "Inter-Company Loan")
by and among Linfinity and SymmetriCom as Lender, dated August 15, 1998, and to
the extent that there is insufficient cash to pay such outstanding amount, such
Inter-Company Loan shall be canceled. To the extent that there is surplus cash
after payment of the Inter-Company Loan prior to Closing, SymmetriCom shall be
entitled to apply such excess cash for purposes of covering the assumption by it
of the Bonus Plan as set forth in Section 1.11 hereof and for any other cash
payments to be made to employees as a result of the consummation of this
Agreement.
SECTION 1.11 Assumption of Strategic Partner Bonus Plan. Immediately prior
to the Effective Time, SymmetriCom shall have legally assumed by way of
assignment or otherwise the entire rights and obligations of Linfinity under
that certain Strategic Partner Bonus Plan (the "Bonus Plan") entered into among
Linfinity and the beneficiaries thereunder in August 1998 relating to the
payment of special bonuses in connection with the sale of Linfinity, a copy of
which has been provided to Purchaser. SymmetriCom will indemnify and hold the
Purchaser and the Company harmless in respect of any claim or liability arising
in connection with the Bonus Plan.
SECTION 1.12 The Company's Stockholders' Meeting. The Company shall take
all action in accordance with the federal and state securities laws, the GCL,
and the Company's Certificate of Incorporation and By-laws necessary to convene
a special meeting of the Company's Stockholders' (the "Company's Stockholders'
Meeting") to be held on the date determined by the Company and acceptable to
Purchaser, to consider and vote upon approval of the Merger, this Agreement and
the transactions contemplated hereby, including the Company's Board of
Director's Recommendation that the Company Stockholders' approve the Merger.
SECTION 1.13 Proxy Statement for the Stockholders' Meeting. Consistent with
the timing for the Company's Stockholders' Meeting as determined by the Company,
the Company shall use all reasonable efforts to mail at the earliest practicable
date to the Company Stockholders, a proxy statement regarding the proposed
Merger, which shall include all information required under applicable law to be
furnished to the Company's Stockholders in connection with the Merger and the
4
transactions contemplated thereby and hereby and shall include the Company's
Board of Director's Recommendation that the Company Stockholders' approve the
Merger.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 2.01 Dissenting Shares
(a) Notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the GCL, if
such Section 262 provides for appraisal rights for such Shares in the Merger
("Dissenting Shares"), shall not be converted into the right to receive the
Preferred Price Per Share or Common Price Per Share, as the case may be, as
provided in Section 1.07, unless and until such holder fails to perfect or
withdraws or otherwise loses his right to appraisal and payment under the GCL.
If, after the Effective Time, any such holder fails to perfect or withdraws or
loses his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to receive
the Preferred Price Per Share or the Common Price Per Share, as the case may be,
if any, to which such holder is entitled, without interest or dividends thereon.
(b) Each of Linfinity and Purchaser shall give the other prompt notice of
any demands received by Linfinity or Purchaser for appraisal of Shares and of
all negotiations and proceedings with respect to such demands. After the
Effective Time, neither Linfinity nor Purchaser shall, except with the prior
written consent of SymmetriCom, make any payment with respect to, or settle or
offer to settle, any such demands. SymmetriCom shall indemnify the Purchaser
and the Company from any costs and expenses of the Company incurred with respect
to appraisals or proceedings regarding Dissenting Shares and from any
incremental amount required to be paid to a shareholder over and above the
amount such shareholder is entitled to receive under this Agreement and the
Merger.
SECTION 2.02 Exchange of Certificates; Escrow
(a) Prior to the Effective Time, Purchaser shall designate a bank or trust
company reasonably acceptable to Linfinity to act as paying agent (the "Paying
Agent") in effecting the exchange for the Preferred Price Per Share of
certificates (the "Preferred Certificates") that, prior to the Effective Time,
represented Preferred Stock, the Common Price Per Share of Certificates (the
"Common Certificates") that, prior to the Effective Time, represented Common
Stock, and the Option Price Per Share for Option Cancellation Certificates. Upon
the surrender of each Preferred Certificate formerly representing Preferred
Stock, together with a properly completed letter of transmittal, the Paying
Agent shall pay the holder of such Preferred Certificate the Preferred Price
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Per Share multiplied by the number of shares of Preferred Stock formerly
represented by each such Preferred Certificate, in exchange therefor, and each
such Preferred Certificate shall forthwith be canceled. Until so surrendered
and exchanged, each such Preferred Certificate (other than Preferred
Certificates representing Dissenting Shares) shall represent solely the right to
receive the Preferred Price Per Share. No interest shall be paid or accrue on
the Preferred Price Per Share. If the Preferred Price Per Share (or any portion
thereof) is to be delivered to any person other than the person in whose name
the Preferred Certificate formerly representing shares of Preferred Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the Preferred Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such exchange shall pay to the Paying Agent any transfer or other
Taxes required by reason of the payment of the Preferred Price Per Share to a
person other than the registered holder of the Preferred Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such Tax has been paid or is not applicable. Upon the surrender of each Common
Certificate formerly representing shares of Common Stock, together with a
properly completed letter of transmittal, the Paying Agent shall pay the holder
of such Common Certificate the Common Price Per Share multiplied by the number
of shares of Common Stock formerly represented by each such Common Certificate,
in exchange therefor, and each such Common Certificate shall forthwith be
canceled. Until so surrendered and exchanged, each such Common Certificate
(other than Common Certificates representing Dissenting Shares) shall represent
solely the right to receive the Common Price Per Share. No interest shall be
paid or accrue on the Common Price Per Share. If the Common Price Per Share (or
any portion thereof) is to be delivered to any person other than the person in
whose name the Common Certificate formerly representing shares of Common Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the Common Certificate so surrendered shall be properly endorsed
or otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other Taxes required by
reason of the payment of the Common Price Per Share to a person other than the
registered holder of the Common Certificate surrendered, or shall establish to
the satisfaction of the Paying Agent that such Tax has been paid or is not
applicable. Upon the surrender of each Option Cancellation Certificate,
together with a properly completed letter of transmittal, the Paying Agent shall
pay the holder of such Option Cancellation Certificate the Option Price Per
Share multiplied by the number of shares of Common Stock formerly represented by
each such Option Cancellation Certificate, in exchange therefor. Until so
surrendered and exchanged, each such Option Cancellation Certificate shall
represent solely the right to receive the Option Price Per Share. No interest
shall be paid or accrued on the Option Price Per Share. If the Option Price Per
Share (or any portion thereof) is to be delivered to any person other than the
person in whose name the Option Cancellation Certificate surrendered in exchange
therefor is registered, it shall be a condition to such exchange that the Option
Cancellation Certificate so surrendered shall be properly endorsed or otherwise
be in proper form for transfer and that the person requesting such exchange
shall pay to the Paying Agent any transfer or other Taxes required by reason of
the payment of the Option Price Per Share to a person other than the registered
holder of the Option Cancellation Certificate surrendered, or shall establish to
the satisfaction of the Paying Agent that such Tax has been paid or is not
applicable.
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(b) Prior to the Effective Time, Purchaser or Purchaser Sub shall deposit,
or cause to be deposited, in trust with the Paying Agent an amount equal to the
Purchase Price to which holders of Shares shall be entitled at the Effective
Time pursuant to Section 1.07 hereof; provided, however, that no such deposit
shall relieve Purchaser or Purchaser Sub of its obligation to pay the Purchase
Price pursuant to Section 1.07. Notwithstanding the foregoing, $1,125,000 of
the consideration otherwise payable to SymmetriCom under this Section 2.02(b)
shall not be paid in cash at the Closing, but instead shall be held in escrow
pursuant to the Escrow Agreement attached hereto as Exhibit A (the "Escrow
Agreement").
(c) The Purchase Price shall be invested by the Paying Agent as directed by
Purchaser, provided that such investments shall be limited to direct obligations
of the United States of America, obligations for which the full faith and credit
of the United States of America is pledged to provide for the payment of
principal and interest, commercial paper rated of the highest quality by Xxxxx'x
Investors Services, Inc. or Standard & Poor's Corporation, or certificates of
deposit issued by a commercial bank having at least $1,000,000,000 in assets;
provided further that no loss on investment made pursuant to this Section
2.02(c) shall relieve Purchaser or Purchaser Sub of its obligation to pay the
Purchase Price pursuant to Section 1.07.
(d) Promptly after the Effective Time, the Paying Agent shall mail: (i) to
each record holder of Preferred Certificates that immediately prior to the
Effective Time represented Preferred Stock, a form of letter of transmittal and
instructions for use in surrendering such Preferred Certificates and receiving
the Preferred Price Per Share in exchange therefor and (ii) to each record
holder of Common Certificates that immediately prior to the Effective Time
represented Common Stock, a form of letter of transmittal and instructions for
use in surrendering such Common Certificates and receiving the Common Price Per
Share in exchange therefor.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares. If, after the
Effective Time, Common Certificates formerly representing Common Stock are
presented to the Surviving Corporation or the Paying Agent, they shall be
canceled and exchanged for the Common Price Per Share as provided in this
Article II, subject to applicable law in the case of Dissenting Shares.
(f) Promptly following the date which is six (6) months after the Effective
Time, the Paying Agent shall deliver to Purchaser all cash and documents in its
possession relating to the transactions described in this Agreement, and the
Paying Agent's duties shall terminate. Thereafter, each holder of a Common
Certificate formerly representing Common Stock may surrender such Common
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Common
Price Per Share, without any interest thereon.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SYMMETRICOM AND LINFINITY
SymmetriCom and the Company each represents and warrants to Purchaser and
Purchaser Sub that subject to such exceptions as are specifically disclosed in
the disclosure schedules corresponding to the appropriate Section and paragraph
numbers herein supplied to Purchaser and Purchaser Sub (the "Linfinity
Disclosure Schedules"):
SECTION 3.01 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has no subsidiaries. The Company has the
requisite corporate power and authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction in
which the nature of its business or the properties owned, operated or leased by
it makes such qualification, licensing or good standing necessary, except where
the failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect on the
Company.
The term "Material Adverse Effect on the Company," as used in this Agreement,
means any adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, has had or
will have a material adverse effect on the business, financial condition,
properties or results of operations of the Company taken as a whole; provided,
however, that an effect of less than $100,000 shall be deemed not to be a
Material Adverse Effect.
SECTION 3.02 Charter and By-laws. The Company has heretofore made available
to Purchaser a complete and correct copy of its Certificate of Incorporation and
the By-laws, each as amended as of the date hereof.
SECTION 3.03 Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000
Shares consisting of 20,000,000 shares of Common Stock, par value $.01 per
share, and 10,000,000 shares of Preferred Stock, par value $.01 per share, of
which 6,000,000 shares were designated Series A Preferred Stock. As of the close
of business on December 22, 1998, 10,197,824 Shares were issued and outstanding,
of which 6,000,000 Shares are Series A Preferred Stock and 4,197,824 shares are
Common Stock. SymmetriCom is the record and beneficial owner of 6,000,000
shares of Series A Preferred and 4,000,000 shares of Common Stock of the
Company. The Company has no Shares reserved for issuance, except that, as of
December 22, 1998, there were 2,303,000 Shares reserved for issuance pursuant to
the Option Plan of which 1,643,102 Shares represent outstanding Options or other
awards under the Option Plan and there were 6,000,000 shares of Common Stock,
reserved for
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issuance upon conversion of the Preferred Stock. The Company has no options to
purchase Shares outstanding other than Options which will be cancelled pursuant
to Section 1.09(b) hereof. Since September 30, 1998, the Company has not issued
any shares of capital stock except pursuant to the exercise of Options
outstanding as of such date. All of the outstanding Shares are, and all Shares
which may be issued pursuant to the exercise of outstanding Options will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and nonassessable. There are no bonds, debentures,
notes or other indebtedness having general voting rights (or convertible into
securities having such rights) ("Voting Debt") of the Company issued and
outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement, there are no existing options, warrants, calls,
subscriptions or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the issued or unissued capital
stock of the Company, obligating the Company to issue, transfer or sell or cause
to be issued, transferred or sold any shares of capital stock or Voting Debt of,
or other equity interest in, the Company or securities convertible into or
exchangeable for such shares or equity interests, and the Company is not
obligated to grant, extend or enter into any such option, warrant, call,
subscription or other right, convertible security, agreement, arrangement or
commitment. Except as set forth in Section 1.09, there are no outstanding
contractual obligations of the Company to (i) repurchase, redeem or otherwise
acquire any Shares of the capital stock of the Company or (ii) provide funds to
or make any investment in (in the form of a loan, capital contribution or
otherwise) any entity.
(b) There are no voting trusts or other agreements or understandings to
which Linfinity is a party with respect to the voting of the capital stock of
the Company.
SECTION 3.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize or approve
this Agreement, or to consummate the transactions contemplated hereby (other
than, with respect to the approval and adoption of the Merger and this Agreement
by the affirmative vote of the holders of a majority of the Shares then
outstanding and the approval of the holders of a majority of the Series A
Preferred Stock, voting as a separate class). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by Purchaser and
Purchaser Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
SECTION 3.05 No Conflict; Required Filings and Consents.
9
(a) Except as set forth on Schedule 3.05 hereto, none of the execution,
delivery or performance of this Agreement by the Company, the consummation by
the Company of the transactions contemplated hereby or the compliance by the
Company with any of the provisions hereof will (i) conflict with or violate the
Certificate of Incorporation or By-Laws of the Company, (ii) conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company, or by which its properties or assets may be bound or
affected, or (iii) result in a violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any lien on any of the property or assets of the Company (any of the
foregoing referred to in clause (ii) or this clause (iii) being a "Violation")
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be bound
or affected.
(b) None of the execution, delivery or performance of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
or the compliance by the Company with any of the provisions hereof will require
any consent, waiver, approval, authorization or permit of, or registration or
filing with or notification to (any of the foregoing being a "Consent"), any
government or subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (a "Governmental Entity"),
except for (i) the filing of a certificate of merger pursuant to the GCL, (ii)
notifications required by certain environmental statutes, and (iii) compliance
with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act").
(c) The Company is not subject to, or a party to, any charter, bylaw,
mortgage, lien, lease, license, permit, instrument, order, judgment or decree,
or any other agreement, contract or restriction of any kind or character which
would prevent consummation of the transactions contemplated by this Agreement,
compliance by the Company with the terms, conditions and provisions hereof or
the continued operation of the business of the Company after the date hereof or
as of the Closing Date on substantially the same basis as heretofore operated or
which would restrict the ability of the Company to acquire any property or
conduct business of the nature currently conducted by the Company.
SECTION 3.06 Linfinity Financial Statements. Schedule 3.06 sets forth the
Company's unaudited balance sheet as of June 30, 1998 and the Company's'
unaudited balance sheet as of September 30, 1998 and the related unaudited
statements of income and cash flow for the three (3) months then ended (the
"Financials"). The Financials have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent throughout
the periods indicated and consistent with each other (except that they do not
contain all the notes that may be required by GAAP). The Financials present
fairly the financial condition, operating results and cash flows of the Company
as
10
of the dates and for the periods indicated therein, subject to normal year-end
adjustments, which on the basis of information available or which should be
available to the Company as of the date hereof will not be material in amount or
significance. The Company's' unaudited Balance Sheet as of September 30, 1998
is sometimes referred to herein as the "Current Balance Sheet".
SECTION 3.07 No Undisclosed Liabilities. The Company does not have any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type (whether accrued, absolute, contingent, matured,
unmatured or other) required to be reflected in financial statements in
accordance with GAAP, which individually or in the aggregate, (i) has not been
reflected in the Current Balance Sheet, or (ii) has not arisen in the ordinary
course of the Company's' business consistent with past practices since the date
of the Current Balance Sheet.
SECTION 3.08 No Changes. Except as set forth on Schedule 3.08, since
September 30, 1998, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of business as
conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation or By-laws of
the Company;
(c) capital expenditure or commitment by the Company, either individually or
in the aggregate, exceeding $50,000;
(d) loss of or any material destruction of or damage to any material assets,
business or customer of the Company (whether or not covered by insurance)
either individually or in the aggregate in excess of $50,000;
(e) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action;
(f) material change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to any Shares, or any direct or indirect redemption,
purchase or other acquisition by the Company of any Shares other than
repurchases of stock from former employees, directors and consultants at cost
in connection with any termination of service to the Company;
(i) material increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration,
11
payment or commitment or obligation of any kind for the payment by the Company
of a bonus or other additional salary or compensation to any such person;
(j) termination, extension, amendment or modification to the terms of any
material agreement, contract, covenant, instrument, lease, license or commitment
to which the Company is a party or by which it or any of its assets is bound,
other than licenses of products in the ordinary course of business;
(k) sale, lease, license or other disposition of any of the material assets
or properties of the Company, or the creation of any security interest in such
assets or properties other than licenses of products in the ordinary course of
business;
(l) loan by the Company to any person or entity, incurring by the Company of
any indebtedness for borrowed money, guaranteeing by the Company of any
indebtedness for borrowed money, issuance or sale of any debt securities of the
Company or guaranteeing of any debt securities of others, except for advances to
employees for travel and business expenses in the ordinary course of business
and not exceeding $50,000 in the aggregate, consistent with past practices and
drawdowns by the Company from SymmetriCom pursuant to the Inter-Company Loan;
(m) waiver or release of any right or claim of the Company, including any
write-off or other compromise of any account receivable of the Company in excess
of $50,000 in the aggregate;
(n) commencement or notice or threat or reasonable basis therefor of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(o) notice, oral or written, of any claim or potential claim of ownership by
a third party of the Company Intellectual Property (as defined in Section 3.13
below) or, to the knowledge of the Company, infringement by the Company of any
third party's Intellectual Property rights;
(p) issuance or sale, or contract to issue or sell, by the Company of any
Company Shares, or securities exchangeable, convertible or exercisable therefor,
or any securities, warrants, options or rights to purchase any of the foregoing;
except for issuance of Shares of the Company in accordance with Options granted
under the Option Plan;
(q) material change in pricing or royalties set or charged by the Company to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to the Company;
(r) event or condition of any character that has or would reasonably be
expected to have a Material Adverse Effect on the Company;
12
(s) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(r) (other than negotiations with Purchaser and its representatives regarding
the transactions contemplated by this Agreement).
SECTION 3.09 Contracts, Commitments and Proposals
(a) Except as listed in Schedule 3.09 the Company is not bound by any of the
following:
(i) any contract or commitment which requires payment or services in excess
of $100,000 or which requires payment or services in excess of $10,000 and has
an unexpired term in excess of one (1) year;
(ii) any agreement, contract or instrument that grants a power of attorney,
agency or similar authority to another Person or entity;
(iii) any agreement, contract or commitment to loan or advance to, invest
in, or guaranty any indebtedness or obligation of, any individual, partnership,
joint venture, corporation, trust, unincorporated organization or other entity,
where the principal amount thereof is more than $100,000 in the ordinary course
of the Company's business, or, if such agreement, contract, commitment or
guarantee is not in the ordinary course of business of the Company, any amount
whatsoever.
(iv) any agreement, contract or commitment relating to the employment of any
Person by the Company or any Subsidiary not terminable at will by the employer,
or any bonus, deferred compensation, pension, severance, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit plan;
(v) any consulting or similar type of contract which is not, without any
payment required thereunder (beyond those due for work performed or materials
delivered thereunder), terminable upon ninety (90) days' notice (or less);
(vi) any confidentiality, non-disclosure or similar agreement;
(vii) any agreement, contract or commitment which has had, or would
reasonably be expected to have, an adverse impact on the business or operations
of the Company, in excess of $100,000;
(viii) any agreement, contract or commitment limiting the freedom of the
Company from engaging in its present business;
(ix) any contract or agreement that contains a right of first refusal with
respect to any material asset of the Company; and
13
(x) any unexpired written bid or proposal to enter into any of the
agreements identified above that is of a nature that it could, as presented, be
accepted by a third party and be thereby binding upon the Company.
(b) Each contract, agreement and commitment listed in Schedule 3.09 is valid
and in full force and effect and there exists no (A) material default or event
of default or (B) event, occurrence, condition or act which, with the giving of
notice or the lapse of time, would become a material default or event of
material default thereunder. The Company has fully performed all of the terms
or conditions of any contract or agreement set forth in Schedule 3.09 (or
required to be set forth in such Schedule) in all material respects which is
required to be performed on or prior to the date hereof and all of the covenants
required to be performed by any other party thereto on or prior to the date
hereof have been performed in all material respects. A copy of each contract,
agreement or commitment listed in Schedule 3.09 has heretofore been made
available or delivered to, Purchaser and such copy is true, correct and
complete.
SECTION 3.10 Litigation. Except as set forth in Schedule 3.10, as of the
date hereof, there are no suits, claims, actions, proceedings, including,
without limitation, arbitration proceedings or alternative dispute resolution
proceedings, or investigations ("Litigation") pending or, to the knowledge of
the Company, threatened against the Company before any Governmental Entity that
would be reasonably likely to have a Material Adverse Effect on the Company, nor
is there, to the knowledge of the Company any basis for such proceedings or
investigations, and, to the knowledge of the Company, there is no written
judgment, decree, injunction, award or order outstanding, against or affecting
the Company, the business of the Company, any of the Company's assets or the
Company Shares, or any transaction contemplated by this Agreement; and the
Company has not received any notice from any Governmental Entity claiming any
violation of any law, and the Company has not been during the past five years
nor is the Company currently in violation of any law which violation would have
a Material Adverse Effect on the Company and, to the knowledge of the Company,
no event has occurred or condition or state of facts exists that would give rise
to any such violation. The Company does not have Litigation pending against any
third party, except as listed on Schedule 3.10.
SECTION 3.11 Employee Plans and Arrangements.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 3.11(a)(i) below (which definition shall apply only to this
Section 3.11), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common control
with the Company within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of 1986, as amended;
14
(iii) "Company Employee Plan" or Linfinity Employee Plan" shall mean any
plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written or unwritten or
otherwise, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any Employee, or with respect to which the
Company or any Affiliate has or may have any liability or obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current or former employee, consultant or
director of the Company or any Affiliate;
(vii) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between the Company or any
Affiliate and any Employee;
(viii) "Employee Welfare Benefit Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement that is defined in Section
3(1) of ERISA which is or is deemed to be maintained, contributed to, or
required to be contributed to by the Company or any Affiliate for the benefit of
any Employee immediately prior to the Effective Time;
(ix) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended;
(x) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
(xiii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
15
(xiv) "Pension Plan" shall mean each Linfinity Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 3.11(b) contains an accurate and complete list of
each Linfinity Employee Plan and each Employee Agreement under each Linfinity
Employee Plan or Employee Agreement.
(c) Documents. The Company has made available to Purchaser: (i) correct and
complete copies of all documents embodying each Linfinity Employee Plan and each
Employee Agreement including (without limitation) all amendments thereto and all
related trust documents; (ii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Linfinity Employee
Plan; (iii) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Linfinity Employee Plan; (iv) the most recent IRS
determination letter, if applicable; (v) all material correspondence to or from
any governmental agency relating to any Linfinity Employee Plan; and (vi) all
COBRA forms and related notices.
(d) Employee Plan Compliance. (i) The Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Linfinity Employee Plan, and each Linfinity Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code and the Company has
not, and to SymmetriCom's and the Company's knowledge each other fiduciary has
not, breached its fiduciary duty with respect to any Linfinity Employee Plan;
(ii) each Linfinity Employee Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination, opinion, notification or advisory
letter from the IRS with respect to each such Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Linfinity Employee Plan and neither the
Company nor SymmetriCom are aware of any facts that would materially adversely
affect the continuing applicability of such favorable determinations; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of the Company,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Linfinity Employee Plan or against the assets of any Linfinity
Employee Plan; (v) there are no audits, inquiries or proceedings by the IRS or
DOL with respect to any Linfinity Employee Plan; and (vi) neither Linfinity nor
any Affiliate
16
is subject to any penalty or tax with respect to any Linfinity Employee Plan
under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any Affiliate
contributed to or been obligated to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Linfinity Employee Plan provides, or
reflects or represents any liability to provide, retiree health benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, or benefits arising in connection with a separation or severance
program, plan or arrangement or benefits for which the participant pays the full
cost.
(h) COBRA. Neither the Company nor any Affiliate has, prior to the
Effective Time and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 3.11(i), the execution of this Agreement
and the consummation of the transactions contemplated hereby will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any Linfinity Employee Plan, Employee Agreement, trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 3.11(i), no payment or benefit which
will or may be made by the Company or its Affiliates with respect to any
Employee as a result of the transactions contemplated by this Agreement or
otherwise will be characterized as a "parachute payment," within the meaning of
Section 280G(b)(2) of the Code.
(j) Employment Matters. The Company: (i) is in compliance in all respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
17
benefits, social security or other benefits or obligations for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against the Company under any worker's compensation policy or
long-term disability policy.
(k) Labor. To the best of the Company's knowledge, no work stoppage or
labor strike against the Company is pending, threatened or reasonably
anticipated. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. There are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. The Company is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by the Company.
(l) Plan Termination. No Linfinity Employee Plan precludes the Company from
prospectively amending or terminating such Linfinity Employee Plan.
SECTION 3.12 Assets. The Company has (a) good and marketable title to or a
valid leasehold interest under a capitalized lease in all assets recorded on the
Company's balance sheet as of September 30, 1998 included in the Company
Financial Statements referred to in Section 3.06 except for assets disposed of
in the ordinary course of business since such date, and (b) a valid leasehold or
other interest in all other assets used by it in its business, except in each
case for exceptions to the foregoing that would not have a Material Adverse
Effect on the Company.
SECTION 3.13 Intellectual Property.
(a) Schedule 3.13 lists all of the United States (a) patent and patent
applications; (b) registered trademarks and trademark applications; (c)
registered copyrights and applications for copyright registration; (d) mask work
registrations and applications to register mask works; and (e) other registered
Intellectual Property owned by the Company.
(b) Except for any exceptions to the following that would not have a
Material Adverse Effect on the Company, to the Company's knowledge (but without
conducting an investigation), the Company owns or has the right to use all
Intellectual Property reasonably necessary for the Company to conduct its
business as it is currently conducted and consistent with past practice.
18
(c) Except for any exceptions to the following that would not have a
Material Adverse Effect on the Company and except as set forth in Schedule 3.13:
(i) to the Company's knowledge (but without conducting an investigation), the
Intellectual Property owned by the Company is free of all Liens and security
interests; (ii) the Intellectual Property owned by the Company does not infringe
upon the Intellectual Property rights of any third party; (iii) none of the
Intellectual Property owned by the Company is the subject of any material
license or other material agreement granting rights therein to any third party
(except for contracts relating to manufacturing information and confidential
information licensed to foundries, distributors, OEMs and third parties in the
ordinary course of the Company's business); (iv) no judgment, decree,
injunction, rule or order has been rendered by any Governmental Entity which
would limit, cancel or question the validity of, or the Company's rights in and
to, any Intellectual Property owned by the Company; (v) the Company has not
received notice of any pending or threatened suit, action or proceeding that
seeks to limit, cancel or question the validity of, or the Company's rights in
and to, any Intellectual Property owned or used by the Company; (vi) no person
is infringing or misappropriating any Intellectual Property owned or used by the
Company; and (vii) the Company takes reasonable steps to protect, maintain and
safeguard the Intellectual Property owned by the Company, including any
Intellectual Property for which improper or unauthorized disclosure would impair
its value or validity, and have caused its employees to execute agreements in
connection with the foregoing.
(d) For purposes of this Agreement "Intellectual Property" shall mean all
rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (i)(A)
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments, technology, new and useful improvements
thereof and know-how relating thereto, whether or not patented or eligible for
patent protections; (B) copyrights and copyrightable works, including computer
applications, programs, software, databases and related items; (C) trademarks,
service marks, and trade names, the goodwill of any business symbolized thereby,
and all common-law rights relating thereto; and (D) trade secrets and other
confidential information; and (ii) all registrations, applications, recordings,
and licenses or other similar agreements related to the foregoing.
SECTION 3.14 Taxes.
(a) The Company has (i) filed all Tax Returns which it is required to file
under applicable laws and regulations either separately or as a member of a
group of corporations pursuant to the Code, (ii) paid all Taxes which have
become due and payable, and (iii) accrued as a liability on the balance sheet
included in the Company's Financial Statements described in Section 3.06 all
Taxes which were accrued but not yet due and payable as of the date thereof.
For purposes of this Agreement, "Tax" or "Taxes" shall mean any federal, state,
local or foreign income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, social security,
19
unemployment, disability, payroll, license, employee or other withholding, or
other tax of any kind, including any interest or penalties in respect of the
foregoing. "Income Taxes" shall mean any federal, state, local or foreign
income, gross receipts, franchise, estimated or alternative minimum tax of any
kind, including any interest or penalties in respect of the foregoing. "Tax
Returns" means returns, declarations, reports, information returns, or other
documents filed or required to be filed in connection with the determination,
assessment or collection of Taxes of any person or the administration of any
laws, regulations or administrative requirements relating to any Taxes.
(b) Except as disclosed in Schedule 3.14, none of the United States federal
and state income Tax Returns of the Company have been audited by the IRS or
relevant state tax authorities. SymmetriCom has provided or made available all
reasonably requested information regarding any such Tax audits to the Purchaser
and its accountants. Except as disclosed in Schedule 3.14, neither SymmetriCom
nor the Company has been requested to give waivers or extensions (or is or would
be subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which the
Company may be liable.
(c) There is no contract, agreement, plan or arrangement to which the
Company is a party, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount
following the Closing that would not be deductible pursuant to Section 280G, 404
or 162(m) of the Code.
(d) The Company is, and will be at the Closing Date, a "Section 338(h)(10)
target" and a member of the consolidated group of which SymmetriCom is the
common parent within the meaning of Code Section 338(h)(10) and Treasury
Regulation Section 1.338(h)(10)-1(c)(1) and (3), and the Company and SymmetriCom
are eligible to make a Section 338(h)(10) election as contemplated by Section
6.09 of this Agreement.
SECTION 3.15 Environmental Laws and Regulations. Except as disclosed in
Schedule 3.15:
(a) The Company (i) is and has been in compliance with applicable
Environmental Laws; (ii) has not received any notice of any alleged claim,
violation of or liability under any Environmental Law which has not heretofore
been cured or for which there is any remaining liability; (iii) has not received
notice of any Environmental Claim (as hereinafter defined) filed or threatened
against it, or against any Person whose liability for any Environmental Claim
the Company has retained or assumed either contractually or by operation of law;
(iv) has not disposed of, emitted, discharged, handled, stored, transported,
used or released any Hazardous Materials, arranged for the disposal, discharge,
storage or release of any Hazardous Materials, or exposed any employee or other
individual to any Hazardous Materials so as to give rise to any liability or
corrective or remedial obligation under any Environmental Laws; and (v) is not
aware of the presence of Hazardous Materials in, on, or under any properties
owned, leased or used at any time by
20
the Company such as would give rise to any liability or corrective or remedial
obligation under any Environmental Laws.
(b) "Environmental Claim" means any notice, claim, act, cause of action or
investigation by any person or entity alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the presence, or
release into the environment, of any Hazardous Materials (as hereinafter
defined) or (B) any violation, or alleged violation, of any Environmental Laws.
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of the environment or the
protection of human health, including laws and regulations relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, registration,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials. "Hazardous Materials" means chemicals, pollutants,
contaminants, wastes, toxic substances, radioactive and biological materials,
asbestos-containing materials (ACM), hazardous substances, petroleum and
petroleum products or any fraction thereof.
SECTION 3.16 Inventory. All of the finished goods inventory of the Company
is in good, merchantable and usable condition and is salable in the ordinary
course of business within a reasonable time, except to the extent (and in the
amount) reserved for on the Company Financial Statements. None of the Company's
inventory has been consigned to others or is on consignment from others.
SECTION 3.17 Receivables. Schedule 3.17 discloses all trade and other
accounts receivable of the Company ("Receivables") outstanding as of September
30, 1998, presented on an aged basis, and separately identifies the name of each
account debtor and the total amount of each related Receivable. All
Receivables, whether reflected on the Company Financial Statements, disclosed on
Schedule 3.17 hereto or created after the date of the Company Financial
Statements, arose from bona fide sale transactions of the Company and no portion
of any Receivable is subject to counterclaim, defense or set-off or is otherwise
in dispute, except to the extent (and in the amount) reserved for on the Company
Financial Statements for normal cash and trade discounts, price protection,
stock rotation and other miscellaneous returns (and since the data of the
Company Financial Statements, such reserves for normal cash and trade discounts
as are consistent with past practice). Except to the extent of the recorded
reserve for doubtful accounts, all of the Receivables are collectible in the
ordinary course of business using commercially reasonable efforts.
SECTION 3.18 Bank Accounts. Set forth in Schedule 3.18 is an accurate and
complete list showing the name and address of each bank in which the Company has
an account or safe deposit box, the number of any such account or any such box
and the names of all Persons authorized to draw thereon or to have access
thereto.
SECTION 3.19 Real Property. Schedule 3.19 discloses all real property
currently owned by the Company (the "Owned Properties"). The Company owns the
Owned Properties free and clear of any liens or
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encumbrances other than liens for taxes not yet delinquent, such matters as
would be shown by an accurate survey of the Owned Properties, and the matters
described on Schedule 3.19 hereto (collectively, the "Permitted Title
Exceptions"). Schedule 3.19 discloses all real properties currently leased by
the Company (the "Leased Properties") and identifies the Company's leases (the
"Leases") of all such Leased Properties. The Owned Properties and the Leased
Properties are collectively referred to herein as the "Real Properties." The
Leases are in full force and effect and constitute the entire agreement between
the Company as tenants and the landlords thereunder with respect to the
respective Leased Properties. The Company has not received written notice of
any default under any Lease that has not been remedied or waived. There
currently exists no sublease of any Leased Property by the Company. Copies of
all title insurance policies written in favor of the Company have been delivered
to Purchaser. Except as may be disclosed in the Leases or such title policies,
the Company has not received written notice from any governmental authority that
a Real Property is in violation of any applicable land use, zoning, building or
fire code, statute, ordinance or law that has not been remedied or waived. The
Company has not received written notice of condemnation of any Real Property.
SECTION 3.20 Insurance. Set forth in Schedule 3.20 is a complete list of
insurance policies which the Company maintains with respect to the business or
the operations, properties or employees of the Company. The Company has paid
all premiums due under said policies and such policies are in full force and
effect.
SECTION 3.21 Insider Interests. Except as set forth on Schedule 3.21 (and
except for de- minimus amounts), no director, officer or other Affiliate of the
Company ("Related Party") has any interest in any property, real or personal,
tangible or intangible of the Company, is indebted or otherwise obligated to the
Company (other than for employee reimbursement arising in the ordinary course of
business), has any contractual relationship with the Company (other than as an
employee of the Company) or is an officer, director, employee or consultant of a
competitor of the Company. Except as set forth on Schedule 3.21, the Company is
not indebted or otherwise obligated to any such Person, except for amounts due
under normal arrangements applicable to all employees generally as to salary or
reimbursement of ordinary business expenses not unusual in amount or
significance. Except as set forth on Schedule 3.21, no Related Party will at
any time after the Closing, pursuant to agreements or arrangements created prior
to Closing, directly or indirectly, be or become entitled to receive any payment
or transfer of money or other property of any kind from the Company, and the
Company will not at any time after Closing for any reason, directly or
indirectly, be or become subject to any obligation of any Related Party.
SECTION 3.22 Permits. The Company holds all "Permits" (defined to include
any permit, certificate, license, franchise, privilege, approval, registration
or authorization required under any law in connection with the operation of its
assets and business). All Permits of the Company are listed on Schedule 3.22.
Each Permit is valid, subsisting and in full force and effect. The Company is
in compliance with and has fulfilled and performed its obligations under each
Permit, and no event or
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condition or state of facts exists (or would exist upon the giving of notice or
lapse of time or any of them) that could constitute a breach or default under
any Permit. The Company has not received any notice of non-renewal of any
Permit.
SECTION 3.23 Disclosure. No representation, warranty or written statement
or certificate made or furnished by the Company in this Agreement, or any
Schedule or Exhibit furnished to Purchaser pursuant to the express terms hereof,
contains or will contain any misstatement of a material fact or omits or will
omit to state a material fact necessary in order to make the representations,
warranties and statements contained herein and therein not misleading in light
of the circumstances in which they are made.
SECTION 3.24 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has by unanimous vote of those directors
present (a) determined that this Agreement and the transactions contemplated
hereby, including the Merger, taken together, are fair to and in the best
interests of the Company's Stockholders, and (b) resolved to recommend that the
Company's Stockholders approve this Agreement and the transactions contemplated
herein, including the Merger (the "Company Board Recommendation").
SECTION 3.25 Brokers. Except for the engagement of B.T. Xxxx Xxxxx, Inc.,
whose fees will be paid by SymmetriCom, none of the Company, or any of its
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SYMMETRICOM
SymmetriCom represents and warrants to Purchaser and Purchaser Sub that:
SECTION 4.01 Organization. SymmetriCom is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
SECTION 4.02 Title to Stock. SymmetriCom is the beneficial and record owner
of 6,000,000 shares of Series A Preferred Stock and 4,000,000 shares of Common
Stock of the Company and SymmetriCom has good and marketable title thereto, free
and clear of any liens, "Encumbrances" (defined as any liability, debt,
mortgage, deed of trust, pledge, security interest, encumbrance, option, right
of first refusal, agreement of sale, adverse claim, easement, lien, assessment,
restrictive covenant, encroachment, burden or charge of any kind or nature
whatsoever or any item similar to related to the foregoing), security
agreements, equities, charges, conditions and restrictions.
SECTION 4.03 Authority Relative to this Agreement. SymmetriCom has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by SymmetriCom and the consummation by
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SymmetriCom of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of SymmetriCom and no other
corporate proceedings on the part of SymmetriCom are necessary to authorize or
approve this Agreement, or to consummate the transactions contemplated hereby
(other than following the date hereof and prior to the Closing, the approval and
adoption of the Merger and this Agreement by the affirmative vote of the holders
of a majority of the Shares then outstanding and the approval of a majority of
the Series A Preferred Stock, voting as a separate class). This Agreement has
been duly and validly executed and delivered by SymmetriCom and, assuming the
due and valid authorization, execution and delivery of this Agreement by
Purchaser and Purchaser Sub, constitutes a valid and binding obligation of
SymmetriCom enforceable against SymmetriCom in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
SECTION 4.04 No Conflict; Required Filings and Consents.
(a) None of the execution, delivery or performance of this Agreement by
SymmetriCom, the consummation by SymmetriCom of the transactions contemplated
hereby or the compliance by SymmetriCom with any of the provisions hereof will
(i) conflict with or violate the Articles of Incorporation or By-Laws of
SymmetriCom, (ii) conflict with or violate any statute, ordinance, rule,
regulation, order, judgment or decree applicable to SymmetriCom, or by which its
properties or assets may be bound or affected.
(b) None of the execution, delivery or performance of this Agreement by
SymmetriCom, the consummation by SymmetriCom of the transactions contemplated
hereby or the compliance by SymmetriCom with any of the provisions hereof will
require any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to by SymmetriCom (any of the
foregoing being a "Consent"), any government or subdivision thereof, domestic,
foreign or supranational or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational (a "Governmental Entity"), except for (i) the filing of a
certificate of merger pursuant to the GCL, (ii) notifications required by
certain environmental statutes, and (iii) compliance with the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
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(c) SymmetriCom is not subject to, or a party to, any charter, bylaw,
mortgage, lien, lease, license, permit, instrument, order, judgment or decree,
or any other agreement, contract or restriction of any kind or character which
would prevent consummation of the transactions contemplated by this Agreement or
compliance by SymmetriCom with the terms, conditions and provisions hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUB
Purchaser and Purchaser Sub represent and warrant to the Company that:
SECTION 5.01 Organization and Qualification. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its organization and each material subsidiary of Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Purchaser Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its organization. Each of Purchaser and its material subsidiaries (including
Purchaser Sub) has the requisite corporate power and authority to own, operate
or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary, except where the failure to have such power or
authority, or the failure to be so qualified, licensed or in good standing,
would not have a Material Adverse Effect on Purchaser. The term "Material
Adverse Effect on Purchaser," as used in this Agreement, means any adverse
change, circumstance or effect that, individually or in the aggregate with all
other adverse changes, circumstances and effects, has had or will have a
materially adverse effect on the business, financial condition, properties or
results of operations of Purchaser and its Subsidiaries taken as a whole
provided, however, that an effect of less than $100,000 shall be deemed not to
be a Material Adverse Effect.
SECTION 5.02 Authority Relative to this Agreement. Each of Purchaser and
Purchaser Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Purchaser and Purchaser Sub and
the consummation by Purchaser and Purchaser Sub of the transactions contemplated
hereby have been duly and validly authorized and approved by the Boards of
Directors of Purchaser and Purchaser Sub and by Purchaser as sole stockholder of
Purchaser Sub, and no other corporate proceedings on the part of Purchaser or
Purchaser Sub are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of Purchaser and Purchaser Sub and, assuming the
due and valid authorization, execution and delivery by the Company, constitutes
a valid and binding obligation of each of Purchaser and Purchaser Sub
enforceable against each of them in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency,
25
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by Purchaser or
Purchaser Sub, the consummation by Purchaser or Purchaser Sub of the
transactions contemplated hereby or compliance by Purchaser or Purchaser Sub
with any of the provisions hereof will (i) conflict with or violate the
organizational documents of Purchaser or Purchaser Sub, (ii) conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to Purchaser or Purchaser Sub, or any of their subsidiaries, or by
which any of them or any of their respective properties or assets may be bound
or affected, or (iii) result in a Violation pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Purchaser or Purchaser Sub, or any of
their subsidiaries, is a party or by which any of their respective properties or
assets may be bound or affected, except in the case of the foregoing clauses
(ii) and (iii) for any such Violations which would not have a Material Adverse
Effect on Purchaser or materially adversely affect the ability of Purchaser or
Purchaser Sub to consummate the transactions contemplated hereby.
(b) None of the execution and delivery of this Agreement by Purchaser and
Purchaser Sub, the consummation by Purchaser and Purchaser Sub of the
transactions contemplated hereby or compliance by Purchaser and Purchaser Sub
with any of the provisions hereof will require any Consent of any Governmental
Entity, except for (i) the filing of a certificate of merger pursuant to the
GCL, (ii) compliance with the HSR Act and any requirements of any foreign or
supranational Antitrust Laws and (iii) Consents the failure of which to obtain
or make would not have a Material Adverse Effect on Purchaser or materially
adversely affect the ability of Purchaser or Purchaser Sub to consummate the
transactions contemplated hereby.
SECTION 5.04 Financing. Subject to the condition set forth in Section
7.02(i), Purchaser or Purchaser Sub will have available to it at the time
required the funds necessary to consummate the Merger and the transactions
contemplated hereby.
SECTION 5.05 Brokers. None of Purchaser, Purchaser Sub, any of their
Subsidiaries, or any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, other than Purchaser's engagement of X.X. Xxxxxxx with respect
to a fairness opinion, whose fees will be paid by Purchaser.
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ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as expressly
contemplated by this Agreement or with the prior written consent of Purchaser,
during the period from the date of this Agreement to the Effective Time, the
Company will conduct its operations only in the ordinary and usual course of
business consistent with past practice and will use its best reasonable efforts
to preserve intact the business organization of the Company, to keep available
the services of its present officers and key employees, and to preserve the good
will of those having business relationships with it. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, the Company will not, prior to the Effective Time, without the
prior written consent of Purchaser:
(a) adopt any amendment to its Certificate of Incorporation or By-laws or
comparable organizational documents;
(b) issue, reissue, pledge or sell, or authorize the issuance, reissuance,
pledge or sale of (i) additional shares of capital stock of any class, or
securities convertible into, exchangeable for or evidencing the right to
substitute for, capital stock of any class, or any rights, warrants, options,
calls, commitments or any other agreements of any character, to purchase or
acquire any capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, capital stock, other
than the issuance of Shares, pursuant to the exercise of Options outstanding on
the date hereof, or (ii) any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any class
or series of its capital stock;
(d) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock, or any of its other securities other than (i) the purchase
and cancellation of Options in accordance with Section 1.09 of the Agreement or
(ii) repurchases from employees at cost upon termination of their employment
with the Company;
(e) except for increases in salary and wages granted to officers and
employees of the Company in conjunction with promotions or other changes in job
status or normal compensation reviews in the ordinary course of business
consistent with past practice (all of which shall be promptly disclosed to
Purchaser), increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees, or pay or award any benefit not
required by any existing plan or arrangement (including, without limitation, the
granting of stock options pursuant to the Option Plans or otherwise) or grant
any additional severance or termination pay to (other than as
27
required by existing agreements or policies listed on Schedule 5.01(e) hereto),
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or, except pursuant to arrangements disclosed
in Schedule 5.01(e) or as required by Section 1.09, establish, adopt, enter
into, amend, accelerate any rights or benefits or waive any performance or
vesting criteria under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees
(any of the foregoing being an "Employee Benefit Arrangement"), except in each
case to the extent required by applicable law or regulation; provided, however,
that nothing herein will be deemed to prohibit the payment of benefits as they
become payable;
(f) acquire, sell, lease or dispose of any assets or securities which are
material to the Company, or enter into any commitment to do any of the foregoing
or enter into any material commitment or transaction, in each case outside the
ordinary course of business consistent with past practice;
(g) (i) except for drawdowns and the payment of the Inter-Company Loan
described in Section 1.10 hereof, incur, assume or pre-pay any long-term debt or
incur or assume any short-term debt, except that the Company may incur or pre-
pay debt in the ordinary course of business in amounts and for purposes
consistent with past practice, (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person except in the ordinary course of business
consistent with past practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other Person except in the ordinary
course of business consistent with past practice;
(h) settle or compromise any suit or claim or threatened suit or claim;
(i) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any contract, (ii) waive, release,
relinquish or assign any contract (or any of the Company's rights thereunder),
right or claim, or (iii) cancel or forgive any indebtedness owed to the Company;
(j) make any tax election not required by law or settle or compromise any
tax liability, in either case that is material to the Company except for an
election pursuant to Section 338(h)10 of the Code in connection with this
Agreement and the transactions contemplated hereunder;
(k) make any material change, other than in the ordinary course of business
and consistent with past practice or as required by applicable law, regulation
or change in generally accepted accounting principles, applied by the Company
(including tax accounting principles);
28
(l) release any Person or entity from, or waive any provision of, or any
confidentiality agreement between it and another person or entity;
(m) agree in writing or otherwise to take any of the foregoing actions
prohibited under Section 5.01 or any action which would cause any representation
or warranty in this Agreement to be or become untrue or incorrect in any
material respect; or
(n) take any action that is outside the normal course of business consistent
with past practice to defer the payment of payables, or to accelerate the
collection of receivables.
SECTION 6.02 Access to Information. From the date of this Agreement until
the Effective Time, the Company will, and will cause its officers, directors,
employees, counsel, advisors and representatives (collectively, the "Company
Representatives"), to give Purchaser and Purchaser Sub and their respective
officers, employees, counsel, advisors and representatives (collectively, the
"Purchaser Representatives") reasonable access, during normal business hours, to
the offices and other facilities and to the books and records of the Company and
will cause the Company Representatives to furnish Purchaser, Purchaser Sub and
Purchaser Representatives to the extent available with such financial and
operating data and such other information with respect to the business and
operations of the Company as Purchaser and Purchaser Sub may from time to time
reasonably request. Purchaser will comply with the terms of the Confidentiality
Agreement (as hereinafter defined).
SECTION 6.03 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided and to applicable
legal requirements, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, and to assist and cooperate with the other parties hereto in doing, as
promptly as practicable, all things necessary, proper or advisable under
applicable laws and regulations to ensure that the conditions set forth in
Article VII are satisfied, to remove any injunctions or other impediments or
delays, legal or otherwise and to consummate and make effective the transactions
contemplated by this Agreement.
(b) If at any time after the Effective Time any reasonable further action is
necessary or desirable to carry out the purposes of this Agreement, including
the execution of additional instruments, the proper officers and directors of
each party to this Agreement shall take all such necessary or desirable
reasonable action.
SECTION 6.04 Consents.
(a) Each of the parties will use its reasonable best efforts to obtain as
promptly as practicable all Consents of any Governmental Entity or any other
public or private person required in connection with, and waivers of any
Violations that may be caused by, the consummation of the transactions
contemplated by this Agreement.
29
(b) Each of the Company and Purchaser shall use its reasonable best efforts
to file as soon as practicable notifications under the HSR Act and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any other Governmental
Entity in connection with antitrust matters. The Purchaser (or the Purchaser
Sub) and the Company (or SymmetriCom) will each pay one-half of the filing fee
of the HSR notification.
(c) In furtherance and not in limitation of the foregoing, each of Purchaser
and the Company shall use its reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any antitrust, competition or trade
regulatory laws, rules or regulations of any Governmental Entity ("Antitrust
Laws"); provided, however, that nothing in this Agreement shall require, or be
construed to require, Purchaser or any of its affiliates to proffer to, or agree
to, sell or hold separate and agree to sell, before or after the Effective Time,
any assets, businesses, or interest in any assets or businesses of Purchaser,
the Company or any of their respective affiliates (or to consent to any sale, or
agreement to sell, by the Company of any of its assets or businesses) or to
agree to any changes or restrictions in the operations of any such assets or
businesses.
(d) Any party hereto shall promptly inform the others of any material
communication from the United States Federal Trade Commission, the Department of
Justice or any other governmental authority regarding any of the transactions
contemplated by this Agreement. If any party or any affiliate thereof receives a
request for additional information or documentary material from any such
government or authority with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request. Purchaser will
advise the Company promptly in respect of any understandings, undertakings or
agreements (oral or written) which Purchaser proposes to make or enter into with
the Federal Trade Commission, the Department of Justice or any other domestic or
foreign government or governmental or multinational authority in connection with
the transactions contemplated by this Agreement.
SECTION 6.05 Public Announcements. The mutual press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Purchaser, the Company and SymmetriCom. Thereafter, so long as this Agreement is
in effect prior to the Closing, neither Purchaser nor Purchaser Sub, on the one
hand, nor the Company nor any affiliate of the Company, on the other, shall
issue any press release or otherwise make any public statement with respect to
the transactions contemplated by this Agreement without prior consultation with
the other party, except as may be required by law (it being understood and
agreed that each of Purchaser and the Company's parent corporation, SymmetriCom,
intends to file a Current Report on Form 8-K with respect to the transaction
contemplated hereby promptly after the date hereof).
30
SECTION 6.06 Notification of Certain Matters. The parties shall promptly
notify each other of (a) the occurrence or non-occurrence of any fact or event
regarding such notifying party which would be reasonably likely (i) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (ii) to cause any material covenant, condition or agreement
under this Agreement not to be complied with or satisfied in all material
respects and (b) any failure of the notifying party, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder.
SECTION 6.07 Acquisition Proposals. Neither the Company nor any stockholder
shall (nor shall the Company permit any of its Affiliates to) directly or
indirectly, solicit, initiate or encourage any inquiries or the making of any
proposals from, engage or participate in any negotiations or discussions with,
provide any confidential information or data to, or enter into (or authorize)
any agreement or agreement in principle with any Person or announce any
intention to do any of the foregoing, with respect to any offer or proposal to
acquire all or any substantial part of the assets, properties, or the business
of the Company or the Shares, whether by merger, purchase of capital stock or
assets or otherwise (a "Competing Proposal"); provided, however, that at any
time prior to the approval of the Merger by the Company Stockholders', the
Company may furnish information to, and negotiate or otherwise engage in
discussions with, any party who delivers an unsolicited Competing Proposal to
the Company, if and so long as the Board of Directors of the Company determines
in good faith by a majority vote (after consultation with and receipt of written
advice from outside counsel which is consistent with such a determination) that
failing to take such action would constitute a breach of the fiduciary duties of
the Board of Directors of the Company under applicable Law. The Company shall
immediately advise Purchaser, in writing, of any inquiry, offer or proposal
regarding a Competing Proposal and/or any determination by the Company's Board
of Directors with respect thereto, and shall keep Purchaser informed at all
times of the status thereof.
SECTION 6.08 Additional SymmetriCom Obligations. In order to induce
Purchaser to enter into this Agreement, and as further consideration for the
promises and mutual covenants herein, SymmetriCom further represents, warrants
and covenants with Purchaser as follows:
(a) Voting. SymmetriCom will vote or cause to be voted all shares of
capital stock of the Company owned of record or beneficially owned or held in
any capacity by it or under its control in favor of the Merger and other
transactions provided for in or contemplated by this Agreement.
(b) Restriction on Transfer. SymmetriCom will not sell, transfer, pledge or
otherwise dispose of any of the Shares or any interest therein or agree to sell,
transfer, pledge or otherwise dispose of any of the Company or any interest
therein prior to Closing or the termination of this Agreement, without
Purchaser's express written consent.
31
SECTION 6.09 Certain Tax Matters
(a) Liability for Taxes.
(i) SymmetriCom shall be liable for all Taxes (A) imposed on the Company or
any corporation (other than the Company) that joins with SymmetriCom in filing a
combined or consolidated tax return (the "Company Tax Group") for any taxable
year, or (B) imposed on the Company or for which the Company may otherwise be
liable, for any taxable year or period that ends on or before the Closing Date
(including Income Taxes attributable to the Section 338(h) (10) Election) (a
"Pre-Closing Period") and, with respect to any period beginning prior to the
Closing Date and which does not terminate on the Closing Date (a "Straddle
Period"), the portion of such Straddle Period ending on and including the
Closing Date; provided, however, that SymmetriCom shall not be liable for and
shall not indemnify Purchaser for any (i) Taxes (other than Taxes attributable
to the Section 338(h) (10) Election) imposed on the Company as a result of
transactions (other than transactions in the ordinary course of business)
occurring on the Closing Date that are properly allocable to the portion of the
Closing Date after the Closing or (ii) any Taxes (other than income, franchise
or similar Taxes) reflected on the Current Balance Sheet or incurred in the
ordinary course of business since the Current Balance Sheet ((i) and (ii) being
referred to as "Excluded Taxes"). SymmetriCom shall be entitled to any refund
of Taxes for which it is liable pursuant to this paragraph (a) (i).
(ii) Purchaser shall be liable for (A) all Taxes imposed on the Company, or
for which the Company may otherwise be liable, for any taxable year or period
that begins after the Closing Date (a "Post-Closing Period") and, with respect
to any Straddle Period, the portion of such Straddle Period beginning after the
Closing Date and (B) any Excluded Taxes. Purchaser shall be entitled to any
refund of Taxes for which it is liable pursuant to this paragraph (a)(ii).
(iii) For purposes of paragraphs (a)(i) and (a)(ii) of this Section 6.09,
whenever it is necessary to determine the liability for Taxes of SymmetriCom for
a portion of any Straddle Period, the determination of the Taxes of the Company
for the portion of the Straddle Period ending on and including, and the portion
of the Straddle Period beginning after, the Closing Date shall be determined by
assuming that the Straddle Period consisted of two taxable years or periods, one
which ended at the close of the Closing Date and the other which began at the
beginning of the day following the Closing Date, and items of income, gain,
deduction, loss or credit of the Company for the Straddle Period shall be
allocated between such two taxable years or periods on a "closing of the books
basis" by assuming that the books of the Company were closed at the close of the
Closing Date; provided, however, that (I) Taxes imposed on the Company as a
result of transactions (other than transactions in the ordinary course of
business) occurring on the Closing Date that are properly allocable to the
portion of the Closing Date after the Closing shall be allocated to the taxable
year or period that is deemed to begin at the beginning of the day following the
Closing Date and (II) exemptions, allowances or deductions that are calculated
on an annual basis, such as the deduction for depreciation, shall be apportioned
between such two taxable years or
32
periods on a daily basis. For purposes of paragraphs (a)(i) and (a)(ii) of this
Section 6.09, whenever it is necessary to determine the liability for Taxes
(other than Excluded Taxes) attributable to real or personal property Taxes of
the Company for a portion of any Straddle Period, the total amount of such Taxes
for the period in question shall be multiplied by a fraction, the numerator of
which is the number of days of the Straddle Period that are in the Pre-Closing
Period and the denominator of which is the total number of days in the Straddle
Period; provided, however, that any amount of Straddle Period Taxes attributable
to the increase in the assessed value of real or personal property as a result
of the transactions contemplated by this Agreement shall be borne by Purchaser.
(iv) For purposes of paragraphs (a) (i) and (a) (ii) of this Section 6.09
whenever it is necessary to allocate an item of income, gain, deduction, loss or
credit to either a taxable year or period that ends on or before the Closing
Date or a taxable year or period that begins after the Closing Date, rules
consistent with those in Treas. Reg. (S) 1.1502-76(b) shall be applied.
(v) If, as a result of any action, suit, investigation, audit, claim,
assessment or amended Tax Return, there is any change after the Closing Date in
an item of income, gain, loss, deduction or credit that results in an increase
in an Income Tax liability for which SymmetriCom would otherwise be liable
pursuant to paragraph (a) (i) of this Section 6.09, and such change results in a
decrease in the Income Tax liability of the Company, Purchaser, or any Affiliate
or successor thereof for any taxable year or period beginning after the Closing
Date or for the portion of any Straddle Period beginning after the Closing Date,
SymmetriCom shall not be liable pursuant to such paragraph (a) (i) with respect
to such increase to the extent of such decrease. If, as a result of any action,
suit, investigation, audit, claim, assessment or amended Income Tax Return,
there is any change after the Closing Date in an item of income, gain, loss,
deduction or credit that results in an increase in an Income Tax liability for
which Purchaser would otherwise be liable pursuant to paragraph (a) (ii) of this
Section 6.09, and such change results in a decrease in the Income Tax liability
of SymmetriCom or any Affiliate or successor thereof (other than the Company)
for any taxable year or period ending on or before the Closing Date or for the
portion of any Straddle Period ending on the Closing Date (other than by reason
of a carryback of losses or deductions), Purchaser shall not be liable pursuant
to such paragraph (a) (ii) with respect to such increase to the extent of such
decrease.
(vi) Purchaser shall pay all Transfer Taxes. For purposes of this
Agreement, "Transfer Taxes" means all stamp, recordation, sales, use, real
property transfer or gains or similar transfer Taxes attributable to the actual
or deemed transfer of property or stock from SymmetriCom or the Company to
Purchaser or the Company, together with any penalties or interest with respect
to such taxes.
(vii) On or prior to the Closing Date, all Tax Sharing Arrangements (other
than this Agreement) between the Company, on one hand, and SymmetriCom or any
member of the Company Tax Group, on the other hand, shall terminate and the
Company shall not have any further rights or obligations thereunder. For
purposes of this paragraph, a "Tax Sharing
33
Arrangement" shall mean any agreement or arrangement for the allocation or
payment of Tax liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Tax Return which Tax Return includes the
Company.
(b) Tax Returns.
(i) SymmetriCom shall file or cause to be filed when due all Tax Returns
that are required to be filed by or with respect to the Company for taxable
years or periods ending on or before the Closing Date and which relate to Taxes
for which SymmetriCom is liable pursuant to Section 6.09(a)(i) and shall remit
any Taxes due in respect of such Tax Returns, and Purchaser shall file or cause
to be filed when due all Tax Returns that are required to be filed by or with
respect to the Company for taxable years or periods ending after the Closing
Date and shall remit any Taxes due in respect of such Tax Returns. Any Tax
Returns required to be filed by Purchaser pursuant to this Section 6.09 relating
in whole or in part to Taxes for which SymmetriCom is liable pursuant to
paragraph (a)(i) of this Section 6.09 shall be submitted to SymmetriCom for
SymmetriCom's approval (which approval shall not be unreasonably withheld) prior
to Purchaser filing such Tax Returns. SymmetriCom or Purchaser shall reimburse
the other party for the Taxes for which SymmetriCom or Purchaser is liable
pursuant to paragraphs (a)(i) and (ii) of this Section 6.09 but which are
payable with Tax Returns to be filed by the other party pursuant to the second
preceding sentence upon the written request of the party entitled to
reimbursement, setting forth in detail the computation of the amount owed by
SymmetriCom or Purchaser, as the case may be, but in no event earlier than ten
(10) days prior to the due date for the payment of such Income Taxes.
(ii) With respect to the period prior to the Closing Date, Purchaser shall
promptly cause the Company to prepare and provide to SymmetriCom a package of
tax information materials, including, without limitation, schedules and work
papers (the "Tax Package"), required by the Company to enable the Company to
prepare and file all Income Tax Returns required to be prepared and filed by it
pursuant to paragraph (b) of this Section 6.09. The Tax Package shall be
completed in accordance with past practice, including past practice as to
providing such information, and as to the method of computation of separate
taxable income or other relevant measure of income of the Company. SymmetriCom
shall cooperate with any reasonable request for information by Purchaser or the
Company made in connection with the preparation of the Tax Package. Purchaser
shall cause the Tax Package to be delivered to SymmetriCom within ninety (90)
days after the Closing Date.
(c) Contest Provisions.
(i) Purchaser shall promptly notify SymmetriCom in writing upon receipt by
Purchaser, any of its Affiliates or the Company of notice of any pending or
threatened federal, state, local or foreign Tax audits, examinations or
assessments which may affect any Income Tax liability for which SymmetriCom is
liable pursuant to paragraph (a)(i) of this Section 6.09, provided that failure
to comply with this provision shall not affect Purchaser's right to
indemnification
34
hereunder except to the extent such failure materially impairs SymmetriCom's
ability to contest any such Income Tax liabilities.
(ii) SymmetriCom shall have the sole right to represent the Company's
interests in any Income Tax audit or administrative or court proceeding relating
to taxable periods ending on or before the Closing Date, and to employ counsel
of its choice at its expense. In the case of any Straddle Period, SymmetriCom
shall be entitled to participate at its expense in any Tax audit or
administrative or court proceeding relating (in whole or in part) to Taxes
attributable to the portion of such Straddle Period ending on and including the
Closing Date and, with the written consent of Purchaser, and at SymmetriCom's
sole expense, may assume the entire control of such audit or proceeding.
Purchaser and SymmetriCom each agrees not to (and Purchaser shall cause its
Affiliates, including, after the Closing Date, the Company, and the Company
shall cause its Affiliates, not to) agree to settle any Tax claim which may be
the subject of indemnification by the other party pursuant to Section 6.09
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld).
(d) Assistance and Cooperation. After the Closing Date, each of SymmetriCom
and Purchaser shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which such other
party is responsible for preparing and filing in accordance with paragraph (b)of
this Section 6.09;
(ii) cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Company.
(iii) make available to the other for inspection and duplication and to any
taxing authority as reasonably requested all information, records, and documents
relating to Taxes of the Company and shall maintain such information, records
and documents for a period of 15 years from the Closing Date.
(iv) provide timely notice to the other in writing of any pending or
threatened Tax audits or assessments of the Company for taxable periods for
which the other may have a liability under this Section 6.09; and
(v) furnish the other with copies of all correspondence received from any
taxing authority in connection with any Tax audit with respect to any taxable
period for which the other may have a liability under this Section 6.09.
(e) Election Under Section 338(h)(10).
(i) SymmetriCom and Purchaser shall make a joint election for the Company
under Section 338(h)(10) of the Code with respect to the purchase of the Company
capital
35
stock effected by the Merger (the "Section 338(h)(10) Election") together with
any corresponding elections under state and local tax laws. SymmetriCom and
Purchaser shall within ninety (90) days of the Closing exchange completed and
executed copies of Internal Revenue Service Form 8023, any required schedules
thereto, and any similar state forms. If any changes are required in these
forms as a result of information which is first available after the Closing
Date, the parties will promptly agree on such changes.
(ii) At the Closing, Purchaser and SymmetriCom shall agree on a written
schedule (the "Allocation Schedule") allocating the Modified Adjusted Deemed
Sales Price, as defined in Treas. Reg. (S) 1.338(h) (10)-1(f), for the Company,
among the assets of the Company. The Allocation Schedule shall be reasonable and
shall be prepared in accordance with Section 338(h)(10) of the Code and the
regulations thereunder. Purchaser and SymmetriCom each agrees to file (and to
cause their respective Affiliates to file) all federal, state, local and foreign
Tax Returns consistent with the Allocation Schedule.
(f) FIRPTA Certificate. At or prior to the Closing, the Company shall
provide Purchaser with a certificate described in Treas. Reg. (S) 1.1445-2(b)
(2) to the effect that, as contemplated by such certificate, SymmetriCom is not
a foreign corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in the Code and Treasury Regulations).
(g) References to Company. References in this Section 6.09 to the Company
shall mean, with respect to any period after the Effective Time, the Surviving
Corporation.
(h) Treatment of Transaction. SymmetriCom and Purchaser shall, and shall
cause their respective Affiliates to, treat the Merger for all Tax purposes as a
purchase by Purchaser from SymmetriCom of the Company's capital stock.
(i) Adjustment to Purchase Price. Any payment by Purchaser or SymmetriCom
to the other party under this Section 6.09 will be deemed to be an adjustment to
the Purchase Price.
SECTION 6.10 Linfinity Audited Financials. Within sixty (60) days of the
Closing, SymmetriCom will at its expense and using its current auditors provide
to Purchaser audited financial statements for Linfinity for the three year
period ended on June 30, 1998. Following the Closing Microsemi and Linfinity
will provide SymmetriCom and its auditors with full access to the books and
records of Linfinity for purposes of completion of the audited financials under
this Section 6.10.
36
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the Stockholders of the Company by the requisite vote
under applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality seeking any of the foregoing be
pending; nor shall there be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal. All waiting periods, if any,
under the HSR Act relating to the transactions contemplated hereby will have
expired or terminated early.
SECTION 7.02 Additional Conditions to Obligations of Purchaser and Purchaser
Sub. The obligations of Purchaser and Purchaser Sub to consummate the Merger
and the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by Purchaser:
(a) Representations and Warranties. The representations and warranties of
the Company and SymmetriCom contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of the Company and SymmetriCom contained in
this Agreement shall be true and correct in all material respects on and as of
the Effective Time except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct in all material respects as
of such date), with the same force and effect as if made on and as of the
Effective Time, except in such cases where all of the failures of any kind to be
so true and correct would not in the aggregate have a Material Adverse Effect on
the Company.
(b) Agreements and Covenants. The Company and SymmetriCom shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Effective Time.
37
(c) Material Adverse Effect. There shall not have occurred any event,
effect or change that has had or would reasonably be expected to have a Material
Adverse Effect on the Company.
(d) Certificate of the Company. Purchaser shall have been provided with a
certificate executed on behalf of the Company by its Chief Executive Officer,
President or Chief Financial Officer or higher ranking officer and by the Chief
Executive Officer of SymmetriCom to the effect that, as of the Effective Time
the conditions set forth in Section 7.02(a), (b), (f) and (g) have been
satisfied.
(e) Legal Opinion. Purchaser shall have received a legal opinion from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx (counsel to the Company) in substantially the
form attached hereto as Exhibit B hereto.
(f) Inter-Company Loan. The Inter-Company Loan shall have been paid and/or
canceled on or prior to the Closing.
(g) Assignment and Assumption of Bonus Plan. The Bonus Plan shall have been
effectively and legally assigned to and assumed by SymmetriCom subject to the
right of SymmetriCom to use any Linfinity excess cash against its obligations
thereunder pursuant to Section 1.10 hereof.
(h) Financing. All of the conditions set forth in the commitment letter for
a $60,000,000 Senior Secured Credit Facility, arranged by CIBC Xxxxxxxxxxx
Corp., to Purchaser dated January 15, 1999 as amended by a side letter dated
February ___, 1999 shall have been satisfied or met, other than those incumbent
upon Purchaser.
SECTION 7.03 Additional Conditions to the Obligations of the Company and
SymmetriCom. The obligations of the Company and SymmetriCom to consummate the
Merger and the transactions contemplated by this Agreement shall be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties of
the Purchaser and Purchaser Sub contained in this Agreement shall have been true
and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of the Purchaser and Purchaser Sub
contained in this Agreement shall be true and correct in all material respects
on and as of the Effective Time except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct in all
material respects as of such date), with the same force and effect as if made on
and as of the Effective Time, except in such cases where the failure to be so
true and correct would not have a Material Adverse Effect on the Purchaser and
Purchaser Sub.
38
(b) Agreements and Covenants. Purchaser and Purchaser Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time;
(c) Legal Opinion. The Company shall have received a legal opinion from
legal counsel to Purchaser, substantially in the form attached hereto as Exhibit
D.
(d) Certificate of Purchaser. The Company shall have been provided with a
certificate executed on behalf of Purchaser by its Chief Executive Officer,
President or Chief Financial Officer to the effect that, as of the Effective
Time, the conditions set forth in this Section 7.03, (a) and (b) have been
satisfied.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. Except as provided in Section 8.02 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Company and Purchaser;
(b) by the Company or Purchaser if: (i) there shall be a final
nonappealable order of a foreign, federal or state court in effect preventing
consummation of the Merger; or (ii) there shall be any statute, rule, regulation
or order enacted, promulgated or issued or deemed applicable to the Merger by
any Governmental Entity that would make consummation of the Merger illegal;
(c) by the Company or Purchaser if it is not in material breach of its
obligations under this Agreement and if the Effective Time has not occurred
before 5:00 p.m. (Pacific Standard time) forty-five (45) days following the
later of: (i) the date of this Agreement; and (ii) the date the HSR notification
is filed pursuant to Section 6.04 hereof (provided that the right to terminate
this Agreement under this Section 8.01(c) shall not be available to a party
whose failure to fulfill any obligation hereunder has been a principal cause of
the failure of the Effective Time to occur on or before such date of termination
or if the failure of the Effective Time to occur on or before such date has
resulted principally from such failure of such party);
(d) by Purchaser if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger, by any Governmental Entity, which would: (i) prohibit the Purchaser's
ownership or operation of all or any portion of the business of the Company or
(ii) compel Purchaser or the Company to dispose of or hold separate, all or a
portion of the business or assets of Purchaser or the Company as a result of the
Merger;
39
(e) by SymmetriCom or the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Purchaser or Purchaser Sub and such breach has not been cured within
ten (10) business days after written notice to Purchaser; provided, however,
that, no cure period shall be required for a breach which by its nature cannot
be cured;
(f) by Purchaser if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
SymmetriCom or the Company and such breach has not been cured within ten (10)
business days after written notice to the Company; provided, however, that, no
cure period shall be required for a breach which by its nature cannot be cured;
(g) by Purchaser if an event, effect or change having or which reasonably
would be expected to have a Material Adverse Effect on the Company shall have
occurred after the date of this Agreement;
Where action is taken to terminate this Agreement pursuant to this Section 8.01,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
SECTION 8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Purchaser or
the Company, or their respective officers, directors or Stockholders, provided
that the provisions of Section 8.05 and this Section 8.02 of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
SECTION 8.03 Amendment. Except as is otherwise required by applicable law,
this Agreement may be amended by the parties hereto at any time by execution of
an instrument in writing signed on behalf of each of the parties hereto.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective Time,
the Company and SymmetriCom, on the one hand, and Purchaser and Purchaser Sub,
on the other hand, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. Any waiver or extension given under this
Section 8.04 shall not operate as a waiver of extension with respect to any
subsequent or other failure.
SECTION 8.05 Fees and Expenses; Termination Fee.
40
(a) Except as expressly contemplated by this Agreement, including but not
limited to the provisions of Section 8.05(b) and (c), each party hereto shall
bear its own expenses and costs in connection with this Agreement and the
transactions contemplated hereby.
(b) SymmetriCom shall pay Purchaser a liquidated damages termination fee of
$500,000 upon the termination of this Agreement by Purchaser and/or Purchaser
Sub pursuant to Section 8.01(f);
(c) Purchaser shall pay SymmetriCom a liquidated damages termination fee of
$500,000 upon the termination of this Agreement by SymmetriCom and/or the
Company pursuant to Section 8.01(e);
(d) The fees payable pursuant to Section 8.03(b) or (c), as the case may be,
shall be paid within three (3) business days after demand therefor has been
notified in accordance with this Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 Survival of Representations and Warranties.
(a) The representations and warranties of SymmetriCom and Linfinity set
forth in Article III of this Agreement shall survive the Closing until the first
anniversary thereof, provided, however, that the representations and warranties
of SymmetriCom and the Company contained in Sections 3.05, 3.11, 3.13 and 3.22
shall survive the Closing until the second anniversary thereof, and provided
further that Sections 3.01, 3.03, 3.04, 4.02 and 4.03 shall survive the Closing
indefinitely.
(b) The representations and warranties of SymmetriCom in Article IV (other
than those set forth in Sections 4.02 and 4.03) of this Agreement and the
representations and warranties of Purchaser and Purchaser Sub in Article V of
this Agreement shall terminate upon the Closing.
SECTION 9.02 SymmetriCom Indemnity.
(a) SymmetriCom shall indemnify, defend and hold harmless Purchaser, its
subsidiaries, including but not limited to the Surviving Corporation, and their
respective officers, directors, employees and agents (collectively, the
"Purchaser Indemnified Persons") against all claims, demands, actions,
obligations, suits, fines, losses, liabilities, damages, deficiencies, costs and
expenses, including without limitation reasonable attorneys', accountants' and
expert witness' fees, costs and expenses of investigation, and the costs and
expenses of enforcing the indemnification
41
(hereinafter individually a "Loss" and collectively "Losses") incurred by the
Purchaser Indemnified Persons and arising out of or relating to:
(i) any inaccuracy or breach by SymmetriCom and/or Linfinity of any
representation or warranty made by it under Article III of this Agreement,
except as set forth in Section 9.02(c) below;
(ii) any Losses related to claims by current or former employees of
Linfinity with respect to occurrences or omissions that took place prior to or
upon the Closing including, but not limited to, claims related to Options and
claims related to the Bonus Plan;
(iii) any liabilities of SymmetriCom provided for in Section 2.01 of this
Agreement; and
(iv) any liabilities of SymmetriCom provided for in Section 6.09(a)(i) of
this Agreement.
(b) Purchaser shall indemnify, defend and hold harmless SymmetriCom, its
subsidiaries and their respective officers, directors, employees and agents
(collectively, the "SymmetriCom Indemnified Persons") against any Loss or Losses
as defined in Section 9.02(a) incurred by any of them arising out of or relating
to:
(i) any inaccuracy or breach of the representations and warranties made by
Purchaser and/or Purchaser Sub in Article V of this Agreement;
(ii) any Losses or liabilities under Section 6.09(a)(ii) or (vi) of this
Agreement; and
(iii) any Losses or liabilities relating to the Company that arise or relate
solely to occurrences or omissions after the Closing.
(c) Notwithstanding Section 9.02(a)(i) above or anything to the contrary
contained in this Agreement:
(i) with respect to any remedial actions which are required or otherwise
recommended as set forth in that certain Fire, Life Safety and Code Compliance
Review dated August 20, 1997 by Xxxxxxx-Xxxxxxxx ("H6 Report"), the parties
acknowledge that the Purchase Price has been negotiated with the full
understanding of the matters raised in the H6 Report ("H6 Report Remedial
Actions"), and no claims shall be made by Purchaser against SymmetriCom with
respect to or otherwise arising out of the H6 Report or H6 Report Remedial
Actions (including, without limitation, any Third Party Claims of any kind or
nature, as defined hereinafter, arising out of SymmetriCom's failure to complete
any or all of the H6 Report Remedial Actions prior to the
42
Closing), nor shall SymmetriCom make any claims against Purchaser arising out of
Purchaser's failure to complete such H6 Report Remedial Actions after the
Closing; and
(ii) with respect to Section 3.15 and environmental representations set
forth in Article III, Purchaser and SymmetriCom acknowledge that Purchaser has
reviewed that certain report entitled Soil and Groundwater Investigations
Conducted at the Facilities Located at 00000 Xxxxxxx Xxxxxx and 00000 Xxxxxx
Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx prepared by XXX Xxxxxxx Xxxxxxxx Xxxxx and dated
January 27, 1999, and that certain Contingent Environmental Liability Report
dated January 25, 1999 by EQQUA (the "Phase II Site and Liability Assessments")
and Purchaser agrees that based on Purchaser's and its consultant's review of
the Phase II Site and Liability Assessments, SymmetriCom's liability for any
violations of the representations set forth in Section 3.15 or any other
environmental representations set forth in Article III shall be limited to the
$128,000. SymmetriCom shall not have any liability in excess of that provided
for in this Section 9.02(c)(ii) for any violations of the representations set
forth in Section 3.15 or any other environmental representations set forth in
Article III.
SECTION 9.03 Notification and Defense of Claims.
(a) Notification. Other than with respect to claims for indemnification
under Section 6.09 (which Section 6.09 claims shall be treated as provided for
therein), the "Indemnified Persons" (referred to hereinafter as the Purchaser
Indemnified Persons or the SymmetriCom Indemnified Persons, as the case may be)
will give written notice to the "Indemnitors" (referred to hereinafter as
SymmetriCom, in the case of indemnifications pursuant to Section 9.02(a)(i),
(ii) or (iii) and Purchaser, in the case of indemnifications pursuant to Section
9.02(b)(i) or (iii)) of any claim for Losses for which the Indemnified Persons
claim a right of indemnification under Section 9.02 (an "Indemnification
Notice"); provided, however, that if the Indemnified Persons have received from
any third party actual notice of any actual or threatened demand, claim,
action, suit, proceeding or investigation by such third party (a "Third Party
Claim"), then the Indemnified Persons shall provide the Indemnification Notice
to the Indemnitors within ten (10) days of receiving such actual notice; and
provided, further, that no failure to so notify the Indemnitors of a Third Party
Claim will relieve the Indemnitees of any obligation to indemnify the
Indemnified Persons unless and except to the extent that such failure to so
notify prejudices the position of the Indemnitors in responding to such Third
Party Claim. The Indemnification Notice shall include:
(i) A summary description of the facts giving rise to any indemnification
provided for in Section 9.02 (with such material detail and documents related
thereto as are then reasonably available to the Indemnified Persons), and will
specify the estimated amount of the Loss for which indemnification is claimed,
to the extent known to the Indemnified Persons; and
(ii) If the facts giving rise to any indemnification provided for in Section
9.02 involve a Third Party Claim, then the Indemnified Persons shall indicate
whether they have elected (1) to tender to the Indemnitors the defense of such
Third Party Claim through counsel
43
of the Indemnitors' own choosing, subject to the terms of Section 9.03(d) or
9.03(e), as the case may be, or (2) to assume the defense of any such Third
Party Claim through counsel of the Indemnified Persons' own choosing.
(b) Response. The Indemnitors will have twenty (20) days following delivery
of the Indemnification Notice to make such investigation of the claim as they
deem necessary or desirable. On or prior to the expiration of such 20-day
period, the Indemnitors will, by written notice to the Indemnified Persons (a
"Response Notice"):
(i) Either (1) admit liability in whole, (2) admit that the claim is so
covered by Section 9.02 but dispute the amount of the claim, or (3) dispute that
any amount of the claim is so covered; and
(ii) If the defense of a Third Party Claim has been tendered to the
Indemnitors pursuant to Section 9.03(a)(ii), indicate whether the Indemnitors
will assume or decline the tendered defense.
The failure of the Indemnitors to deliver to the Indemnified Persons a timely
Response Notice in accordance with this Section 9.03(b) will be deemed an
admission of liability for the entire Loss as set forth in the Indemnification
Notice and a decline to assume the tendered defense of a Third Party Claim, if
such defense has been tendered.
(c) Indemnity Disputes. If the Indemnitors deliver to the Indemnified
Persons a timely Response Notice pursuant to Section 9.03(b) disputing the
amount of the claim or disputing that the claim is covered by Section 9.02, or
if any other dispute arises with respect to this Article IX, then the
Indemnitors and the Indemnified Persons will use their best efforts to resolve
such dispute. In the event the Indemnitors and the Indemnified Persons resolve
the dispute, they will both execute a memorandum setting forth such resolution
and, if applicable, the amount of any Loss payable to the Indemnified Persons.
In the event the Indemnitors and the Indemnified Persons are unable to resolve
such dispute within thirty (30) days from the Indemnified Persons' receipt of
the Response Notice pursuant to Section 9.03(b), the Indemnitors and the
Indemnified Persons will be entitled to initiate legal proceedings in order to
resolve such dispute.
(d) Defense by Indemnitors. If the defense of a Third Party Claim is
tendered by the Indemnified Persons to the Indemnitors pursuant to Section
9.03(a)(ii) and is subsequently assumed by the Indemnitors, the Indemnified
Persons will be entitled, at their own expense, to participate in such
settlement or defense through counsel chosen by the Indemnified Persons. If the
Indemnitors assume the defense of the Third Party Claim, they will take all
steps reasonably necessary in the defense or settlement of the Third Party Claim
and will hold the Indemnified Persons harmless from and against all Losses
(other than the Indemnified Persons' expenses of participation in such defense
or settlement) caused by or arising out of any settlement thereof or any
judgment in connection therewith. The Indemnitor may not, in the defense of any
Third Party Claim they assume, except
44
with the written consent of the Indemnified Persons, consent to the entry of any
judgment or enter into any settlement (i) which does not include as an
unconditional term thereof the giving to the Indemnified Persons by the third
party of a full and final release from all liability in respect of such Third
Party Claim, (ii) which will limit, restrict or otherwise affect the right of
the Indemnified Persons to carry on or conduct business (then or in the future),
or require any payment to be made by the Indemnified Persons or limit, restrict,
make more expensive or less profitable or otherwise adversely affect the manner
in which the Indemnified Persons carry on or conduct business (then or in the
future) or (iii) under which the amount of settlement or judgment against the
Indemnified Persons exceeds the amount of indemnification for such Third Party
Claim then available to the Indemnified Persons from the Indemnitors.
(e) Defense by Indemnified Persons. If the Indemnitors do not assume the
defense of a Third Party Claim within the 20-day period required by Section
9.03(b), or if the Indemnified Persons assume the defense of any such Third
Party Claim pursuant to Section 9.03(a)(ii)(2), then the Indemnified Persons may
defend such Third Party Claim in such manner as they may deem appropriate, in
which case legal expenses of the Indemnified Persons' counsel and all other
expenses incurred in such defense will be promptly paid by the Indemnitors as
receipts, invoices or other reasonable evidence of such expenses are presented
to the Indemnitees. In such case, the Indemnified Persons may settle such Third
Party Claim on such terms as the Indemnified Persons reasonably deem
appropriate, and the Indemnitors will promptly pay the Indemnified Persons for
the Losses incurred as a result of such settlement for which the Indemnified
Persons are entitled to be indemnified. If no such settlement of such Third
Party Claim is made, the Indemnitors will promptly pay the Indemnified Persons
for the Losses arising out of any judgment rendered with respect to such Third
Party Claim; provided, however, that if such judgment is appealable and the
Indemnified Persons notify the Indemnitors of their intention not to appeal, the
Indemnitors may prosecute such appeal, at their sole cost and expense, subject
to the terms set forth in this Article IX. Notwithstanding anything in this
Article IX to the contrary, (i) the Indemnitors shall not be responsible for the
fees, costs or expenses of the Indemnified Persons in excess of such fees, costs
or expenses which are reasonable, and (ii) if the Indemnified Persons elect to
assume the defense of any Third Party Claim without first tendering the defense
of such Third Party Claim to the Indemnitees under Section 9.03(a)(ii), and if
the Indemnified Persons then enter into a settlement or consent to a judgment in
respect of such Third Party Claim without the approval of the Indemnitors (which
approval will not unreasonably be withheld), then the amount of such settlement
or judgment shall not be determinative of the amount of the Loss against which
the Indemnified Persons are entitled to indemnification under this Article IX.
In connection with any settlement entered into by the Indemnified Persons and
approved by the Indemnitees, the Indemnified Persons shall grant to the
Indemnitors an unconditional release in connection with the specific Losses to
which such settlement relates, contingent upon payment by the Indemnitors of the
amounts required by this Article IX (which amounts shall be specified in such
release).
45
SECTION 9.04 Order of Payment; Exclusion and Limitation of Liability.
Notwithstanding the foregoing Sections 9.01 through 9.03, the following
provisions shall apply in the event the Purchaser Indemnified Persons incur any
Losses covered by Section 9.02.
(a) Payment for Breach of SymmetriCom and Linfinity Representations and
Warranties. With respect to Losses arising in connection with Article III
(other than Sections 3.01, 3.03 and 3.04) and Section 9.02(a)(i) of this
Agreement, and subject to Section 9.02(c), the amount of any Loss against which
the Purchaser Indemnified Persons are entitled to indemnification under Section
9.02(a)(i) shall be limited to the Escrow Fund amount of $1,125,000 (as defined
under the Escrow Agreement) and shall be made under the terms of the Escrow
Agreement.
(b) De Minimus Losses. The Purchaser Indemnified Persons shall not be
entitled to make a claim for indemnification under Section 9.02(a)(i) until the
amount of Losses suffered by the Purchaser Indemnified Persons exceeds $100,000.
If the threshold amount is reached, the Purchaser Indemnified Persons may
recover the full amount of Losses, including the threshold amount.
(c) Limitation of Liability. In no case shall SymmetriCom be required to
provide indemnification under this Agreement in an amount in excess of the
amount of cash consideration it is entitled to receive under this Agreement;
provided, however that such limitation shall not apply in the case of actual
fraud by SymmetriCom.
(d) Non-Exclusion of Amounts Below Material Adverse Effect. In no event
shall the presence of any qualification of a representation or warranty with the
term "Material Adverse Effect" limit SymmetriCom's liability with respect to
indemnifying against the entire amount of Loss otherwise provided for in this
Agreement, including the portion which by itself would not constitute a
"Material Adverse Effect."
SECTION 9.05 General.
(a) For purposes of this Article IX, Purchaser shall be agent and attorney-
in-fact (the "Purchaser Indemnified Persons' Agent") for each Purchaser
Indemnified Person, to give and receive notices and communications, to request
delivery to Purchaser Indemnified Persons of monies subject to the Escrow
Agreement or otherwise due to the Purchaser Indemnified Persons hereunder, to
agree, negotiate, enter into settlements and compromises, demand initiation of
legal proceedings and comply with orders or awards in any such proceeding, and
to take all other actions necessary or appropriate in the judgment of the
Purchaser Indemnified Persons' Agent on behalf of the Purchaser Indemnified
Persons with respect to the matters subject to this Article IX or the Escrow
Agreement. No bond shall be required of the Purchaser Indemnified Persons'
Agent, and the Purchaser Indemnified Persons' Agent shall not receive
compensation for its services. Notices or communications to or from the
Purchaser Indemnified Persons' Agent shall constitute notice to or from each of
the Purchaser Indemnified Persons. A decision, act, consent or instruction of
the Purchaser Indemnified Persons' Agent shall constitute the decision, act,
consent or instruction of all
46
the Purchaser Indemnified Persons and shall be final, binding and conclusive
upon each of such Purchaser Indemnified Persons, and SymmetriCom and the Escrow
Agent (as such term is defined in the Escrow Agreement) may rely upon any such
decision, act, consent or instruction of the Purchaser Indemnified Persons'
Agent as being the decision, act, consent or instruction of each Purchaser
Indemnified Person, notwithstanding any notice to the contrary from any
Purchaser Indemnified Person. SymmetriCom and the Escrow Agent are hereby
relieved from any liability to any Purchaser Indemnified Person for any acts
done by them in accordance with such decision, act, consent or instruction of
the Purchaser Indemnified Persons' Agent.
(b) SymmetriCom shall be agent and attorney-in-fact (the "SymmetriCom
Indemnified Persons' Agent") for each SymmetriCom Indemnified Person, to give
and receive notices and communications, to request delivery to SymmetriCom
Indemnified Persons of monies due to the SymmetriCom Indemnified Persons
hereunder, to agree, negotiate, enter into settlements and compromises, demand
the initiation of legal proceedings and comply with orders or awards made in
such proceeding, and to take all other actions necessary or appropriate in the
judgment of the SymmetriCom Indemnified Persons' Agent on behalf of the
SymmetriCom Indemnified Persons with respect to the matters subject to this
Article IX or the Escrow Agreement. No bond shall be required of the
SymmetriCom Indemnified Persons' Agent, and the SymmetriCom Indemnified Persons'
Agent shall not receive compensation for its services. Notices or
communications to or from the SymmetriCom Indemnified Persons' Agent shall
constitute notice to or from each of the SymmetriCom Indemnified Persons. A
decision, act, consent or instruction of the SymmetriCom Indemnified Persons'
Agent shall constitute the decision, act, consent or instruction of all the
SymmetriCom Indemnified Persons and shall be final, binding and conclusive upon
each of such SymmetriCom Indemnified Persons, and Purchaser and the Escrow Agent
(as such term is defined in the Escrow Agreement) may rely upon any such
decision, act, consent or instruction of the SymmetriCom Indemnified Persons'
Agent as being the decision, act, consent or instruction of each SymmetriCom
Indemnified Person, notwithstanding any notice to the contrary from any
SymmetriCom Indemnified Person. Purchaser and the Escrow Agent are hereby
relieved from any liability to any SymmetriCom Indemnified Person for any acts
done by them in accordance with such decision, act, consent or instruction of
the SymmetriCom Indemnified Persons' Agent.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Entire Agreement; Assignment.
(a) This Agreement, including the Exhibits and Schedules hereto, and the
other documents and certificates delivered pursuant to the terms of this
Agreement, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements, communications,
47
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other party (except
that Purchaser may assign its rights and Purchaser may assign its rights,
interest and obligations to any affiliate or direct or indirect subsidiary of
Purchaser without the consent of the Company). Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 10.02 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
SECTION 10.03 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Purchaser or Purchaser Sub:
Microsemi Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Attn: Xxxxxx Xxxx, Xx.
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxxxxxx Xxxxx, Xx.
If to SymmetriCom:
SymmetriCom, Inc.
0000 Xxxxxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxxx
If to the Company:
48
Linfinity Microelectronics Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxx Xxxxxxxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.04 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.05 Consent to Jurisdiction; Waiver of Immunities. The Company,
SymmetriCom, Purchaser and Purchaser Sub irrevocably submit to the jurisdiction
of any California state or federal court thereof in any action or proceeding
arising out of or relating to this Agreement, and the Company, SymmetriCom,
Purchaser and Purchaser Sub hereby irrevocably agree that all claims in respect
of such action or proceeding may be heard and determined in such California
court or in such federal court. The Company, SymmetriCom, Purchaser and
Purchaser Sub agree that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
SECTION 10.06 Descriptive Headings. The descriptive headings and captions
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 10.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.08 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except with respect to
Section 1.09, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 10.09 Certain Definitions. As used in this Agreement:
49
(a) the term "Affiliate," as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" shall include individuals, corporations, partnerships,
trusts, other entities and groups (which term shall include a "group" as such
term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term "Subsidiary", "Subsidiaries" or "subsidiaries" means, with
respect to Purchaser, the Company or any other person, any corporation,
partnership, joint venture or other legal entity of which Purchaser, the Company
or such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 10.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 10.11 Arbitration. Each party for itself expressly (i) waives any
rights to a trial by jury in any action or proceeding to enforce or defend any
matter arising from or related to this Agreement; (ii) irrevocably submits to
the jurisdiction of any professional arbitration service in Orange County,
California, over any such action or proceeding; (iii) irrevocably waives the
defense of an inconvenient forum or improper venue to the maintenance of such
action or proceeding; (iv) agrees that an award in any such action or proceeding
shall be final, non-appealable, binding and conclusive and may be enforced in
any other jurisdiction by suit on the judgment or in any other manner provided
by law; (v) agrees not to institute any legal action or proceeding against a
party or its directors, officers, employees, agents or property concerning any
matter arising out of or relating to this Agreement in any court or forum other
than in an arbitration before such professional arbitration service in Orange
County, California; and (vi) agrees to accept and not to contest service of
process by certified mail in such actions, which method of service is deemed
adequate by the parties hereto. Except as expressly modified herein, the
parties are authorized in such arbitration proceedings to conduct discovery in
accordance with the California Code of Civil Procedure (S)(S) 1280 et seq. The
parties shall submit a proposed discovery plan to the arbitrator, and the scope
and duration of discovery will be within the sole discretion of the arbitrator.
The parties expressly waive their appeal rights under California Code of Civil
Procedure (S) 1294(b), (c) and (d). The arbitrator shall
50
include in the award an assessment of the expense and cost of the arbitration,
in addition to the attorneys' fees and costs as provided elsewhere in this
Agreement, to the prevailing party or parties (and against either or both of the
parties). The arbitrator shall give a detailed reasoned opinion.
* * * * *
51
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan of
Reorganization to be executed on its behalf by its respective officer thereunto
duly authorized on this 10th day of February, 1999.
Microsemi Corporation
By: /S/ XXXXXX XXXX, XX.
Name: XXXXXX XXXX, XX.
Title: President, CEO, Chairman
Date: February 10, 1999
Micro-Linfinity Acquisition Corporation
By: /S/ XXXXXX XXXX, XX.
Name: XXXXXX XXXX, XX.
Title: President, CEO, Chairman
Date: February 10, 1999
Linfinity Microelectronics Inc.
By: /S/ XXXX X. XXXXXXXXX
Name: Xxxx X. Xxxxxxxxx
Title: Director
Date: 2-10-99
SymmetriCom, Inc.
By: /S/ XXXXXX X. XXXXXX
Name: XXXXXX X. XXXXXX
Title: CEO
Date: 2-10-99
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
52
EXHIBIT A
(To Agreement and Plan of Reorganization)
ESCROW AGREEMENT
In order to designate Southern California Bank as the escrow agent (the "Escrow
Agent") of the undersigned for the purposes and upon the terms and conditions
herein set forth, SymmetriCom Inc., a California corporation ("SymmetriCom"),
and Microsemi Corporation, a Delaware corporation ("Microsemi"), do hereby enter
into this Escrow Agreement effective as of ____________, 1999.
1. Appointment. The Escrow Agent is hereby appointed escrow agent for the
undersigned with respect to the Escrow Fund as that term is herein defined. The
Escrow Fund is established pursuant to Section 2.02(b) of the Agreement and Plan
of Reorganization dated February 10, 1999 (the "Merger Agreement") by and among
Microsemi, SymmetriCom and their respective subsidiaries. Capitalized terms used
herein and not otherwise defined shall have the same meaning ascribed to them in
the Merger Agreement.
2. The Escrow Fund. Concurrently with the execution and delivery hereof,
Microsemi and SymmetriCom have delivered to the Escrow Agent in accordance with
the terms hereof the amount of one million one hundred twenty-five thousand
dollars ($1,125,000) (the "Escrow Fund") and direct that it be held and disposed
of by the Escrow Agent as herein provided.
3. Escrow Agent's Duties and Authority to Act.
(a) The provisions of the Merger Agreement addressing the Escrow Fund
created hereby, the powers of the Purchaser Indemnified Persons' Agent
(sometimes referred to hereinafter as "Purchaser"), the powers of the
SymmetriCom Indemnified Persons' Agent (sometimes referred to hereinafter as
"SymmetriCom") and the resolution of disputes relating to the Escrow Fund
between the Purchaser Indemnified Persons and the SymmetriCom Indemnified Person
are attached hereto as Exhibit A. The Escrow Agent is not a party to, and is
not bound by, or charged with notice of, any agreement out of which this escrow
may arise, except that the Escrow Agent shall be charged with notice of and be
bound by the provisions of the Merger Agreement attached hereto as Exhibit A.
(b) The Escrow Agent is hereby authorized and directed to deliver the Escrow
Fund, or any portion thereof, only at such times, in such amounts and upon such
terms and conditions as directed in writing by both the Purchaser and
SymmetriCom.
(c) Notwithstanding the foregoing, if the Escrow Agent has not received any
notice of claim against the Escrow Fund from the Purchaser on or before the
first anniversary of the effective date of this Escrow Agreement (except that
notices of claims with respect to Sections 3.01, 3.03, 3.04, 3.05, 3.11, 3.13,
3.22, 4.02 and 4.03 may be made on or before the second anniversary of the
effective date of this Escrow Agreement), the Escrow Agent shall remit within
three (3) business days of such second anniversary of the effective date of this
Escrow Agreement the entire Escrow Fund to SymmetriCom, without further action
by any party.
4. Standards of Care; Indemnification of Escrow Agent. In performing any
duties under this Escrow Agreement, the Escrow Agent shall not be liable to any
party for consequential damages, (including, without limitation, lost profits)
losses, or expenses, except for breach of this Escrow Agreement, gross
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for any act or failure to act made or
omitted in good faith, or any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Escrow Agreement that the Escrow Agent shall in good faith believe to be
genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
the Escrow Agent's duties under this Escrow Agreement and shall be fully
protected in any act taken, suffered, or permitted by him/her in good faith in
accordance with the advice of legal counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Escrow Agreement. The parties
and their respective successors and assigns agree jointly and severally to
indemnify and hold the Escrow Agent harmless against any and all losses, claims,
damages, liabilities, and expenses, including reasonable costs of investigation,
counsel fees, including allocated costs of in-house counsel and disbursements
that may be imposed on or incurred by the Escrow Agent in connection with the
performance of his/her duties under this Escrow Agreement, including but not
limited to any litigation arising from this Escrow Agreement or involving its
subject matter. The Escrow Agent shall have a first lien on the property and
papers held under this Escrow Agreement for such compensation and expenses.
However, any such lien shall not in any way modify the responsibilities between
SymmetriCom and Purchaser hereunder.
5. Investments.
(a) For the purpose of investing funds held in the Escrow Fund, the Escrow
Agent may accept written instructions (including instructions sent to the Escrow
Agent by facsimile transmission, with original sent promptly to the Escrow
Agent) from SymmetriCom, provided that such investments shall be limited to
short term instruments of 90 days or less with maturity not in any event to be
beyond the anniversary of the date of the term of this Escrow Agreement and
further
2
limited to direct obligations of the United States of America, obligations for
which the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest, commercial paper rated of the
highest quality by Xxxxx'x Investors Services, Inc. or Standard & Poor's
Corporation, or certificates of deposit issued by a commercial bank having at
least $1,000,000,000 in assets; provided further that no loss on investment made
pursuant to this Section 5 shall relieve SymmetriCom of its obligation to
indemnify the Purchaser Indemnified Persons in accordance with Article IX of the
Merger Agreement. The parties shall indemnify and hold the Escrow Agent
harmless from any and all liability for acting on such investment instruction
purported to be given by SymmetriCom. The Escrow Agent shall not be responsible
for the authenticity of any instructions, or be in any way liable for any
unauthorized instruction. In no event shall the Escrow Agent be liable to the
parties for any consequential, special, or exemplary damages, including but not
limited to lost profits, from any cause whatsoever arising out of, or in any way
connected with acting upon instructions believed by the Escrow Agent to be
genuine.
(b) The Escrow Agent may make any investments through its own investment
department or that of its affiliates. The Escrow Agent shall not be liable for
any loss from such investments, including upon the sale or disposition of any
investments.
(c) The Escrow Agent will act upon investment instructions the day that 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 funds
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 making an investment which is caused by
circumstances beyond the Escrow Agent's reasonable control.
(d) The Parties acknowledge that payment of any interest earned on the funds
invested in this escrow will be subject to backup withholding penalties unless a
properly completed Internal Revenue Service form W8 and W9 certification is
submitted to the Escrow Agent.
6. Income. Any net income received by the Escrow Fund shall be disbursed to
SymmetriCom within ten (10) days of the end of each calendar quarter, and shall
not be deemed a part of the "Escrow Fund" hereunder.
7. Termination. This Escrow Agreement shall terminate without further
action of any party when all of the terms hereof have been fully performed,
whereupon the Escrow Agent's obligations hereunder shall terminate.
8. Fees.
3
(a) The Escrow Agent shall be entitled to the fees described on the Fee
Schedule attached hereto as Exhibit B (the "Fee Schedule"). It is understood
that the fees and usual charges agreed upon for services of the Escrow Agent
shall be considered compensation for ordinary services as contemplated by this
Escrow Agreement. In the event that the conditions of this Escrow Agreement are
not promptly fulfilled, or if the Escrow Agent renders any service not provided
for in this Escrow Agreement at the request of the parties or as reasonably
determined to be necessary by the Escrow Agent, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Escrow Agent is made a party to, or intervenes in, any litigation pertaining to
this escrow or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, including allocated costs of in-house counsel, and expenses
occasioned by such default, delay, controversy or litigation and the Escrow
Agent shall have the right to retain all documents and/or other things of value
at any time held by the Escrow Agent in this escrow until such compensation,
fees, costs, and expenses are paid. The parties jointly and severally promise to
pay these sums upon demand and agree that the Escrow Agent may deduct such sums
from the Escrow Fund (it being understood that this sentence is for the benefit
of the Escrow Agent, and does not affect any agreement between SymmetriCom and
Purchaser as to the allocation of such expenses).
(b) In the case of all fees payable under Section 8(a), responsibility shall
be split equally between Microsemi and SymmetriCom.
9. Dispute. In the event any dispute arises as to payment of funds from the
Escrow Fund:
(a) funds in excess of the disputed amount, if any, less amounts
withheld pursuant to the terms of Section 8 hereof, shall be released to
SymmetriCom in accordance with the terms of this Escrow Agreement; and
(b) the remaining funds subject to a claim by the Purchaser Indemnified
Persons shall continue to be held in escrow until the claim or claims have been
fully resolved by agreement between the Purchaser Indemnified Persons and
SymmetriCom.
(c) If any controversy arises between the parties to this Escrow
Agreement, or with any other party, concerning the subject matter of this Escrow
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may require, despite what may be set
forth elsewhere in this Escrow Agreement. In such event, the Escrow Agent will
not be liable for interest or damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate or arbitrate any claims and rights among themselves. The Escrow Agent
is authorized to deposit with the clerk of the court all documents and funds
held in escrow, except all costs, expenses,
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charges and reasonable attorney fees incurred by the Escrow Agent due to the
interpleader action and which the Parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Escrow Agreement.
10. Resignation of Escrow Agent; Automatic Succession. The Escrow Agent may
resign at any time upon giving at least thirty (30) days written notice to
Microsemi and SymmetriCom; provided, however, that no such resignation shall
become effective until the appointment of a successor Escrow Agent which shall
be accomplished as provided below in this Section 10. Upon any such
resignation, Microsemi and SymmetriCom shall use their best efforts to mutually
agree on a successor Escrow Agent within thirty (30) days after receiving such
notice. If Microsemi and SymmetriCom fail to agree upon a successor Escrow
Agent within such time, Microsemi shall have the right to appoint a successor
escrow agent authorized to do business in the state of California. The
successor Escrow Agent shall execute and deliver an instrument accepting such
appointment and all of the terms and conditions of this Escrow Agreement, and it
shall, without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor Escrow Agent as if originally named as
Escrow Agent. The predecessor Escrow Agent shall be thereupon discharged from
any further duties and liability under this Escrow Agreement. Any company into
which the Escrow Agent may be merged or with which it may be consolidated, or
any company to whom the Escrow Agent may transfer a substantial amount of its
Global Escrow business, shall be the successor to the Escrow Agent without the
execution or filing of any paper or any further act on the part of any of the
parties, anything herein to the contrary notwithstanding.
11. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, it being understood and
agreed that disputes between the Purchaser Indemnified Persons and SymmetriCom
arising under the Merger Agreement shall be resolved under the governing law and
procedures set forth in such Agreement.
12. Notice. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or other-wise delivered by facsimile transmission, by
hand or by nationally recognized overnight courier service (next day delivery),
addressed:
If to Microsemi: Microsemi Corporation
0000 X. Xxxxxxxx Xxxxxx
Xxxxx Xxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
Copy to: Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000-0000
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Attn: Xxxxxxxx Xxxxx, Xx.
Facsimile: (000) 000-0000
If to SymmetriCom: SymmetriCom, Inc.
0000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000-0000
Attn.: Chief Financial Officer
Facsimile: (000) 000-0000
Copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Escrow Agent: Southern California Bank
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Escrow Department
Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
(or to such other address as may be stated in written notice furnished by any
party to the other parties hereto). Each such notice or other communication
shall for all purposes of this Escrow Agreement be treated as effective or
having been given (i) when delivered if delivered personally, (ii) if sent by
facsimile, the first business day after the date of confirmation that the
facsimile has been successfully transmitted to the facsimile number for the
party notified, (iii) if sent by mail, at the earlier of its receipt or 72 hours
after the same has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid or (iv) if
sent by nationally recognized overnight courier service, the first business day
following the deposit of such notice with the courier service.
13. Entire Agreement; Amendment. This Escrow Agreement, including the
portions of the Merger Agreement attached hereto as Exhibit A, constitutes the
full and entire understanding and agreement among the parties with regard to the
Escrow Fund and supersedes and voids all prior understandings and agreements
among the parties, whether written or oral, with respect to the subject matter
herein. Except as expressly provided herein, neither this Escrow Agreement nor
any term herein may be amended, waived, discharged or terminated other than by a
written instrument signed
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by the party against whom enforcement of any such amendment, waiver, discharge
or termination is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed as of the date first set forth above.
MICROSEMI CORPORATION: SYMMETRICOM, INC.:
a Delaware corporation a California corporation
By: ___________________________ By: ___________________________
Title: _________________________ BY ___________________________
The Escrow Agent hereby acknowledges receipt of the Escrow Fund and accepts the
same subject to the terms and conditions of this Escrow Agreement effective as
of the date first set forth above.
ESCROW AGENT:
_______________________________
By:
Title:
[SIGNATURE PAGE TO ESCROW AGREEMENT]
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