Exhibit 10.1
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of September 17, 1998
By and Among
PHOENIX TECHNOLOGIES LTD.
PHOENIX SUB CORPORATION
SAND MICROELECTRONICS, INC.
and
XXXX XXXXXXXXX
XXXXX XXXXX
XXXX XXXXX
AGREEMENT AND PLAN OF REORGANIZATION
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Effective Time; Closing. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Articles of Incorporation; Bylaws. . . . . . . . . . . . . . . . . . . . .2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.6 Effect on Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.7 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.8 Surrender of Certificates. . . . . . . . . . . . . . . . . . . . . . . . .9
1.9 No Further Ownership Rights in Sand Common Stock . . . . . . . . . . . . 10
1.10 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . 10
1.11 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . 10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SAND. . . . . . . . . . . . . . . . . 10
2.1 Organization of Sand . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Sand Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Obligations With Respect to Common Stock . . . . . . . . . . . . . . . . 11
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 Sand Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 13
2.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . 13
2.7 Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.9 Compliance; Permits; Restrictions. . . . . . . . . . . . . . . . . . . . 16
2.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Employee Matters and Benefit Plans . . . . . . . . . . . . . . . . . . . 16
2.13 Absence of Liens and Encumbrances; Condition of Equipment. . . . . . . . 20
2.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.16 Agreements, Contracts and Commitments. . . . . . . . . . . . . . . . . . 21
2.17 Employees; Change of Control Payments. . . . . . . . . . . . . . . . . . 22
2.18 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . 22
2.19 Title to Properties; Absence of Liens and Encumbrances . . . . . . . . . 22
2.20 Proxy Statement/Information Statement. . . . . . . . . . . . . . . . . . 23
2.21 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.23 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.24 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.25 No Material Misrepresentations . . . . . . . . . . . . . . . . . . . . . 24
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PHOENIX AND MERGER SUB . . . . . . . 24
3.1 Organization of Phoenix. . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3 No Material Misrepresentations . . . . . . . . . . . . . . . . . . . . . 25
3.4 Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Securities Act Exemption . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Stock Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3 Sand Shareholders' Representations Regarding Securities Law Matters. . . 26
4.4 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Nasdaq National Market Listing . . . . . . . . . . . . . . . . . . . . . 27
4.6 Blue Sky Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.8 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.9 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.10 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . 30
4.11 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.12 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.13 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.14 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . 31
4.15 Commercially Reasonable Efforts and Further Assurances . . . . . . . . . 31
4.16 Joint Business Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.17 Sand Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.18 Tax Return Preparation and Review. . . . . . . . . . . . . . . . . . . . 32
ARTICLE V CONDITIONS TO OBLIGATIONS OF PHOENIX . . . . . . . . . . . . . . . . . . 32
5.1 Shareholder Approval.. . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2 No Actions or Proceeding . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 32
5.4 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 Non-Compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.7 Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9 Certificates and Documents . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VI CONDITIONS TO OBLIGATIONS OF SAND . . . . . . . . . . . . . . . . . . . 33
6.1 Shareholder Approval.. . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 No Actions or Proceeding.. . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Representations and Warranties.. . . . . . . . . . . . . . . . . . . . . 34
6.4 Non-Compete Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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6.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 34
ARTICLE VIII INDEMNITY OF PHOENIX. . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Indemnification of Phoenix.. . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Indemnification for Dissenters' Shares.. . . . . . . . . . . . . . . . . 35
8.3 Notice.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Survival of Indemnification Obligation.. . . . . . . . . . . . . . . . . 36
8.5 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 No Limitation of Remedies. . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Determination of Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX COSTS INCIDENT TO AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4 Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Exhibit A Form of Voting Agreement
Exhibit B Form of Agreement of Merger
Exhibit C Form of Non-Compete Agreement
Exhibit D Declaration of Registration Rights
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into by and among PHOENIX TECHNOLOGIES LTD., a Delaware corporation
("PHOENIX"), PHOENIX SUB CORPORATION, a California corporation and a wholly
owned subsidiary of Phoenix ("MERGER SUB"), SAND MICROELECTRONICS, INC., a
California corporation ("SAND"), and Xxxx Xxxxxxxxx, Xxxxx Xxxxx and Xxxx Xxxxx
(the "SAND FOUNDERS").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the California General Corporation Law ("CALIFORNIA LAW"),
Phoenix and Sand will enter into a business combination transaction pursuant to
which Merger Sub will merge with and into Sand (the "MERGER").
B. The Board of Directors of Phoenix (i) has determined that the Merger
is in the best interests of its stockholders and (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement;
C. The Board of Directors of Sand (i) has determined that the Merger is
in the best interests of Sand and its shareholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement
and (iii) has determined to recommend that the shareholders of Sand (the "SAND
SHAREHOLDERS") approve this Agreement and approve the Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Phoenix's willingness to enter into this Agreement, the Sand
Founders shall enter into Voting Agreements in substantially the form attached
hereto as EXHIBIT A (the "VOTING AGREEMENTS");
E. Phoenix, Merger Sub and Sand desire to make certain representations
and warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section l.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of California Law, Merger Sub shall be merged with and
into Sand, the separate corporate existence of Merger Sub shall cease and Sand
shall continue as the surviving corporation. Sand as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing an
Agreement of Merger, substantially in the form
of EXHIBIT B hereto (the "AGREEMENT OF MERGER") with the Secretary of State
of the State of California, in accordance with the relevant provisions of
California law (the time of such filing (or such later time as may be agreed
in writing by the parties and specified in the Agreement of Merger) being the
"EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as
herein defined). Unless the context otherwise requires, the term "AGREEMENT"
as used herein refers collectively to this Agreement and the Agreement of
Merger. The closing of the Merger (the "CLOSING") shall take place at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a
time and date to be specified by the parties, which shall be no later than
the second business day after the satisfaction or waiver of the conditions
set forth in Articles V and VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
California Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Sand and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Sand and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation; provided, however, that at
the Effective Time the Articles of Incorporation of the Surviving Corporation
shall be amended so that the name of the Surviving Corporation shall be Sand
Microelectronics, Inc.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, until their successors are elected or
appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK.
(a) DEFINITIONS.
(i) 1999 REVENUE PAYMENT shall mean a number calculated by
multiplying $800,000 by the 1999 Revenue Percentage; provided, however, that in
no event shall the 1999 Revenue Payment exceed $2,400,000;
(ii) 2000 REVENUE PAYMENT shall mean a number calculated by
multiplying $1,600,000 by the 2000 Revenue Percentage and subtracting the 1999
Revenue Payment; provided,
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however, that in no event shall the sum of the 1999 Revenue Payment and the
2000 Revenue Payment exceed $2,400,000;
(iii) 2001 REVENUE PAYMENT shall mean a number calculated by
multiplying $2,400,000 by the 2001 Revenue Percentage and subtracting the sum of
(A) the 1999 Revenue Payment and (B) the 2000 Revenue Payment; provided,
however, that in no event shall the sum of the 1999 Revenue Payment, the 2000
Revenue Payment and the 2001 Revenue Payment exceed $2,400,000;
(iv) 1999 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 1999 Actual Revenues by the 1999 Projected Revenues;
(v) 2000 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 2000 Cumulative Revenues by the 2000 Cumulative
Projected Revenues;
(vi) 2001 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 2001 Cumulative Revenues by the 2001 Cumulative
Projected Revenues;
(vii) 1999 ACTUAL REVENUES shall mean the actual net revenues
of the Business Unit for the fiscal year ended September 30, 1999; provided,
however, that one-half of the actual net revenues of the Business Unit from the
Closing Date through September 30, 1998 shall be included in the 1999 Actual
Revenues, but in no event shall the 1999 Actual Revenues be less than zero;
(viii) 2000 CUMULATIVE REVENUES shall mean the sum of the
actual net revenues of the Business Unit for the fiscal years ended September
30, 1999 and September 30, 2000, but in no event shall the 2000 Cumulative
Revenues be less than zero;
(ix) 2001 CUMULATIVE REVENUES shall mean the sum of the
actual net revenues of the Business Unit for the fiscal years ended September
30, 1999, September 30, 2000 and September 30, 2001, but in no event shall the
2001 Cumulative Revenues be less than zero;
(x) 1999 PROJECTED REVENUES shall mean the net revenues of
the Business Unit for the fiscal year ended September 30, 1999 as set forth in
the Joint Business Plan;
(xi) 2000 CUMULATIVE PROJECTED REVENUES shall mean the sum
of the net revenues of the Business Unit for the fiscal years ended September
30, 1999 and September 30, 2000 as set forth in the Joint Business Plan;
(xii) 2001 CUMULATIVE PROJECTED REVENUES shall mean the sum
of the net revenues of the Business Unit for the fiscal years ended September
30, 1999, September 30, 2000 and September 30, 2001 as set forth in the Joint
Business Plan;
(xiii) 1999 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $533,334 by the 1999 Operating Earnings Percentage;
provided, however, that in no event shall the 1999 Operating Earnings Payment
exceed $1,600,000;
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(xiv) 2000 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $1,066,666 by the 2000 Operating Earnings Percentage
and subtracting the 1999 Operating Earnings Payment; provided, however, that in
no event shall the sum of the 1999 Operating Earnings Payment and the 2000
Operating Earnings Payment exceed $1,600,000;
(xv) 2001 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $1,600,000 by the 2001 Operating Earnings Percentage
and subtracting the sum of the (A) 1999 Operating Earnings Payment and (B) the
2000 Operating Earnings Payment; provided, however, that in no event shall the
sum of the 1999 Operating Earnings Payment, the 2000 Operating Earnings Payment
and the 2001 Operating Earnings Payment exceed $1,600,000;
(xvi) 1999 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 1999 Actual Operating Earnings by the 1999
Projected Operating Earnings;
(xvii) 2000 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 2000 Cumulative Operating Earnings by the
2000 Cumulative Projected Operating Earnings;
(xviii) 2001 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 2001 Cumulative Operating Earnings by the
2001 Cumulative Projected Operating Earnings;
(xix) 1999 ACTUAL OPERATING EARNINGS shall mean the
fully-allocated operating earnings from continuing operations of the Business
Unit before interest and taxes for the fiscal year ended September 30, 1999
determined on a basis consistent with the guidelines set forth in the Joint
Business Plan, but in no event shall the 1999 Actual Operating Earnings be
less than zero;
(xx) 2000 CUMULATIVE OPERATING EARNINGS shall mean the sum
of the fully-allocated operating earnings (loss) from continuing operations of
the Business Unit before interest and taxes for the fiscal years ended September
30, 1999 and September 30, 2000 determined on a basis consistent with the
guidelines set forth in the Joint Business Plan, but in no event shall the 2000
Cumulative Operating Earnings be less than zero;
(xxi) 2001 CUMULATIVE OPERATING EARNINGS shall mean the sum
of the fully-allocated operating earnings (loss) from continuing operations of
the Business Unit before interest and taxes for the fiscal years ended September
30, 1999, September 30, 2000 and September 30, 2001, determined on a basis
consistent with the guidelines set forth in the Joint Business Plan, but in no
event shall the 2001 Cumulative Operating Earnings be less than zero;
(xxii) 1999 PROJECTED OPERATING EARNINGS shall mean the
fully-allocated operating earnings (loss) of the Business Unit as set forth
in the Joint Business Plan for the fiscal year ended September 30, 1999;
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(xxiii) 2000 CUMULATIVE PROJECTED OPERATING EARNINGS shall mean
the sum of the fully-allocated operating earnings (loss) of the Business Unit
for the fiscal years ended September 30, 1999 and September 30, 2000 as set
forth in the Joint Business Plan;
(xxiv) 2001 CUMULATIVE PROJECTED OPERATING EARNINGS shall mean
the sum of the fully-allocated operating earnings (loss) of the Business Unit
for the fiscal years ended September 30, 1999, September 30, 2000 and September
30, 2001 as set forth in the Joint Business Plan;
(xxv) BUSINESS UNIT shall mean a portion of the business and
product lines of Phoenix as described in the Joint Business Plan;
(xxvi) JOINT BUSINESS PLAN shall mean the joint business plan
prepared by the parties hereto dated _________, 1998;
(xxvii) OPTION EXCHANGE RATIO shall mean (A) $26,076,800, the
estimated net present value of the Merger Consideration, plus the aggregate
exercise price of any vested Sand Stock Options exercised between the date
hereof and the Effective Time, minus the amount by which the costs and expenses
incurred by Sand in connection with the preparation, execution or delivery of
this Agreement or the performance of its obligations hereunder, including,
without limitation, the fees and disbursements of its attorneys, accountants,
investment bankers, consultants, brokers and persons providing other services
exceeds $400,000, divided by the Fully Diluted Number, and divided by (B) $7.10,
the average closing price of a share of Phoenix Common Stock for the ten most
recent days that Phoenix Common Stock has traded ending on the trading day
immediately prior to the date hereof, as reported on the Nasdaq Stock Market;
(xxviii) FULLY DILUTED NUMBER shall mean all shares of Sand
Common Stock outstanding at the Effective Time plus the number of shares of Sand
Common Stock underlying all vested and unvested Sand Stock Options (as defined
below) outstanding as of the Effective Time; and
(xxix) OUTSTANDING SHARES shall mean the number of shares of
Sand Common Stock outstanding at the Effective Time.
(b) CONVERSION OF SAND COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, Sand or
the holders of any shares of the Common Stock of Sand, each share of the Common
Stock, no par value, of Sand (the "SAND COMMON STOCK") issued and outstanding
immediately prior to the Effective Time and all rights to accrued dividends in
respect thereof (other than any shares of Sand Common Stock to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined in and to the
extent provided in Section 1.7(a))), will be canceled and extinguished and
automatically converted into the right to receive on the dates described below,
the following (the "MERGER CONSIDERATION"):
(i) at the Effective Time, an amount of cash equal to (A)
the total of $20,000,000 plus the aggregate exercise price of any vested Sand
Stock Options exercised between the date hereof and the Effective Time, minus
the amount by which the costs and expenses incurred by Sand
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in connection with the preparation, execution or delivery of this Agreement
or the performance of its obligations hereunder, including, without
limitation, the fees and disbursements of its attorneys, accountants,
investment bankers, consultants, brokers and persons providing other services
exceeds $400,000, divided by (B) the Fully Diluted Number (the "FIXED
AMOUNT");
(ii) at the Effective Time, the right to receive a number of
shares of Phoenix Common Stock (the "PHOENIX COMMON STOCK") equal to 500,000
divided by the Fully Diluted Number, together with a right to purchase (in
respect of each whole share of Phoenix Common Stock) 1/100 of a share of Series
A Junior Participating Preferred Stock of Phoenix pursuant to the Rights
Agreement dated October 31, 1989 between Phoenix and The First National Bank of
Boston;
(iii) (A) sixty (60) days following Phoenix's 1999 fiscal
year, an amount equal to the sum of the 1999 Revenue Payment and 1999 Operating
Earnings Payment divided by the Fully Diluted Number; (B) sixty (60) days
following Phoenix's 2000 fiscal year, an amount equal to the sum of the 2000
Revenue Payment and 2000 Operating Earnings Payment divided by the Fully Diluted
Number; and (C) sixty (60) days following Phoenix's 2001 fiscal year, an amount
equal to the sum of the 2001 Revenue Payment and 2001 Operating Earnings Payment
divided by the Fully Diluted Number Shares (the "CONTINGENT PAYMENTS").
For purposes of calculating the Contingent Payments, both
actual net revenues of the Business Unit and Actual Operating Earnings shall be
determined on a basis consistent with generally accepted accounting principles
("GAAP") applied as set forth in the Joint Business Plan. Notwithstanding the
foregoing, any net proceeds received by Phoenix or the Surviving Corporation
(after deduction of all expenses incurred by Phoenix or the Surviving
Corporation in connection therewith, including all attorneys' fees and expenses)
that arise out of or result from any claims that Sand may have against any third
party with respect to any Sand IP Rights (as defined below) shall be included in
the actual net revenues and fully-allocated operating earnings (loss) of the
Business Unit for the fiscal year in which such proceeds are received.
In the event that after the Effective Time and on or before
September 30, 2001, there has occurred (A) a merger or consolidation of Phoenix
with or into any other corporation or corporations in which the stockholders of
Phoenix own less than fifty percent (50%) of the voting securities of the
surviving corporation or a sale of all or substantially all of the assets of
Phoenix (an "Acquisition"), or (B) any merger, consolidation, reorganization,
sale of substantially all of the assets of the Business Unit or spin-off of the
securities of any entity conducting the business of the Business Unit (a "Spin
Off"), Phoenix shall cause the surviving corporation in any Acquisition or the
acquiring corporation or entity that is conducting the business of the Business
Unit in any Spin Off, to assume, by operation of law or otherwise, all of
Phoenix's remaining obligations under this Agreement, and if the operation of
the Business Unit is discontinued by such surviving or acquiring corporation or
entity for reasons unrelated to the Business Unit's performance against the
Joint Business Plan, the remaining Contingent Payments will be paid annually on
the dates set forth herein and shall be calculated as if the Revenue Percentage
and the Operating Earnings Percentage for each of the 1999, 2000 and 2001 fiscal
years is 1 provided, however, that in no event shall the aggregate of the
Contingent Payments exceed $4,000,000;.
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In the event that after the Effective Time and on or before
September 30, 2001, Phoenix (or any successor in interest, assignee or
transferee of Phoenix's obligations hereunder) materially modifies or alters the
business model on which the Business Unit operates as set forth in the Joint
Business Plan, such that the actual net revenue and Actual Operating Earnings
targets set forth in the Joint Business Plan reasonably could not be achieved
prior to September 30, 2001, Phoenix (or any successor in interest, assignee or
transferee of Phoenix's obligations hereunder) shall have the right, at its
option, to either (i) adjust and calculate actual net revenues and Actual
Operating Earnings of the Business Unit for purposes of calculating Contingent
Payments as if the Business Unit were continuing to operate under the business
model set forth in the Joint Business Plan or (ii) modify the Joint Business
Plan to reflect the change in the business model; provided, however, that
Phoenix (or any successor in interest, assignee or transferee of Phoenix's
obligations hereunder) may not make such adjustment or modification more than
once in any fiscal year; and, provided further, that in the event of such
material modification or alteration of the business model on which the Business
Unit operates as set forth in the Joint Business Plan, Phoenix (or any successor
in interest, assignee or transferee of Phoenix's obligations hereunder) shall,
within 60 days, give the Representative of the Sand Shareholders (defined below)
notice of such material modification or alteration to the business model (which
notice shall set forth such material modification or alteration in reasonable
detail) and what option (as set forth in subsections (i) or (ii) above) that
Phoenix has elected. The Representative of the Sand Shareholders shall have 60
days after receipt of the foregoing notice to either (i) dispute the foregoing
modification or alteration in which case the parties shall submit the dispute to
arbitration as set forth in Sections 8.5(c) and (d) or (ii) to elect, on behalf
of all the Sand Shareholders, to receive in lieu of any remaining Contingent
Payment (on the date each remaining Contingent Payment is due), an amount per
share of Sand Common Stock, equal to $866,667 payable on each Contingent Payment
due date subsequent to the event causing this adjustment divided by the Fully
Diluted Number. If no objections are raised within such sixty (60) day period,
the Representative, on behalf of all the Sand Shareholders shall be deemed to
have accepted such material modification or alteration and Phoenix's election
with respect thereto shall be final, binding and conclusive upon all of the
parties hereto.
Phoenix shall deliver to Xxxxx Xxxxx, acting as
representative of the Sand Shareholders (the "REPRESENTATIVE") no later than
five days prior to the payment date of each year for a Contingent Payment, a
certificate signed by an officer of Phoenix containing a detailed summary of
all computations, including any adjustments, as described above, performed by
Phoenix in arriving at the Contingent Payment for such year (the
"CERTIFICATE"). The Representative shall have a period of sixty (60) days
after receipt of the Certificate to dispute any amounts reflected thereon;
provided, that the Representative shall notify Phoenix in writing of each
disputed item in reasonable detail and shall specify the amount thereof in
dispute within such sixty (60) day period. Phoenix agrees to cooperate with
any such confirmation request and make available to the Representative or his
designated accountant, at all reasonable times, for inspection and review,
the books and records of Phoenix relating to the Business Unit, including,
but not limited to, all worksheets for the period under review and the
aforementioned computations. If no objections are raised within such sixty
(60) day period, the Certificate and the Contingent Payment shall be final,
binding and conclusive upon all of the parties hereto. If, during his review
of the Certificate and accompanying worksheets and records, Representative or
his designated accountant disagrees with the computation prepared by Phoenix
and such disagreement cannot, with good faith effort, be promptly settled,
Phoenix and Representative shall appoint a mutually
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satisfactory independent certified public accountant (the "Resolution
Accountant") to review the computations of both Phoenix and Representative.
The determination of the Resolution Accountant shall be delivered within
ninety (90) days after the appointment of the Resolution Accountant and shall
be binding on Phoenix and the Sand Shareholders. The fees and costs of the
Resolution Accountant shall be borne one-half by Phoenix and one-half by the
Sand Shareholders. Within three (3) business days after the Resolution
Accountant makes his determination, Phoenix shall pay the Sand Shareholders
the aggregate amount by which the Contingent Payment is increased thereby or
the Sand Shareholders shall reimburse Phoenix the aggregate amount by which
the Contingent Payment is decreased thereby. Alternatively, Phoenix may
deduct any amounts payable to Phoenix under this Section 1.6(b)(iv) from the
Contingent Payments.
(c) CANCELLATION OF PHOENIX-OWNED STOCK. Any share of Sand Common
Stock held in the treasury of Sand or owned by Merger Sub, Phoenix or any direct
or indirect wholly owned subsidiary of Sand or of Phoenix immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) STOCK OPTIONS. At the Effective Time, all options to purchase
Sand Common Stock ("SAND STOCK OPTIONS") then outstanding under Sand's
Non-Qualified Stock Option Plan and 1998 Stock Plan (together, the "SAND
STOCK OPTION PLANS") shall be assumed by Phoenix and shall continue to have,
and be subject to, the same terms and conditions as set forth in the Sand
Stock Option Plan and/or any agreements pursuant to which such Sand Stock
Options were granted as in effect immediately prior to the Effective Time,
except that (A) each Sand Stock Option shall be exercisable for that number
of whole shares of Phoenix Common Stock equal to the number of shares
underlying such Sand Stock Option immediately prior to the Effective Time,
multiplied by the Option Exchange Ratio and rounded down to the nearest whole
number of shares of Phoenix Common Stock and (B) the price at which each such
Sand Stock Option is exercisable shall be divided by the Option Exchange
Ratio and rounded up to the nearest cent. Phoenix will cause such assumed
Sand Stock Options to be registered on Form S-8 within 20 days of the
Effective Time and shall have reserved at the Effective Time a sufficient
number of its shares of Common Stock for issuance upon exercise of the
assumed Sand Stock Options.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, no par
value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of Common Stock, no
par value, of the Surviving Corporation. Each certificate of shares of Merger
Sub Common Stock shall continue to evidence ownership of such share of Common
Stock of the Surviving Corporation.
(f) ADJUSTMENTS TO OPTION EXCHANGE RATIO. The Option Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Phoenix Common Stock or Sand Common Stock), reorganization,
recapitalization or other like change with respect to Phoenix Common Stock or
Sand Common Stock occurring on or after the date hereof and prior to the
Effective Time.
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1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
the shares of any holder of Sand Common Stock who has demanded and perfected
appraisal rights for such shares in accordance with California Law and who, as
of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("DISSENTING SHARES") shall not be converted into, or represent a right
to receive, the Merger Consideration pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by California Law.
(b) Notwithstanding the foregoing, if any holder of shares of Sand
Common Stock who demands appraisal of such shares under California Law shall
effectively withdraw or lose (for failure to perfect or otherwise) the right to
appraisal, then, as of the later of the Effective Time or the occurrence of such
event, such holder's shares shall automatically be converted into and represent
only the right to receive the Merger Consideration pursuant to Section 1.6
hereof, without interest thereon, upon surrender of the certificate representing
such shares of Sand Common Stock in the manner provided in Section 1.8 hereof
(or, in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.10
hereof).
(c) Sand shall give Phoenix (i) prompt notice of any written demands
for appraisal of any shares of Sand Common Stock, withdrawals of such demands,
and any other instruments served pursuant to California Law and received by Sand
which relate to any such demand for appraisal and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under California Law. Sand
shall not, except with the prior written consent of Phoenix or as may be
required by applicable law, voluntarily make any payment with respect to any
demands for appraisal of Sand Common Stock or offer to settle or settle any such
demands. Any payments made in respect of Dissenting Shares shall be made by
Sand or the Surviving Corporation, as the case may be.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. Promptly after the Effective Time,
Phoenix shall mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Sand Common Stock whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to Phoenix
and shall be in such form and have such other provisions as Phoenix may
reasonably specify) ("LETTER OF TRANSMITTAL") and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration pursuant to Section 1.6. Upon surrender of Certificates for
cancellation to Phoenix, together with the Letter of Transmittal, duly
completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor the Merger Consideration pursuant to Section 1.6, and the
Certificates so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Certificate will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the right to receive
the Merger Consideration set forth in
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Section 1.6. Notwithstanding the foregoing, Phoenix shall cooperate with the
Sand Shareholders to cause the Letters of Transmittal to be made available
prior to the Effective Time so they may be completed by the Sand Shareholders
before the Effective Time and to cause the cash portion of the Merger
Consideration to be paid by wire transfer to the Sand Shareholders within two
business days following the Effective Time for those Sand Shareholders for
which the Letter of Transmittal and Certificates are provided to Phoenix at
or following the Effective Time.
(b) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, neither Phoenix, the Surviving Corporation nor any party hereto
shall be liable to a holder of shares of Sand Common Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN SAND COMMON STOCK. All Merger
Consideration paid upon the surrender for exchange of shares of Sand Common
Stock in accordance with the terms hereof shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Sand Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Sand Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, Phoenix shall pay the Merger
Consideration in exchange for such lost, stolen or destroyed Certificates upon
the making of an affidavit of that fact by the holder thereof; PROVIDED,
HOWEVER, that Phoenix may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Phoenix, Sand or the
Surviving Corporation with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Sand and Merger Sub, the officers and directors of Sand and
Merger Sub are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is consistent with this Agreement. This provision shall be a
continuing obligation of the Sand Founders and the officers and directors of
Sand and shall survive the Effective Time of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SAND
Sand hereby makes the representations and warranties to Phoenix and
Merger Sub contained in this Article II, except as set forth in the
disclosure letter previously delivered by Sand to Phoenix dated on or before
the date hereof and certified by a duly authorized officer of Sand (the "SAND
DISCLOSURE LETTER"). As used herein, where a statement is made "to the
knowledge" of Sand or a statement is made
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that Sand "knows" a particular fact or circumstance, such knowledge shall
include the actual knowledge after reasonable inquiry of each of the persons
set forth in the Sand Disclosure Letter.
2.1 ORGANIZATION OF SAND. Sand is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own, lease and operate its property
and to carry on its business as now being conducted, and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned or held under lease or license or
the nature of the business conducted by it requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the business, assets (including intangible assets), financial condition or
results of operations (a "Material Adverse Effect") on Sand. Sand has never had
any subsidiaries. Sand has delivered true and correct copies of the Articles of
Incorporation and Bylaws of Sand, as amended to date, to counsel for Phoenix.
2.2 SAND CAPITAL STRUCTURE. The authorized capital stock of Sand consists
of 50,000,000 shares of Common Stock, no par value, of which there were
12,218,250 shares issued and outstanding as of the date that is one day prior to
the date hereof and no shares of Preferred Stock are authorized, issued or
outstanding. All outstanding shares of Sand Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of Sand or
any agreement or document to which Sand is a party or by which it is bound. As
of the date that is one day prior to the date hereof, Sand had reserved an
aggregate of 2,000,000 shares of Common Stock, net of exercises, for issuance to
employees, consultants and non-employee directors pursuant to the Sand Stock
Option Plans, under which options are outstanding for an aggregate of 949,000
shares. Through the date that is one day prior to the date hereof Sand has
issued employee offer letters agreeing to issue Sand Stock Options for an
additional 102,000 shares of Sand Common Stock. All shares of Sand Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and nonassessable. Section 2.2 of the
Sand Disclosure Letter is a list of each outstanding option to acquire shares of
the Common Stock of Sand as of the date that is one day prior to the date
hereof, the name of the holder of such option, the number of shares subject to
such option, the exercise price of such option, the number of shares as to which
such option will have vested at such date and whether the exercisability of such
option will be accelerated in any way by the transactions contemplated by this
Agreement or for any other reason, and indicate the extent of acceleration, if
any, and such list is true, correct and complete in all material respects.
2.3 OBLIGATIONS WITH RESPECT TO COMMON STOCK. Except as set forth in
Sections 2.2 or 2.3 of the Sand Disclosure Letter, there are no options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights) of any class of Sand, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except as set forth in Section 2.3 of the
Sand Disclosure Letter, there are no commitments or agreements of any character
to which Sand is a party or by which Sand is bound obligating Sand to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights) of Sand or obligating
Sand to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, partnership interests or similar ownership
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interests, call, right, commitment or agreement. Except as set forth in
Section 2.3 of the Sand Disclosure Letter, there are no registration rights,
and to the knowledge of Sand, except as set forth herein, there are no voting
trusts, proxies or other agreements or understandings, with respect to any
equity security, partnership interests or similar ownership interests of any
class of Sand.
2.4 AUTHORITY.
(a) Sand has all requisite corporate power and authority to enter
into this Agreement and the Voting Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement,
the Voting Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Sand, subject only to the approval of this Agreement by Sand's
shareholders and the filing and recordation of the Agreement of Merger pursuant
to California Law. A vote of the holders of at least a majority of the
outstanding shares of the Sand Common Stock is required for Sand's shareholders
to approve and adopt this Agreement, the Voting Agreements and to approve the
Merger. This Agreement and the Voting Agreements have been duly executed and
delivered by Sand and the Sand Founders and, assuming the due authorization,
execution and delivery by Phoenix and Merger Sub, constitute the valid and
binding obligations of Sand and the Sand Founders, enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity. The execution and delivery
of this Agreement and the Voting Agreements by Sand and the Sand Founders do
not, and the performance of this Agreement and the Voting Agreements by Sand and
the Sand Founders will not, (i) conflict with or violate the Articles of
Incorporation or Bylaws of Sand, (ii) subject to compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Sand
Founders, Sand or by which the Sand Founders, Sand or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair Sand's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Sand pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Sand is a party or by which
Sand or its properties are bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Material Adverse Effect on Sand. Section 2.4
of the Sand Disclosure Letter lists all consents, waivers and approvals under
any of Sand's agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY") is required by or with respect to Sand or the Sand Founders in
connection with the execution and delivery of this Agreement, the Voting
Agreements or the consummation of the transactions contemplated hereby and
thereby, except for (i) the filing of the
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Agreement of Merger with the Secretary of State of the State of California,
and (ii such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material
Adverse Effect on Sand or have a material adverse effect on the ability of
the parties to consummate the Merger.
2.5 SAND FINANCIAL STATEMENTS.
(a) Sand has delivered to Phoenix certain financial statements of
Sand as follows: (i) the audited balance sheets as of December 31, 1997 and
December 31, 1996 and the related audited statements of operations,
shareholders' equity and cash flows of Sand for the years then ended, and the
notes thereto; (ii) the unaudited quarterly financial data for the quarterly
periods ended as of March 31, 1998 and June 30, 1998, and (iii) the unaudited
balance sheet as of July 31, 1998 and the related statement of operations and
shareholders' equity of Sand for the one month period then ended (collectively,
the "SAND FINANCIALS"). Each of the Sand Financials (i) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and (ii) fairly
presented the financial position of Sand as at the respective dates thereof and
the results of its operations and cash flows for the periods indicated, except
for the absence of notes for the unaudited interim financial statements and that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of Sand as of July 31, 1998 is
hereinafter referred to as the "SAND BALANCE SHEET." Except as disclosed in the
Sand Financials, Sand does not have any liabilities, debts or obligations of any
kind or description (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Sand, except (i) as and to the extent reflected or reserved against
in the Sand Balance Sheet, or (ii) incurred since the date of the Sand Balance
Sheet in the ordinary course of business consistent with past practices.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Sand
Balance Sheet through the date of this Agreement, there has not been: (i) any
event that has had or would reasonably be expected to have a Material Adverse
Effect on Sand, or (ii) any material change by Sand in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, nor
has Sand entered into any contracts, leases, orders, or other commitments other
than in the ordinary course of business.
2.7 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX"
or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or
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arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) All federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to Taxes required to be
filed with any tax authority by or on behalf of the Sand with respect to any
taxable period ending on or before the Closing Date if due on or before the
Closing Date (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date if properly obtained), and (ii) have
been, or will be when filed, prepared in all material respects in compliance
with all applicable legal requirements. All amounts shown on the Tax Returns to
be due on or before the Closing Date have been or will be paid on or before the
Closing Date.
(c) Sand's financial statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. Sand will establish, in the ordinary course of
business and consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from the date of this Agreement through the
Closing Date.
(d) Since January 1, 1995, no Tax Return of Sand has been examined or
audited by any applicable tax authority. No extension or waiver (other than the
normal extension occurring by reason of an extension of time to file a Return)
of the limitation period applicable to any such Returns has been granted (by
Sand or any other person on behalf of Sand), and no such extension or waiver has
been requested from Sand.
(e) No claim or legal proceeding is pending or, to the best of the
knowledge of Sand, has been threatened against or with respect to Sand in
respect of any material Tax. There are no unsatisfied liabilities for material
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by Sand with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by Sand and with respect to
which adequate reserves for payment have been established). There are no liens
for material Taxes upon any of the assets of Sand except liens for current Taxes
not yet due and payable. Sand has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Sand has not been
and will not be, required to include any adjustment in taxable income for any
tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or
any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing.
(f) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any Sand that, considered individually or considered
collectively with any other such agreement, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
Sand is not, nor has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar agreement.
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2.8 INTELLECTUAL PROPERTY.
(a) Set forth in Section 2.8(a) of the Sand Disclosure Letter is a
true and complete list of all patents, trademarks, trade names, service marks,
copyrights and registrations thereof and applications therefor used in the
business of Sand.
(b) Except as set forth in Section 2.8(b) of the Sand Disclosure
Letter, Sand owns, or has the right to use, sell or license all intellectual
property (including the patents, trademarks, trade names, service marks,
copyrights and registrations thereof and applications therefor described in
Section 2.8(a) of the Sand Disclosure Letter) necessary or required for the
conduct of its business as currently conducted (such intellectual property and
the rights thereto are collectively referred to herein as the "SAND IP RIGHTS"),
and Sand has delivered or will deliver to Phoenix prior to the Effective Time
certificates of originality with respect to the Sand IP Rights in form and
substance reasonably satisfactory to Phoenix.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement concerning or governing any Sand
IP Rights (the "SAND IP RIGHTS AGREEMENTS"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Sand IP
Rights or impair the right of Sand, the Surviving Corporation or Phoenix to use,
sell or license any Sand IP Rights or portion thereof.
(d) (i) Neither the manufacture, marketing, license, sale or intended
use of any product or technology currently licensed or sold or under development
by Sand (excluding any modifications by Phoenix following the Effective Time)
violates any license or agreement between Sand and any third party or infringes
any intellectual property right of any other party; and (ii) there is no pending
or, to the knowledge of Sand, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any Sand IP
Rights (nor is there any basis therefor). Except as set forth in Section 2.8(d)
of the Sand Disclosure Letter, Sand has not received any written notice
asserting that any Sand IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party. To Sand's knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Sand IP Rights by any third party, including any
employee or former employee of Sand. No Sand IP Rights or product of Sand is
subject to any outstanding decree, order, judgment or stipulation restricting in
any manner the licensing thereof by Sand.
(e) Sand has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all Sand IP Rights. Each employee of and consultant to Sand has
executed a proprietary information and inventions agreement in Sand's standard
form.
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2.9 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Sand is not in conflict with, or in default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to Sand or by
which Sand or any of its properties is bound or affected (except for such
conflicts, defaults and violations which are not, individually or in the
aggregate, material to the operation of the business of Sand), or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Sand is a party or by which
Sand or any of its properties is bound or affected. To the knowledge of Sand,
no investigation or review by any governmental or regulatory body or authority
is pending or threatened against Sand, nor has any governmental or regulatory
body or authority indicated an intention to conduct the same.
(b) Sand holds all permits, licenses, variances, exemptions, orders
and approvals from governmental authorities which are material to the operation
of the business of Sand (collectively, the "SAND PERMITS"). Sand is in
compliance with the terms of Sand Permits.
2.10 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Sand has received any notice of
assertion, nor, to Sand's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Sand, including any such
action, suit, proceeding, claim, arbitration or investigation that in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
2.11 BROKERS' AND FINDERS' FEES. Except for fees payable to Xxxx Xxxxxxxx
Xxxxxxx pursuant to an engagement letter dated January 22, 1998, a copy of which
has been provided to Phoenix, Sand has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.12 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of "Affiliate"
set forth in Section 2.12(a)(i) below (which definition shall apply only to this
Section 2.12), 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 Sand within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(ii) "SAND EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
compensation, stock or stock-related compensation, 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,
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by Sand or any Affiliate for the benefit of any Sand Employee, or with
respect to which Sand or any Affiliate has or may have any liability or
obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "SAND EMPLOYEE" shall mean any current or former
employee, consultant or director of Sand or any Affiliate;
(vi) "SAND EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement or contract or arrangement between Sand or
any Affiliate and any Sand Employee;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "SAND INTERNATIONAL EMPLOYEE PLAN" shall mean each Sand
Employee Plan that has been adopted or maintained by Sand or any Affiliate,
whether informally or formally, or with respect to which Sand or any Affiliate
will or may have any liability, for the benefit of Sand Employees who perform
services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "SAND MULTIEMPLOYER PLAN" shall mean any "Sand Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in
Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "SAND PENSION PLAN" shall mean each Sand Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) SCHEDULE. Section 2.12(b) of the Sand Disclosure Letter contains
an accurate and complete list of each Sand Employee Plan and each Sand Employee
Agreement under each Sand Employee Plan. Sand does not have any plan or
commitment to establish any new Sand Employee Plan or Sand Employee Agreement,
to modify any Sand Employee Plan or Sand Employee Agreement (except to the
extent required by law or to conform any such Sand Employee Plan or Sand
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Phoenix in writing, or as required by this Agreement or
in the ordinary course of business), or to enter into any Sand Employee Plan or
Sand Employee Agreement.
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(c) DOCUMENTS. Sand has made available to Phoenix: (i) correct and
complete copies of all documents embodying each Sand Employee Plan and each Sand
Employee Agreement including (without limitation) all amendments thereto and all
related trust documents; (ii) the most recent annual actuarial valuations, if
any, prepared for each Sand Employee Plan; (iii) 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 Sand Employee Plan; (iv) if the Sand Employee Plan is funded, the most
recently required and completed annual and periodic accounting of Sand Employee
Plan assets; (v) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Sand Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all material written agreements and contracts relating to each Sand Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all written
communications material to any Sand Employee or Sand Employees relating to any
Sand Employee Plan and any proposed Sand Employee Plans, in each case, relating
to any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Sand; (ix) all correspondence to or
from any governmental agency relating to any Sand Employee Plan; (x) all COBRA
forms and related notices; (xi) all policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Sand Employee Plan; (xii) all
discrimination tests for each Sand Employee Plan for the most recent plan year;
and (xiii) all registration statements, annual reports (Form 11-K and all
attachments thereto) and prospectuses prepared in connection with each Sand
Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth in Section 2.12 of
the Sand Disclosure Letter, (i) Sand 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
Sand Employee Plan, and each Sand Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance in all material respects with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA or the Code; (ii) each
Sand 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 Sand Employee Plan; (iii) to Sand's knowledge, 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 Sand Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Sand, threatened or
reasonably anticipated (other than routine claims for benefits) against any Sand
Employee Plan or against the assets of any Sand Employee Plan; (v) each Sand
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the Phoenix,
Merger Sub, the Surviving Corporation, Sand or any of its Affiliates (other than
ordinary administration expenses or full vesting of any employer contributions
to any Sand
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Employee Plan intended to qualify under Section 401(a) of the Code); (vi)
there are no audits, inquiries or proceedings pending or, to the knowledge of
Sand or any Affiliates, threatened by the IRS or DOL with respect to any Sand
Employee Plan; and (vii) neither Sand nor any Affiliate is subject to any
penalty or tax with respect to any Sand Employee Plan under Section 502(i) of
ERISA or Sections 4975 through 4980 of the Code.
(e) SAND PENSION PLAN. Neither Sand nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any Sand
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) SAND MULTIEMPLOYER PLANS. At no time has Sand or any Affiliate
contributed to or been required to contribute to any Sand Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Section 2.12(g) of the Sand Disclosure Letter, no Sand Employee Plan provides,
or reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and Sand
has never represented, promised or contracted (whether in oral or written form)
to any Sand Employee (either individually or to Sand Employees as a group) or
any other person that such Sand Employee(s) or other person would be provided
with retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) COBRA. Neither Sand 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 Sand Employees.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth in the Disclosure Letter, 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 Sand Employee
Plan, Sand 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 Sand Employee.
(ii) Except as set forth in the Disclosure Letter, no payment
or benefit which will or may be made by Sand or its Affiliates with respect to
any Sand Employee as a result of the transactions contemplated by this Agreement
will be characterized as a "parachute payment," within the meaning of Section
280G(b)(2) of the Code (but without regard to clause (ii) thereof).
(j) SAND INTERNATIONAL EMPLOYEE PLAN. Neither Sand nor any Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any Sand International Employee Plan.
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2.13 ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF EQUIPMENT. Set forth
in Section 2.13 of the Sand Disclosure Letter are a complete and correct list
and summary description of all fixed assets, machinery, equipment, vehicles and
other tangible assets owned or used by Sand at the date of this Agreement. Sand
has the exclusive right to use all such assets, subject, in the case of leased
property, to continuing obligations under leases therefor. Sand has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its material tangible properties and assets, real, personal
and mixed, used in its business, free and clear of any liens or encumbrances
except as reflected in the Sand Financials and except for liens for taxes not
yet due and payable.
2.14 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. No underground storage tanks and no amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies, are
present, as a result of the actions of Sand, or, to Sand's knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that Sand has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Sand has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has Sand disposed of, transported, sold, used, released,
exposed its employees or others to, or manufactured any product containing a
Hazardous Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. Sand currently holds all environmental approvals,
permits, licenses, clearances and consents (the "SAND ENVIRONMENTAL PERMITS")
material to the conduct of Sand's Hazardous Material Activities and other
businesses of Sand as such activities and businesses are currently being
conducted.
(d) ENVIRONMENTAL LIABILITIES. Sand has not received notice of any
material action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim, nor, to Sand's knowledge, is any material action,
proceeding, revocation proceeding, amendment procedure, writ, injunction or
claim threatened concerning any Sand Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of Sand. Sand is not aware of any fact or
circumstance which could involve Sand in any environmental litigation or impose
upon Sand any environmental liability that would have a Material Adverse Effect
on Sand.
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2.15 LABOR MATTERS. To Sand's knowledge, there are no activities or
proceedings of any labor union to organize any employees of Sand and there are
no strikes, or material slowdowns, work stoppages or lockouts, or threats
thereof by or with respect to any employees of Sand. Sand is and has been in
compliance with all applicable laws regarding employment practices, terms and
conditions of employment, and wages and hours (including, without limitation,
ERISA, WARN or any similar state or local law), except for any noncompliance
that would not have a Material Adverse Effect on Sand. Sand has not received
any notice from any of its employees that any employee is terminating his or her
employment with Sand, nor, to the best of Sand's knowledge, does any employee
intend to terminate his or her employment with Sand as a result of the
transactions contemplated hereby.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Set forth in Section 2.16 of
the Sand Disclosure Letter are a complete and correct list and summary
description of all material contracts, agreements, orders, leases, licenses and
other commitments (each a "SAND CONTRACT") of Sand at the date of this
Agreement. Except as set forth in the Sand Disclosure Letter, Sand is not a
party to nor is bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements;
(c) any employment or consulting agreement, contract or commitment
with any officer or director level employee, or member of Sand's Board of
Directors;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(e) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
Sand and any of its officers or directors;
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of Sand to engage in any line of business or compete with
any person;
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $50,000 and not
cancelable without penalty;
(h) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
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(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(j) any joint marketing or development agreement (excluding
agreements with resellers, value added resellers or independent software vendors
entered into in the ordinary course of business that do not permit such
resellers or vendors to modify Sand's software products);
(k) any distribution agreement (identifying any that contain
exclusivity provisions); or
(l) any other agreement, contract or commitment which involves
payment by Sand under any such agreement, contract or commitment of $50,000 or
more individually and is not cancelable without penalty within thirty (30) days.
Neither Sand, nor to Sand's knowledge any other party to a Sand Contract, has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any of
such Sand Contracts in such a manner as would permit any other party to cancel
or terminate any such Sand Contract, or would permit any other party to seek
damages.
2.17 EMPLOYEES; CHANGE OF CONTROL PAYMENTS. Set forth in Section 2.17 of
the Sand Disclosure Letter is a complete list of the current employees of Sand,
including a complete and correct compensation schedule for all employees and a
complete and correct list and summary description of benefits for the key
employees of Sand. Except as set forth in Section 2.17 of the Sand Disclosure
Letter, there are no employment contracts with any personnel. Section 2.17 of
the Sand Disclosure Letter sets forth each plan or agreement pursuant to which
all material amounts may become payable (whether currently or in the future) to
current or former officers and directors of Sand as a result of or in connection
with the Merger.
2.18 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), judgment, injunction, order or decree to which Sand
is a party or otherwise binding upon Sand which has or reasonably would be
expected to have the effect of prohibiting or impairing any business practice of
Sand, any acquisition of property (tangible or intangible) by Sand or the
conduct of business by Sand. Without limiting the foregoing, Sand has not
entered into any agreement under which Sand is restricted from selling,
licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.19 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Sand owns no real property, nor have it ever owned any real
property. Section 2.19(a) of the Sand Disclosure Letter sets forth a list of
all real property currently leased by Sand, the name of the lessor and the date
of the lease and each amendment thereto. All such current leases are in full
force and effect, are valid and effective in accordance with their respective
terms, and there is not,
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under any of such leases, any material existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
material default).
(b) Sand has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort except as reflected in Sand's
Financials or in Section 2.19(b) of the Sand Disclosure Letter and except for
liens for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.20 PROXY STATEMENT/INFORMATION STATEMENT. The information included in
the proxy statement or information statement to be sent to the shareholders of
Sand in connection with the meeting of, or solicitation of written consents
from, Sand's shareholders to consider the approval and adoption of this
Agreement and the approval of the Merger (the "SAND SHAREHOLDERS' MEETING")(such
proxy statement as amended or supplemented is referred to herein as the "PROXY
STATEMENT") shall not, on the date the Proxy Statement is first mailed to Sand's
shareholders and at the time of the Sand Shareholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the Sand
Shareholders' Meeting which has become false or misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of
California Law and the rules and regulations thereunder. If, at any time prior
to the Sand Shareholders' Meeting, any event relating to Sand or any of its
affiliates, officers or directors should be discovered by Sand which should be
set forth in a supplement to the Proxy Statement, Sand shall promptly inform
Phoenix. Notwithstanding the foregoing, Sand makes no representation or
warranty with respect to any information supplied by Phoenix or Merger Sub which
is contained in any of the foregoing documents.
2.21 BOARD APPROVAL. The Board of Directors of Sand has, as of the date of
this Agreement, determined (i) that the Merger is fair to, and in the best
interests of Sand and its shareholders, and (ii) to recommend that the
shareholders of Sand approve and adopt this Agreement and approve the Merger.
2.22 INSURANCE. Section 2.22 of the Sand Disclosure Letter sets forth all
insurance policies held by Sand for the two years prior to the Effective Time.
During the past five years Sand has not experienced any uninsured losses in
respect of public liability, product liability and worker compensation claims.
All insurance policies are duly in force as of the date of this Agreement. No
notice has been received by Sand regarding the cancellation, non-renewal or
increased premiums due with respect to any insurance policy.
2.23 WARRANTIES. Sand has heretofore furnished or made available to
Phoenix or its counsel for its review copies of all written warranties covering
the products of Sand currently in effect. During
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the past five years, Sand has not experienced any warranty claims which have
affected the consolidated net income of Sand by more than $50,000 in any one
fiscal year.
2.24 MINUTE BOOKS. The minute books of Sand made available to counsel for
Phoenix are the only minute books of Sand and contain a reasonably accurate
summary, in all material respects, of all meetings of directors (and committees
thereof) and shareholders or actions by written consent since the time of
incorporation of Sand.
2.25 NO MATERIAL MISREPRESENTATIONS. Neither this Agreement nor any
certificate, exhibit, schedule or other information furnished by or on behalf of
Sand pursuant to this Agreement contains any untrue statement of material fact
or, when this Agreement and such certificates, schedules and other information
are taken in their entirety, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
therein not misleading as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PHOENIX AND MERGER SUB
Phoenix and Merger Sub represent and warrant to Sand, except as set forth
in the disclosure letter supplied by Phoenix to Sand on or before the date
hereof and certified by a duly authorized officer of Phoenix (the "PHOENIX
DISCLOSURE LETTER"), as follows:
3.1 ORGANIZATION OF PHOENIX. Phoenix and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power to own, lease
and operate its property and to carry on its business as now being conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the business, assets (including intangible
assets), financial condition or results of operations of Phoenix and its
subsidiaries taken as a whole.
3.2 AUTHORITY.
(a) Each of Phoenix and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of Phoenix and, in the case of
this Agreement, Merger Sub, subject only to the filing and recordation of the
Agreement of Merger pursuant to California Law. This Agreement has been duly
executed and delivered by each of Phoenix and Merger Sub, and, assuming the due
authorization, execution and delivery by Sand, constitutes the valid and binding
obligations of Phoenix and Merger Sub, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
each of Phoenix and Merger Sub do not, and the performance of this Agreement by
each of Phoenix and Merger Sub will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of Phoenix or the Articles of
Incorporation or Bylaws of Merger Sub or the equivalent organizational documents
of any of Phoenix's other subsidiaries, (ii)
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conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Phoenix or any of its subsidiaries (including Merger Sub) or by
which its or any of their respective properties is bound or affected of its
subsidiaries (including Merger Sub) pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Phoenix or any of its subsidiaries
(including Merger Sub) is a party or by which Phoenix or any of its
subsidiaries or its or any of their respective properties are bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on Phoenix and its subsidiaries taken as a whole.
The Phoenix Disclosure Letter lists all consents, waivers and approvals under
any of Phoenix's or any of its subsidiaries' agreements, contracts, licenses
or leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if not obtained, would have a
Material Adverse Effect on Phoenix and its subsidiaries taken as a whole or
have a material adverse effect on the ability of the parties to consummate
the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Phoenix or Merger Sub in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Agreement of Merger with the Secretary of State
of the State of California and (ii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Phoenix and its subsidiaries taken as a whole
or have a material adverse effect on the ability of the parties to consummate
the Merger.
(c) The shares of Phoenix Common Stock to be issued to the Sand
Shareholders pursuant to Section 1.6(b)(ii) of this Agreement will, upon
issuance, be duly authorized, validly issued, fully paid and non-assessable
and issued in compliance with all applicable state and federal securities
laws.
3.3 NO MATERIAL MISREPRESENTATIONS. Neither this Agreement nor the
Phoenix Disclosure Letter contains any untrue statement of material fact or,
when this Agreement and the Phoenix Disclosure Letter are taken in their
entirety, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
as of the date hereof.
3.4 AVAILABLE FUNDS. Phoenix has sufficient capital available to
consummate the transactions contemplated by this Agreement and is not relying on
obtaining additional financing in connection with such transactions.
3.5 MERGER SUB. Merger Sub is a wholly-owned subsidiary of Phoenix that
was formed to effect the transactions contemplated by this Agreement. As of the
date of this Agreement, Merger Sub has no business, operations, assets or
liabilities other than those arising from its formation and pursuant to this
Agreement.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 SECURITIES ACT EXEMPTION. The Phoenix Common Stock to be issued
pursuant to this Agreement initially will not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), in reliance on the exemption set
forth in Section 4(2) thereof. In connection with the acquisition of Phoenix
Common Stock, each of the Sand Founders hereby represents, and each of the
remaining Sand Shareholders will represent prior to receipt of Phoenix Common
Stock, to the Company that (i) the Sand Shareholder is acquiring the Phoenix
Common Stock for investment purposes only and not with a view to, or for resale
in connection with any "distribution" thereof as that term is used for purposes
of the Securities Act; (ii) the Sand Shareholder is aware of Phoenix's business
affairs and financial condition and has acquired sufficient information about
Phoenix to reach an informed and knowledgeable decision to acquire the Phoenix
Common Stock; and (iii) the Sand Shareholder understands that the Phoenix Common
Stock has not been registered under the Securities Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the investment intent as expressed herein.
4.2 STOCK RESTRICTIONS. In addition to any legend imposed by applicable
state securities laws or by any contract which continues in effect after the
Effective Time, the certificates representing the shares of Phoenix Common Stock
issued pursuant to this Agreement shall bear a restrictive legend (and stop
transfer orders shall be placed against the transfer thereof with Phoenix's
transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
4.3 SAND SHAREHOLDERS' REPRESENTATIONS REGARDING SECURITIES LAW MATTERS.
Each Sand Shareholder, by virtue of the Merger and the conversion into Phoenix
Common Stock of Sand Common Stock held by such Sand Shareholder, shall be bound
by the following provisions:
(a) The Sand Shareholder will not offer, sell or otherwise dispose of
any shares of Phoenix Common Stock except in compliance with the Securities Act
and the rules and regulations thereunder.
(b) The Sand Shareholder will not sell, transfer or otherwise dispose
of any shares of Phoenix Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of
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and in compliance with Rule 144 promulgated by the SEC under the Securities
Act and the Sand Shareholder furnishes Phoenix with reasonable proof of
compliance with such Rule, (ii) in the opinion of counsel, reasonably
satisfactory to Phoenix and its counsel, some other exemption from
registration under the Securities Act is available with respect to any such
proposed sale, transfer, or other disposition of Phoenix Common Stock, or
(iii) the offer and sale of Phoenix Common Stock is registered under the
Securities Act.
4.4 REGISTRATION RIGHTS. Phoenix shall use its reasonable best efforts to
include the Phoenix Common Stock issued to the Sand Shareholders in any
registration statement filed on behalf of Phoenix for a period of one year after
the Effective Time. Any such registration shall be subject to the terms and
conditions set forth in the Declaration of Registration Rights attached hereto
as EXHIBIT D.
4.5 NASDAQ NATIONAL MARKET LISTING. Phoenix shall authorize for listing
on the Nasdaq National Market the shares of Phoenix Common Stock issuable in
connection with the Merger, upon official notice of issuance.
4.6 BLUE SKY LAWS. Phoenix shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Phoenix Common Stock pursuant hereto. Sand
and the Sand Shareholders shall use their best efforts to assist Phoenix as may
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Phoenix
Common Stock pursuant hereto.
4.7 CONDUCT OF BUSINESS. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Sand agrees, except as provided in
Section 4.7 of the Sand Disclosure Letter, or to the extent that Phoenix shall
otherwise consent in writing, to carry on its business diligently and in
accordance with good commercial practice and to carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform other material obligations when due, and use
its commercially reasonable efforts consistent with past practices and policies
to preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others with
which it has business dealings. In addition, Sand will promptly notify Phoenix
of any material event involving its business or operations. No information or
knowledge obtained in any investigation will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Section 4.7 of the Sand Disclosure Letter, without the prior
written consent of Phoenix, Sand shall not do any of the following:
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(a) Waive any stock repurchase rights; accelerate, amend or change
the period of exercisability of options or restricted stock; or reprice options
granted under any employee, consultant or director stock plans; or authorize
cash payments in exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances, agreements to create standards or
agreements with "Standards" bodies;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Sand IP Rights, other
than in the ordinary course of business, or enter into grants to future patent
rights, other than in the ordinary course of business;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock, or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(f) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan or agreement
existing on the date hereof;
(g) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire and
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than (i) shares of
Sand Common Stock issued pursuant to the exercise of stock options outstanding
as of the date of this Agreement, (ii) options to purchase shares of Sand Common
Stock, to be granted at fair market value in the ordinary course of business,
consistent with past practice and in accordance with stock option plans existing
on the date hereof, and (iii) shares of Sand Common Stock issuable upon the
exercise of the options referred to in clause (ii);
(h) Cause, permit or propose any amendments to any charter document
or bylaw (or similar governing instruments of any subsidiaries);
(i) Except as set forth in Section 4.7 of the Sand Disclosure Letter,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or a material portion of the assets of, or by any other
manner, any business or any corporation, partnership interest, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets
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which are material, individually or in the aggregate, to the business of
Sand, or enter into any joint ventures, strategic partnerships or alliances;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Sand;
(k) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of Sand, or
guarantee any debt securities of others;
(l) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(m) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(n) Make any grant of exclusive rights to any third party; or
(o) Agree in writing or otherwise to take any of the actions
described in Section 4.7 (a) through (n) above.
4.8 PROXY STATEMENT. Sand has prepared the Proxy Statement to be sent to
the Sand Shareholders to solicit votes of the Sand Shareholders in connection
with the transactions contemplated by this Agreement, including the Merger, and
has delivered a copy of such Proxy Statement to Phoenix. Insofar as the Proxy
Statement contains information pertaining to Sand, at the time of its mailing to
the Sand Shareholders and at the time of the Sand Shareholders' Meeting to vote
on the Merger, the Proxy Statement will contain no untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and Sand will advise Phoenix in writing if
prior to the meeting of Sand Shareholders to vote on the Merger it shall obtain
knowledge of any facts that would make it necessary to supplement or amend the
Proxy Statement or to comply with applicable laws. Phoenix will cooperate with
Sand in providing necessary information for preparation of the Proxy Statement.
Sand agrees to call a special meeting of the Sand Shareholders or to solicit
votes of the Sand Shareholders by written consent on or before the day that is
15 calendar days after the date hereof, or such later date as may be mutually
agreed upon in writing by Sand and Phoenix, for the purpose of submitting this
Agreement to the Sand Shareholders for approval and adoption and authorizing the
transactions contemplated hereby. The Board of Directors of Sand, subject to
their fiduciary duties, will recommend that the Shareholders approve and adopt
this Agreement.
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4.9 DUE DILIGENCE. During the period between the date of this Agreement
and the Effective Date of the Merger, Phoenix will have the right to conduct
such corporate investigation or investigations of Sand as Phoenix may deem
advisable for the purpose of determining the accuracy of Sand's representations
and warranties. Sand shall give Phoenix, its attorneys, accountants and other
representatives full access and cooperation in connection with such
investigations.
4.10 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to the Confidentiality Agreement between the parties,
each party will afford the other party and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of the other party during the period
prior to the Effective Time to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of such party, as the other party may reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 4.10 will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
(b) The parties acknowledge that Sand and Phoenix have previously
executed the Confidentiality Agreement, which Confidentiality Agreement will
continue in full force and effect in accordance with their terms.
4.11 NO SOLICITATION. From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, Sand shall not, and will instruct its respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or knowingly encourage submission of any
proposals or offers by any person, entity or group (other than Phoenix and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any non-public information concerning Sand to,
or afford any access to the properties, books or records of Sand to, or
otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Phoenix and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to Sand. For the purposes of this Agreement, an "ACQUISITION PROPOSAL" with
respect to Sand means any proposal or offer relating to (i) any merger,
consolidation, sale of substantial assets or similar transactions involving Sand
(other than sales of assets or inventory in the ordinary course of business or
permitted under the terms of this Agreement), (ii) sale of 10% or more of the
outstanding shares of capital stock of Sand (including without limitation by way
of a tender offer or an exchange offer), (iii) the acquisition by any person of
beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) which beneficially owns, or has the right
to acquire beneficial ownership of, 10% or more of the then outstanding shares
of capital stock of Sand; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. Sand will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Sand will (i) notify Phoenix as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in writing in connection with an Acquisition Proposal or potential
Acquisition
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Proposal and (ii) as promptly as practicable provide Phoenix with a copy of
any such inquiry, proposal or Acquisition Proposal (or a detailed summary
thereof if such inquiry, proposal or Acquisition Proposal is not in writing).
In addition, subject to the other provisions of this Section 4.11, from and
after the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, Sand will not, and will
instruct its respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly,
make or authorize any public statement, recommendation or solicitation in
support of any Acquisition Proposal made by any person, entity or group
(other than Phoenix).
4.12 LEGAL REQUIREMENTS. Each of Phoenix, Merger Sub and Sand will take
all reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
4.13 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Sand will obtain all consents, waivers and approvals under any of its
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
4.14 NOTIFICATION OF CERTAIN MATTERS. Subject to the terms and provisions
of the Confidentiality Agreement, each party will give prompt notice to the
other, of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Effective Time, or
(b) any material failure of such party, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
4.15 COMMERCIALLY REASONABLE EFFORTS AND FURTHER ASSURANCES. Subject to
the respective rights and obligations of Phoenix and Sand under this Agreement,
each of the parties to this Agreement will use its commercially reasonable
efforts to effectuate the Merger and the other transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to closing under this
Agreement. Each party hereto, at the reasonable request of another party
hereto, will execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of the transactions contemplated hereby.
4.16 JOINT BUSINESS PLAN. Sand and the Sand Founders have assisted Phoenix
with the preparation of the Joint Business Plan and hereby agree with the
contents thereof, including the definition of "Business Unit", the accounting
policies and guidelines, and the revenue and operating income targets. Sand and
the Sand Founders agree with the projections set forth in the Joint Business
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Plan and agree that such projections were prepared in good faith based on
conclusions and assumptions that were reasonable at the time such conclusions
and projections were made. Phoenix agrees with the projections set forth in the
Joint Business Plan and agrees that such projections were prepared in good faith
based on conclusions and assumptions that were reasonable at the time such
conclusions and projections were made.
4.17 SAND EMPLOYEE MATTERS. Phoenix agrees to continue the employment of
all Sand employees at the same salary as was in existence immediately prior to
the Effective Time; provided, however, that this provisions shall not be
interpreted to limit Phoenix's ability to terminate or change the nature of its
employment relationship with any such Sand employee after the Effective Time.
Phoenix agrees to permit such employees to participate in the Phoenix employee
benefit plans and to give them years of service credit for purposes of such
plans based on each employee's service with Sand prior to the Effective Time.
The parties agree that this Section 4.17 is not intended to create any third
party beneficiary right in any employee. Prior to the Effective Time, Phoenix
agrees to adopt the Retention Bonus Program in the form previously agreed to by
the parties.
4.18 TAX RETURN PREPARATION AND REVIEW. Phoenix shall be responsible for
preparing and filing (or causing the preparation and filing of) all Tax Returns
with respect to Sand due after the Closing Date. Such Tax Returns shall be
prepared in a manner consistent with prior periods, as determined in the good
faith judgment of Phoenix. Phoenix shall pay (or cause to be paid ) any Taxes
shown to be due on such Tax Returns, without prejudice to the right of Phoenix
to seek indemnification for such Taxes from the Sand Founders pursuant to
Section 8.1. From the Closing Date until one year thereafter, Phoenix shall
provide each Sand Founder a copy of all Tax Returns filed with respect to Sand
due after the Closing Date.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PHOENIX
The obligations of Phoenix and Merger Sub hereunder are subject to the
satisfaction, or waiver thereof by Phoenix, of the following conditions:
5.1 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the Sand Shareholders by the requisite vote under
applicable law and Sand's Articles of Incorporation.
5.2 NO ACTIONS OR PROCEEDING. No investigation, action or proceeding by
or before any court or other governmental body shall have been commenced or
threatened, and no inquiry shall have been received that in the opinion of
Phoenix's counsel may lead to an action or proceeding to restrain or otherwise
challenge the transactions contemplated hereby.
5.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Sand shall be true and correct in all material respects on the Effective Time of
the Merger, with the same effect as though such representations and warranties
had been made on and as of such date, and each and all of the
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agreements of Sand to be performed or complied with in all material respects
pursuant to the terms of this Agreement shall have been duly performed and
complied with.
5.4 NO MATERIAL ADVERSE EFFECT. No event shall have occurred since the
date of this Agreement that has had or would reasonably be expected to have a
Material Adverse Effect on Sand.
5.5 OPINION OF COUNSEL. There shall be delivered to Phoenix on the
Closing Date of the Merger an opinion or opinions of counsel to Sand, dated the
Closing Date of the Merger and satisfactory in form and substance to Phoenix and
its counsel, covering such matters as Phoenix or its counsel may reasonably
require.
5.6 NON-COMPETE AGREEMENTS. Sand, Phoenix and the Sand Founders hereto
shall have entered into covenants not-to-compete (the "Non-Compete Agreements")
substantially in the form of EXHIBIT C hereto.
5.7 ACQUISITION AGREEMENT. Phoenix and certain of the Sand Shareholders
shall have entered into an agreement pursuant to which such Shareholders agree
to sell Phoenix 100% of their shares of Sand Microelectronics Pvt. Ltd., India,
an Indian company.
5.8 COMPLIANCE CERTIFICATE. Sand shall have delivered to Phoenix a
certificate, executed by the President of Sand, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.3 and
5.4.
5.9 CERTIFICATES AND DOCUMENTS. Sand shall have delivered to Phoenix:
(a) Certificates, as of the most recent practicable dates, as to the
corporate and tax good standing of Sand issued by the Secretary of State of the
State of California and the Secretary of the State of each other state in which
Sand is currently qualified to transact business; and
(b) Resolutions of the Board of Directors of Sand and the Sand
Shareholders, authorizing and approving all matters in connection with this
Agreement and the Merger, certified by the Secretary or Assistant Secretary of
Sand as of the Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SAND
The obligations of Sand hereunder are subject to the satisfaction, or
waiver thereof by Sand, of the following conditions:
6.1 SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the Sand Shareholders by the requisite vote under
applicable law and Sand's Articles of Incorporation.
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6.2 NO ACTIONS OR PROCEEDING. No investigation, action or proceeding by
or before any court or other governmental body shall have been commenced or
threatened, and no inquiry shall have been received that in the opinion of
Sand's counsel may lead to an action or proceeding to restrain or otherwise
challenge the transactions contemplated hereby.
6.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Phoenix shall be true and correct in all material respects on and as of the
Effective Time of the Merger with the same effect as though such representations
and warranties had been made on and as of such date, and each and all of the
agreements of Phoenix to be performed or complied with in all material respects
pursuant to the terms of this Agreement shall have been duly performed and
complied with.
6.4 NON-COMPETE AGREEMENTS. Sand, Phoenix and the Sand Founders shall
have entered into the Non-Compete Agreements.
6.5 CERTIFICATES. Phoenix shall have delivered to Sand (a) a certificate,
executed by a duly authorized officer of Phoenix, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 6.3, and
(b) resolutions of the Board of Directors of Phoenix, authorizing and approving
all matters in connection with this Agreement and the Merger, certified by the
Secretary or Assistant Secretary of Phoenix as of the Closing Date, including
approval of the Retention Bonus Program.
6.6 OPINION OF COUNSEL. There shall be delivered to Sand on the Closing
Date of the Merger an opinion of counsel to Phoenix, dated the Closing Date of
the Merger to the effect that the shares of Phoenix Common Stock to be issued to
the Sand Shareholders in the Merger, when issued in accordance with this
Agreement will, upon issuance, be duly authorized, validly issued, fully paid
and non-assessable and will be issued in compliance with all applicable state
and federal securities laws.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Notwithstanding any investigation made by or on behalf of Phoenix, the
representations and warranties of Sand contained in this Agreement shall be
continuing representations and warranties and shall survive the Effective Time
of the Merger until the second anniversary thereof; provided, however, that the
representations and warranties with respect to intellectual property matters set
forth in Section 2.8 hereof shall be continuing representations and warranties
and shall survive the Effective Time of the Merger until the third anniversary
thereof, and that the representations and warranties with respect to taxes and
tax liabilities of Sand contained in Section 2.7 hereof shall be continuing
representations and warranties and shall survive until the expiration of the
third year following the date on which Sand shall have completed filing all
required tax returns for any partial tax period ending at the Effective Time of
the Merger or such longer period following the filing of any such return during
which the period of the statute of limitations applicable to such return shall
have been extended by action of Sand or any governmental authority.
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ARTICLE VIII
INDEMNITY OF PHOENIX
8.1 INDEMNIFICATION OF PHOENIX. Each of the Sand Founders shall severally
indemnify, defend and hold harmless Phoenix, Merger Sub and the Surviving
Corporation from and against any claims, damages, costs (including, without
limitation, interest on any loss from the date thereof to the date of payment)
or expenses (including, without limitation, attorneys' fees and disbursements)
(collectively, "Losses") arising out of any misrepresentation in or breach of
the representations, warranties or covenants of Sand contained herein or made to
Phoenix or Merger Sub in any exhibit, certificate or other instrument or
document furnished or to be furnished by Sand pursuant to this Agreement or in
connection with the transactions contemplated herein; provided, however, that
each Sand Founder's liability pursuant to this Section 8.1, including any
offsets pursuant to Section 8.6, shall not exceed one million three hundred
thirty-four thousand dollars ($1,334,000); and, provided further, that the
liability of all of the Sand Founders pursuant to this Section 8.1 shall not
exceed four million dollars ($4,000,000); and, provided further, that the amount
to be payable by a Sand Founder shall in no event exceed one-third of the total
amount to be paid with respect to any claim for indemnification hereunder.
Notwithstanding the foregoing, no payments shall be made pursuant to this
Section 8.1 unless and until the aggregate amount of such Losses exceeds
$175,000, in which case Phoenix shall be entitled to the full amount of the
Losses in excess of $75,000 after deducting any amounts otherwise to be paid
with respect to such Dissenters' Shares pursuant to Section 1.6(b) hereof.
8.2 INDEMNIFICATION FOR DISSENTERS' SHARES. Phoenix shall be indemnified
from and against any Losses as a result of claims asserted against Phoenix by
holders of Dissenters' Shares, and shall be entitled to recover the full amount
of such Losses, after deducting any amounts otherwise to be paid with respect to
such Dissenters' Shares pursuant to Section 1.6(b) hereof.
8.3 NOTICE. Promptly after service of notice of any claim or of process
on Phoenix or the Surviving Corporation by any third person in any matter in
respect of which indemnity may be sought pursuant to this Xxxxxxx 0, Xxxxxxx
shall notify the Sand Founders at the Sand Founders' addresses set forth herein.
Phoenix may, at its option, assume the defense of any such claim or process or
settlement thereof. Regardless of whether any such third-party claim is
defended by Phoenix or the Sand Founders, the defending party shall (i) settle
or defend such claim or proceeding with reasonable diligence; (ii) cooperate
with the other party in the investigation and analysis of such claim or
proceeding; (iii) afford the other party reasonable access to such relevant
information as it may have in its possession; and (iv) keep the other party
reasonably informed regarding such claim or proceeding. The generality of the
foregoing notwithstanding, the Sand Founders shall not settle any such claim or
proceeding without the consent of Phoenix, which consent shall not be
unreasonably withheld; provided that if Phoenix shall withhold such consent, the
Sand Founders shall continue to defend such claim or proceeding and all defense
costs from the date of such refusal to consent onward shall be payable by the
Sand Founders, subject to the maximum limits of such indemnity under this
Section 8. If the Sand Founders shall become obligated to indemnify and hold
harmless Phoenix pursuant to this Section 8, such obligation will be the several
obligation of the Sand Founders only and in no event will the Sand Founders be
entitled to any contribution from the Surviving Corporation with respect to such
indemnity obligation of the Sand Founders, nor shall the Sand Founders assert
any claim against the Surviving
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Corporation, whether for contribution or otherwise, with respect to any such
indemnity obligation of the Sand Founders.
8.4 SURVIVAL OF INDEMNIFICATION OBLIGATION. The indemnification provided
in this Section 8 shall survive the Effective Time of the Merger for the periods
specified in Section 7 and any additional period required to resolve any claim
under this Section 8.
8.5 NOTICE OF CLAIM.
(a) At any time prior to the end of the period specified in Section
7, Phoenix may give the Sand Founders a written notice which states the general
nature of a claim for indemnity ("Claim") pursuant to this Section 8 with
reasonable detail as to the alleged basis of the indemnity claim ("Notice of
Claim"), together with notice that Phoenix intends to apply all or part of the
Sand Founders' pro rata portion of the Contingent Payments to the payment of the
Losses specified in such Notice of Claim. In the event that a Loss has not been
liquidated or determined, Phoenix may, at any time prior to the end of the
period specified in Section 7, give the Sand Founders a Notice of Claim in which
Phoenix describes the general nature of the Claim and makes a good faith
estimate of the Loss.
(b) If a Sand Founder does not give written notice to Phoenix within
30 days after the receipt of such Notice of Claim that he protests the Claim set
forth in the Notice of Claim, then Phoenix shall be entitled to indemnification
for such Claim and all Losses hereunder, including the right of offset as set
forth in Section 8.6 below.
(c) If a Sand Founder does give written notice to Phoenix within 30
days after the receipt of such Notice of Claim that he protests the Claim, then
such Claim shall be referred by Phoenix to, and settled by, binding arbitration
in accordance with the then applicable Rules of Commercial Arbitration of the
American Arbitration Association. The arbitration panel or arbitrator (as
applicable) shall be selected as provided in Section 8.5(d) of this Agreement.
The arbitration panel or arbitrator (as applicable) shall determine the amount,
if any, of such Claim which is proper. The venue of the arbitral proceedings
shall be in Santa Xxxxx County, California. In reaching a decision, the
arbitration panel or arbitrator (as applicable) shall apply the principles of
law that a California court, in applying California law, would use in the event
of litigation on the same issues. The decision rendered by the arbitration
panel or arbitrator (as applicable) shall be final and binding on Phoenix and
each Sand Founder. Judgment on the award rendered by the arbitration panel or
arbitrator (as applicable) may be entered in any court having jurisdiction
thereof. All attorneys' fees, fees for expert witnesses and all other costs
incurred by the Sand Founders in connection with the indemnity claim which is
the subject of the arbitration and any fees charged by the arbitrators or the
American Arbitration Association shall be paid by the Sand Founders.
(d) In the event that a Sand Founder protests a Claim as provided
in Section 8.5(c) and Phoenix and the Sand Founders cannot resolve such
disagreement within the 30-day period specified in Section 8.5(c), then
promptly thereafter Phoenix shall name an individual to serve as an
arbitrator on the arbitration panel to determine the validity of the Claim
and the amount of any Loss, and shall give
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the Sand Founders notice thereof. Within 10 days after such notice, the Sand
Founders shall name a second individual to serve as an arbitrator on such
arbitration panel; and the two individuals so named shall agree upon and name
a third individual to serve as an arbitrator on such arbitration panel. In
the event that the Sand Founders do not name a second individual to serve on
the arbitration panel within such 10-day period, then the arbitrator named by
Phoenix shall serve as the sole arbitrator. In the event that the two
individuals named by Phoenix and the Sand Founders, respectively, cannot
agree on a third member within 10 days, then the selection of a third
individual to serve on the arbitration panel shall be made by the American
Arbitration Association or, if the American Arbitration Association fails to
choose an arbitrator within 15 days after request by Phoenix or the Sand
Founders by the presiding judge of Santa Xxxxx County, California Superior
Court.
8.6 RIGHT OF OFFSET. Phoenix shall be entitled to offset any amounts due
and payable by the Sand Founders pursuant to the indemnity obligations under
this Agreement, including this Article VIII against the Sand Founders' pro rata
portion of the Contingent Payments; provided, however, that Phoenix shall apply
this right of offset against the Sand Founders equally.
8.7 NO LIMITATION OF REMEDIES. Notwithstanding anything contained in this
Agreement to the contrary, nothing shall preclude or limit Phoenix's or the
Surviving Corporation's rights to exercise any other remedy Phoenix or the
Surviving Corporation may have in law or equity regarding fraud or intentional
misrepresentation or any remedies available to Phoenix under the Non-Compete
Agreement with any Sand Founder.
8.8 DETERMINATION OF TAXES. For any taxable period of Sand beginning
before but ending after the Closing Date (a "STRADDLE PERIOD"):
(a) Sand and Phoenix will, to the extent permitted by applicable law,
elect with the relevant taxing authority to treat for all purposes the Closing
Date as the last day of a taxable period of Sand; or
(b) Where applicable law does not permit Sand to treat the Closing
Date as the last day of a taxable period, then for purposes of this Agreement,
the portion of any Tax for a Straddle Period that relates to the period ending
with the Closing Date shall be determined (i) in the case of Taxes based upon or
measured by income or gross receipts, by treating the Closing Date as if it were
the final day of a taxable period and (ii) in the case of other Taxes, by
ratably apportioning such Taxes to each day in the Straddle Period.
ARTICLE IX
COSTS INCIDENT TO AGREEMENT
Except as otherwise expressly provided herein, each of the parties hereto
will pay all the costs incurred by it incident to the preparation, execution or
delivery of this Agreement or the performance of its obligations hereunder,
including, without limitation, the fees and disbursements of its attorneys,
accountants, investment bankers, consultants, brokers and persons providing
other services; provided, however, that all such costs and expenses of Sand in
excess of $400,000, including expenses for fees
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payable to Xxxx Xxxxxxxx Xxxxxxx, shall reduce the Fixed Amount payable to
the Sand Shareholders as set forth in Section 1.6(b).
ARTICLE X
TERMINATION
10.1 TERMINATION. Except as provided in Section 10.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of Sand or Phoenix;
(b) by Phoenix 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 Phoenix's or
Sand's ownership or operation of any portion of the business of Sand or
(ii) compel Phoenix or Sand to dispose of or hold separate, as a result of the
Merger, any portion of the business or assets of Sand or Phoenix; in either
case, the unavailability of which assets or business would have a Material
Adverse Effect on Phoenix or would reasonably be expected to have a Material
Adverse Effect on Phoenix's ability to realize the benefits expected from the
Merger.
(c) by Phoenix if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of Sand
and as a result of such breach the conditions set forth in Section 5.3(a) would
not then be satisfied; provided, however, that if such breach is curable by Sand
within thirty (30) days through the exercise of its reasonable best efforts,
then for so long as Sand continues to exercise such reasonable best efforts
Phoenix may not terminate this Agreement under this Section 10.1(c) unless such
breach is not cured within thirty (30) days (but no cure period shall be
required for a breach which by its nature cannot be cured);
(d) by Sand if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Phoenix or
Merger Sub and as a result of such breach the conditions set forth in Section
6.3 would not then be satisfied; provided, however, that if such breach is
curable by Phoenix or Merger Sub within thirty (30) days through the exercise of
its reasonable best efforts, then for so long as Phoenix or Merger Sub continues
to exercise such reasonable best efforts Sand may not terminate this Agreement
under this Section 10.1(d) unless such breach is not cured within thirty (30)
days (but no cure period shall be required for a breach which by its nature
cannot be cured); or
(e) by either Sand or Phoenix if the Merger shall not have been
consummated by September 30, 1998; provided, however, that the right to
terminate this Agreement under this Section 10.1(e) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a willful and material breach of this
Agreement;
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Where action is taken to terminate this Agreement pursuant to Section 10.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 10.1, this Agreement shall forthwith become void and,
there shall be no liability or obligation on the part of Phoenix, Merger Sub or
Sand, or their respective officers, directors or shareholders, provided that the
provisions of this Article X shall remain in full force and effect and survive
any termination of this Agreement.
10.3 AMENDMENT. Except as is otherwise required by applicable law, prior
to the Closing, this Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed by Phoenix, Sand and the Sand
Founders. Except as is otherwise required by applicable law, after the Closing,
this Agreement may be amended by the parties hereto at any time by execution of
an instrument in writing signed by Phoenix, Sand and the Sand Founders.
10.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Phoenix
and Merger Sub, on the one hand, and Sand, on the other, 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.
ARTICLE XI
MISCELLANEOUS
11.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto, their legal representatives, successors in interest, assignees,
transferees, creditors (including judgment creditors), trustees (including
trustees in bankruptcy), receivers, and all holders or possessors of, or
purported holders or possessors of, any of the stock of Sand, including without
limitation, assignees, transferees, pledgees, holders of security interests in
and liens upon any of such stock and trustees, and all persons with notice or
knowledge, or chargeable with notice or knowledge, of the provisions hereof.
This Agreement cannot be amended or modified except by a written agreement
executed by the parties hereto; provided, however, that no such amendment or
modification may be made after the Sand Shareholders approve and adopt this
Agreement if such amendment or modification, in the judgment of the Board of
Directors of Sand, would materially and adversely affect the interest of the
Sand Shareholders. Except for the purposes or in the events set forth in
Section 1.6(b), this Agreement and the rights, duties and obligations hereunder
may not be assigned by any party without the prior written consent of the other
parties; provided, however, that this Agreement may be assigned by Phoenix to
any directly or indirectly wholly-owned subsidiary of Phoenix, provided that
Phoenix shall continue to be bound by this Agreement after such assignment.
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11.2 NOTICES. Any notices or other communications required or permitted
hereunder will be in writing and will be deemed sufficiently given only if
delivered in person or sent by telegram, telecopy or telex or by first-class or
air mail or by recognized air courier service, postage or other charges prepaid,
addressed as follows:
If to Sand:
If before the Merger:
Sand Microelectronics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTENTION: Xxxxx Xxxxx, President
If after the Merger:
Sand Microelectronics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTENTION: Xxxxx Xxxxx
Copy to:
Xxxxxxx Xxxxxxx, Esq.
Pillsbury Madison & Sutro
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
If to Phoenix:
Phoenix Technologies Ltd.
000 X. Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
ATTENTION: Xxxxxx X. Xxxxxxx, Vice President, General Counsel
and Secretary
Copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered, telegraphed, telecopied,
telexed, mailed or sent by courier.
11.3 ENTIRE AGREEMENT. This Agreement, including the Exhibits attached
hereto, and the Disclosure Letter constitute the entire understanding of the
parties relating to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings, whether oral or written, relating
to the subject matter hereof.
-40-
11.4 REMEDIES. In the event of a breach, or a threatened or attempted
breach, of any provision of this Agreement by any party, any other party shall,
in addition to all other remedies, be entitled to (i) a temporary or permanent
injunction against such breach without the necessity of showing any actual
damages and (ii) a decree for the specific performance of the Agreement.
11.5 WAIVER. The waiver by any party of the breach of any of the terms and
conditions of, or any right under, this Agreement shall not be deemed to
constitute the waiver of any other breach of the same or any other term or
condition or of any similar right. No such waiver shall be binding or effective
unless expressed in writing and signed by the party giving such waiver.
11.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Xxxx Xxx
----------------------------------------
Xxxx Xxx, President and Chief Executive
Officer
PHOENIX SUB CORPORATION
By: /s/ Xxxx Xxx
----------------------------------------
Xxxx Xxx, President and Chief Executive
Officer
SAND MICROELECTRONICS, INC.
By: /s/ Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx, President and Chief
Executive Officer
"SAND FOUNDERS"
/s/ Xxxx Xxxxxxxxx
----------------------
Xxxx Xxxxxxxxx
/s/ Xxxxx Xxxxx
----------------------
Xxxxx Xxxxx
/s/ Xxxx Xxxxx
----------------------
Xxxx Xxxxx
EXHIBIT A
VOTING AGREEMENT
This Voting Agreement ("AGREEMENT") is made and entered into as of
September , 1998, between Phoenix Technologies Ltd., a Delaware
corporation ("PARENT"), and the undersigned shareholder ("SHAREHOLDER") of
Sand Microelectronics, Inc., a California corporation (the "COMPANY").
RECITALS
A. Concurrently with the execution of this Agreement, Parent, the
Company and Phoenix Acquisition Corporation, a California corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), are entering into an
Agreement and Plan of Reorganization (the "MERGER AGREEMENT") which provides
for the merger (the "MERGER") of Merger Sub with and into the Company.
Pursuant to the Merger, shares of capital stock of the Company will be
converted into the right to receive cash payments on the basis described in
the Merger Agreement. Capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in the Merger Agreement.
B. The Shareholder is the record holder and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")) of such number of shares of the outstanding Common
Stock of the Company as is indicated on the final page of this Agreement (the
"SHARES").
C. As a material inducement to enter into the Merger Agreement,
Parent desires the Shareholder to agree, and the Shareholder is willing to
agree to vote the Shares and any other such shares of capital stock of the
Company so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. AGREEMENT TO VOTE SHARES; ADDITIONAL PURCHASES
1.1 AGREEMENT TO VOTE SHARES. At every meeting of the
shareholders of the Company called with respect to any of the following, and
at every adjournment thereof, and on every action or approval by written
consent of the shareholders of the Company with respect to any of the
following, Shareholder shall vote the Shares and any New Shares in favor of
(x) approval of the Merger Agreement and the Merger and (y) any matter that
could reasonably be expected to facilitate the Merger.
1.2 ADDITIONAL PURCHASES. Shareholder agrees that any shares
of capital stock of the Company that Shareholder purchases or with respect to
which Shareholder otherwise acquires beneficial ownership after the execution
of this Agreement and prior to the Expiration Date ("NEW SHARES") shall be
subject to the terms and conditions of this Agreement to the same extent as
if they constituted Shares.
2. IRREVOCABLE PROXY. Concurrently with the execution of this
Agreement, Shareholder agrees to deliver to Parent a proxy in the form
attached hereto as EXHIBIT A (the "PROXY"), which shall be
irrevocable to the fullest extent permitted by law, with respect to the total
number of shares of capital stock of the Company beneficially owned (as such
term is defined in Rule 13d-3 under the Exchange Act) by Shareholder set
forth therein.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. Shareholder
represents and warrants that he (i) is the beneficial owner of the Shares,
which at the date hereof are free and clear of any liens, claims, options,
charges or other encumbrances; (ii) does not beneficially own any shares of
capital stock of the Company other than the Shares (excluding shares as to
which Shareholder currently disclaims beneficial ownership in accordance with
applicable law); and (iii) has absolute and unrestricted power, capacity and
authority to make, enter into and perform the obligations imposed pursuant to
the terms of this Agreement.
4. CONSENT AND WAIVER. Shareholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreements to which Shareholder is a party or pursuant to
any rights Shareholder may have.
5. ADDITIONAL DOCUMENTS. Shareholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent to carry out the intent of this Agreement.
6. TERMINATION. This Agreement shall terminate and shall have no
further force or effect as of the earlier to occur of (i) such date and time
as the Merger shall become effective in accordance with the terms and
provisions of the Merger Agreement or (ii) such date and time as the Merger
Agreement shall have been terminated pursuant to Article X thereof.
7. MISCELLANEOUS.
7.1 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, then the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
7.2 BINDING EFFECT AND ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent of the other.
7.3 AMENDMENTS AND MODIFICATIONS. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
7.4 SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties
hereto acknowledge that Parent will be irreparably harmed and that there will
be no adequate remedy at law for a violation of any of the covenants or
agreements of Shareholder set forth herein. Therefore, it is agreed that, in
addition
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to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Parent at law or in equity.
7.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered
in person, by cable, telegram or telex, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight
courier (prepaid) to the respective parties as follows:
If to Parent: Phoenix Technologies Ltd.
000 X. Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
If to the Shareholder: To the address for notice set forth on the
last page hereof.
With a copy to: Pillsbury Madison & Sutro
Five Palo Alto Square
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall only be effective upon receipt.
7.6 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
California (without regard to the principles of conflict of laws thereof).
7.7 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
7.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
7.9 EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
PHOENIX TECHNOLOGIES LTD.
By:
---------------------------
Title:
------------------------
SHAREHOLDER:
By:
---------------------------
Shareholder's Address for Notice:
------------------------------
------------------------------
------------------------------
Shares of Common Stock
Beneficially Owned
***VOTING AGREEMENT***
-4-
EXHIBIT A
IRREVOCABLE PROXY
The undersigned shareholder of Sand Microelectronics, Inc., a
California corporation (the "COMPANY"), hereby irrevocably appoints the
members of the Board of Directors of Phoenix Technologies Ltd., a Delaware
corporation ("PARENT"), and each of them, as sole and exclusive attorneys and
proxies of the undersigned, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect
to the shares of capital stock of the Company beneficially owned by the
undersigned, which shares are listed on the final page of this Proxy (the
"SHARES"), and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof, until such time as that certain
Agreement and Plan of Reorganization dated as of , 1998 (the
"MERGER AGREEMENT"), among Parent, Phoenix Acquisition Corporation, a
California corporation and a wholly-owned subsidiary of Parent ("MERGER
SUB"), and the Company, shall be terminated in accordance with its terms or
the Merger (as defined in the Merger Agreement) is effective. Upon the
execution hereof, all prior proxies given by the undersigned with respect to
the Shares and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof are hereby revoked. The
undersigned hereby agrees that no subsequent proxies will be given.
This proxy is irrevocable, is granted pursuant to the Voting Agreement
dated as of , 1998 between Parent and the undersigned shareholder
(the "VOTING AGREEMENT"), and is granted in consideration of Parent entering
into the Merger Agreement. The attorneys and proxies named above will be
empowered at any time prior to termination of the Merger Agreement to
exercise all voting and other rights (including, without limitation, the
power to execute and deliver written consents with respect to the Shares) of
the undersigned at every annual, special or adjourned meeting of the
shareholders of the Company, and in every written consent in lieu of such a
meeting, or otherwise, in favor of approval of the Merger and the Merger
Agreement and any other matter that could reasonably be expected to
facilitate the Merger.
The attorneys and proxies name above may only exercise this proxy to
vote the Shares subject hereto at any time prior to termination of the Merger
Agreement at every annual, special or adjourned meeting of the shareholders
of the Company and in every written consent in lieu of such a meeting, or
otherwise, in favor of approval of the Merger and the Merger Agreement and
any other matter that could reasonably be expected to facilitate the Merger.
The undersigned shareholder may vote the Shares on all other matters.
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Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable.
Dated: , 1998
Signature of Shareholder:
------------------
Print Name of Shareholder:
-----------------
Shares of Common Stock Beneficially Owned
**Proxy***
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EXHIBIT B
AGREEMENT OF MERGER
OF
PHOENIX SUB CORPORATION
AND
SAND MICROELECTRONICS, INC.
This Agreement of Merger, dated as of the day of , 1998
("Merger Agreement"), by and among Phoenix Sub Corporation ("Merger Sub"), a
California corporation and a wholly owned subsidiary of Phoenix Technologies,
Ltd, a Delaware corporation ("Phoenix"), and Sand Microelectronics, Inc., a
California corporation ("Sand" or the "Surviving Corporation").
RECITALS
A. Sand was incorporated in the State of California on ,
and as of , 1998 had shares of its Common Stock, no
par value, outstanding ("Sand Common").
B. Merger Sub was incorporated in the State of California on
, and on the date hereof has 1,000 shares of its Common Stock, no
par value, outstanding, all of which are owned by Phoenix.
C. Phoenix, Merger Sub and Sand have entered into an Agreement and
Plan of Reorganization dated as of , 1998 (the "Reorganization
Agreement") providing for certain representations, warranties, covenants and
agreements in connection with the transactions contemplated hereby. This
Merger Agreement and the Reorganization Agreement are intended to be
construed together to effectuate their purpose.
D. The shareholders of Sand and Merger Sub and the Board of Directors
of Phoenix deem it advisable and in their mutual best interests and in the
best interests of the shareholders of Sand and Merger Sub, respectively, that
Merger Sub be merged with and into Sand (the "Merger").
E. The Boards of Directors of Phoenix, Sand and Merger Sub and the
shareholders of Merger Sub and Sand approved the Merger.
AGREEMENTS
The parties hereto hereby agree as follows:
1. Merger Sub shall be merged with and into Sand, and Sand shall be
the Surviving Corporation.
2. The Merger shall become effective at 4:30 p.m. California time on
, 1998 (the "Effective Time").
3. As of the Effective Time, each outstanding share of Common Stock,
no par value, of Merger Sub shall be converted into and exchanged for one
(1) share of Common Stock, no par value, of the Surviving Corporation.
4. At the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Sand or the holders of any shares of the
Common Stock of Sand, each share of the Common Stock, no par value, of Sand
(the "SAND COMMON STOCK") issued and outstanding immediately prior to the
Effective Time and all rights to accrued dividends in respect thereof (other
than any shares of Sand Common Stock to be canceled pursuant to Section 1.6(c)
and any Dissenting Shares (as defined in and to the extent provided in
Section 1.7(a))), will be canceled and extinguished and automatically
converted into the right to receive on the dates described below, the
following:
(a) DEFINITIONS.
(i) 1999 REVENUE PAYMENT shall mean a number calculated
by multiplying $800,000 by the 1999 Revenue Percentage; provided, however,
that in no event shall the 1999 Revenue Payment exceed $2,400,000;
(ii) 2000 REVENUE PAYMENT shall mean a number calculated
by multiplying $1,600,000 by the 2000 Revenue Percentage and subtracting the
1999 Revenue Payment; provided, however, that in no event shall the sum of
the 1999 Revenue Payment and the 2000 Revenue Payment exceed $2,400,000;
(iii) 2001 REVENUE PAYMENT shall mean a number calculated
by multiplying $2,400,000 by the 2001 Revenue Percentage and subtracting the
sum of (A) the 1999 Revenue Payment and (B) the 2000 Revenue Payment;
provided, however, that in no event shall the sum of the 1999 Revenue Payment,
the 2000 Revenue Payment and the 2001 Revenue Payment exceed $2,400,000;
(iv) 1999 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 1999 Actual Revenues by the 1999 Projected
Revenues;
(v) 2000 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 2000 Cumulative Revenues by the 2000 Cumulative
Projected Revenues;
(vi) 2001 REVENUE PERCENTAGE shall mean the quotient
calculated by dividing the 2001 Cumulative Revenues by the 2001 Cumulative
Projected Revenues;
(vii) 1999 ACTUAL REVENUES shall mean the actual net
revenues of the Business Unit for the fiscal year ended September 30, 1999;
provided, however, that one-half of the
2
actual net revenues of the Business Unit from the Closing Date through
September 30, 1998 shall be included in the 1999 Actual Revenues, but in no
event shall the 1999 Actual Revenues be less than zero;
(viii) 2000 CUMULATIVE REVENUES shall mean the sum of the
actual net revenues of the Business Unit for the fiscal years ended
September 30, 1999 and September 30, 2000, but in no event shall the 2000
Cumulative Revenues be less than zero;
(ix) 2001 CUMULATIVE REVENUES shall mean the sum of
the actual net revenues of the Business Unit for the fiscal years ended
September 30, 1999, September 30, 2000 and September 30, 2001, but in no event
shall the 2001 Cumulative Revenues by less than zero;
(x) 1999 PROJECTED REVENUES shall mean the net revenues
of the Business Unit for the fiscal years ended September 30, 1999 as set
forth in the Joint Business Plan;
(xi) 2000 CUMULATIVE PROJECTED REVENUES shall mean the
sum of the net revenues of the Business Unit for the fiscal years ended
September 30, 1999 and September 30, 2000 as set forth in the Joint Business
Plan;
(xii) 2001 CUMULATIVE PROJECTED REVENUES shall mean the
sum of the net revenues of the Business Unit for the fiscal years ended
September 30, 1999, September 30, 2000 and September 30, 2001 as set forth in
the Joint Business Plan;
(xiii) 1999 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $533,334 by the 1999 Operating Earnings Percentage;
provided, however, that in no event shall the 1999 Operating Earnings Payment
exceed $1,600,000;
(xiv) 2000 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $1,066,666 by the 2000 Operating Earnings
Percentage and subtracting the 1999 Operating Earnings Payment; provided,
however, that in no event shall the sum of the 1999 Operating Earnings
Payment exceed $1,600,000;
(xv) 2001 OPERATING EARNINGS PAYMENT shall mean a number
calculated by multiplying $1,600,000 by the 2001 Operating Earnings
Percentage and subtracting the sum of the (A) 1999 Operating Earnings Payment
and (B) the 2000 Operating Earnings Payment; provided, however, that in no
event shall the sum of the 1999 Operating Earnings Payment, the 2000
Operating Earnings Payment and the 2001 Operating Earnings Payment exceed
$1,600,000;
(xvi) 1999 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 1999 Actual Operating Earnings by the
1999 Projected Operating Earnings;
(xvii) 2000 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 2000 Cumulative Operating Earnings by the
2000 Cumulative Projected Operating Earnings;
3
(xviii) 2001 OPERATING EARNINGS PERCENTAGE shall mean the
quotient calculated by dividing the 2001 Cumulative Operating Earnings by the
2001 Cumulative Projected Operating Earnings;
(xix) 1999 ACTUAL OPERATING EARNINGS shall mean the
fully-allocated operating earnings from continuing operations of the Business
Unit before interest and taxes for the fiscal year ended September 30, 1999
determined on a basis consistent with the guidelines set forth in the
Joint Business Plan, but in no event shall the 1999 Actual Operating
Earnings be less than zero;
(xx) 2000 CUMULATIVE OPERATING EARNINGS shall mean the
sum of the fully-allocated operating earnings (loss) from continuing
operations of the Business Unit before interest and taxes for the fiscal
years ended September 30, 1999 and September 30, 2000 determined on a
basis consistent with the guidelines set forth in the Joint Business Plan,
but in no event shall the 2000 Cumulative Operating Earnings be less than
zero;
(xxi) 2001 CUMULATIVE OPERATING EARNINGS shall mean the
sum of the fully-allocated operating earnings (loss) from continuing
operations of the Business Unit before interest and taxes for the fiscal
years ended September 30, 1999, September 30, 2000 and September 30, 2001,
determined on a basis consistent with the guidelines set forth in the
Joint Business Plan, but in no event shall the 2001 Cumulative Operating
Earnings be less than zero;
(xxii) 1999 PROJECTED OPERATING EARNINGS shall mean the
fully-allocated operating earnings (loss) of the Business Unit as set forth
in the Joint Business Plan for the fiscal year ended September 30, 1999;
(xxiii) 2000 CUMULATIVE PROJECTED OPERATING EARNINGS shall
mean the sum of the fully-allocated operating earnings (loss) of the Business
Unit for the fiscal years ended September 30, 1999 and September 30, 2000
as set forth in the Joint Business Plan;
(xxiv) 2001 CUMULATIVE PROJECTED OPERATING EARNINGS shall
mean the sum of the fully-allocated operating earnings (loss) of the Business
Unit for the fiscal years ended September 30, 1999, September 30, 2000
and September 30, 2001 as set forth in the Joint Business Plan;
(xxv) BUSINESS UNIT shall mean a portion of the business
and product lines of Phoenix as described in the Joint Business Plan;
(xxvi) JOINT BUSINESS PLAN shall mean the joint business
plan prepared by the parties hereto dated , 1998;
(xxvii) OPTION EXCHANGE RATIO shall mean (A) $26,076,800,
the estimated net present value of the Merger Consideration, plus the
aggregate exercise price of any vested Sand Stock Options exercised between
the date hereof and the Effective Time, minus the amount by which the costs
and expenses incurred by Sand in connection with the preparation, execution
or delivery of
4
this Agreement or the performance of its obligations hereunder, including,
without limitation, the fees and disbursements of its attorneys, accountants,
investment bankers, consultants, brokers and persons providing other services
exceeds $400,000, divided by the Fully Diluted Number, and divided by
(B) $7.10, the average closing price of a share of Phoenix Common Stock for the
ten most recent days that Phoenix Common Stock has traded ending on the
trading day immediately prior to the date hereof, as reported on the Nasdaq
Stock Market;
(xxviii) FULLY DILUTED NUMBER shall mean all shares of
Sand Common Stock outstanding at the Effective Time plus the number of shares
of Sand Common Stock underlying all vested and unvested Sand Stock Options
(as defined below) outstanding as of the Effective Time; and
(xxix) OUTSTANDING SHARES shall mean the number of
shares of Sand Common Stock outstanding at the Effective Time.
(b) CONVERSION OF SAND COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, Sand
or the holders of any shares of the Common Stock of Sand, each share of the
Common Stock, no par value, of Sand (the "SAND COMMON STOCK") issued and
outstanding immediately prior to the Effective Time and all rights to accrued
dividends in respect thereof (other than any shares of Sand Common Stock to
be canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined
in and to the extent provided in Section 1.7(a))), will be canceled and
extinguished and automatically converted into the right to receive on the
dates described below, the following (the "MERGER CONSIDERATION"):
(i) at the Effective Time an amount of cash equal to
(A) the total of $20,000,000 plus the aggregate exercise price of any
vested Sand Stock Options exercised between the date hereof and the Effective
Time, minus the amount by which the costs and expenses incurred by Sand in
connection with the preparation, execution or delivery of this Agreement or
the performance of its obligations hereunder, including, without limitation,
the fees and disbursements of its attorneys, accountants, investment bankers,
consultants, brokers and persons providing other services exceeds $400,000,
divided by (B) the Fully Diluted Number (the "FIXED AMOUNT");
(ii) at the Effective Time, the right to receive a
number of shares of Phoenix Common Stock (the "PHOENIX COMMON STOCK") equal
to 500,000 divided by the Fully Diluted Number, together with a right to
purchase (in respect of each whole share of Phoenix Common Stock) 1/100 of a
share of Series A Junior Participating Preferred Stock of Phoenix pursuant to
the Rights Agreement dated October 31, 1989 between Phoenix and The First
National Bank of Boston;
(iii) (A) sixty (60) days following Phoenix's 1999
fiscal year, an amount equal to the sum of the 1999 Revenue Payment and
1999 Operating Earnings Payment divided by the Fully Diluted Number;
(B) sixty (60) days following Phoenix's 2000 fiscal year, an amount equal to
the sum of the 2000 Revenue Payment and 2000 Operating Earnings Payment divided
by the Fully Diluted Number; and (C) sixty (60) days following Phoenix's
2001 fiscal year, an amount equal to
5
the sum of the 2001 Revenue Payment and 2001 Operating Earnings Payment
divided by the Fully Diluted Number Shares (the "CONTINGENT PAYMENTS").
For purposes of calculating the Contingent
Payments, both actual net revenues of the Business Unit and Actual Operating
Earnings shall be determined on a basis consistent with generally accepted
accounting principles ("GAAP") applied as set forth in the Joint Business
Plan. Notwithstanding the foregoing, any net proceeds received by Phoenix or
the Surviving Corporation (after deduction of all expenses incurred by
Phoenix or the Surviving Corporation in connection therewith, including all
attorneys' fees and expenses) that arise out of or result from any claims
that Sand may have against any third party with respect to any Sand IP Rights
(as defined below) shall be included in the actual net revenues and
fully-allocated operating earnings (loss) of the Business Unit for the fiscal
year in which such proceeds are received.
In the event that after the Effective Time and on
or before September 30, 2001, there has occurred (A) a merger or
consolidation of Phoenix with or into any other corporation or corporations
in which the stockholders of Phoenix own less than fifty percent (50%) of the
voting securities of the surviving corporation or a sale of all or
substantially all of the assets of Phoenix (an "Acquisition"), or (B) any
merger, consolidation, reorganization, sale of substantially all of the
assets of the Business Unit or spin-off of the securities of any entity
conducting the business of the Business Unit (a "Spin Off"), Phoenix shall
cause the surviving corporation in any Acquisition or the acquiring
corporation or entity that is conducting the business of the Business Unit in
any Spin Off, to assume, by operation of law or otherwise, all of Phoenix's
remaining obligations under this Agreement, and if the operation of the
Business Unit is discontinued by such surviving or acquiring corporation or
entity for reasons unrelated to the Business Unit's performance against the
Joint Business Plan, the remaining Contingent Payments will be paid annually
on the dates set forth herein and shall be calculated as if the Revenue
Percentage and the Operating Earnings Percentage for each of the 1999, 2000
and 2001 fiscal years is 1 provided, however, that in no event shall the
aggregate of the Contingent Payments exceed $4,000,000;.
In the event that after the Effective Time and on
or before September 30, 2001, Phoenix (or any successor in interest, assignee
or transferee of Phoenix's obligations hereunder) materially modifies or
alters the business model on which the Business Unit operates as set forth in
the Joint Business Plan, such that the actual net revenue and Actual
Operating Earnings targets set forth in the Joint Business Plan reasonably
could not be achieved prior to September 30, 2001, Phoenix (or any successor
in interest, assignee or transferee of Phoenix's obligations hereunder) shall
have the right, at its option, to either (i) adjust and calculate actual net
revenues and Actual Operating Earnings of the Business Unit for purposes of
calculating Contingent Payments as if the Business Unit were continuing to
operate under the business model set forth in the Joint Business Plan or
(ii) modify the Joint Business Plan to reflect the change in the business
model; provided, however, that Phoenix (or any successor in interest, assignee
or transferee of Phoenix's obligations hereunder) may not make such adjustment
or modification more than once in any fiscal year; and, provided further,
that in the event of such material modification or alteration of the business
model on which the Business Unit operates as set forth in the Joint Business
Plan, Phoenix (or any successor in interest, assignee or transferee of
Phoenix's obligations hereunder) shall, within
6
60 days, give the Representative of the Sand Shareholders (defined below)
notice of such material modification or alteration to the business model
(which notice shall set forth such material modification or alteration in
reasonable detail) and what option (as set forth in subsections (i) or (ii)
above) that Phoenix has elected. The Representative of the Sand Shareholders
shall have 60 days after receipt of the foregoing notice to either
(i) dispute the foregoing modification or alteration in which case the parties
shall submit the dispute to arbitration as set forth in Sections 8.5(c) and
(d) or (ii) to elect, on behalf of all the Sand Shareholders, to receive
in lieu of any remaining Contingent Payment (on the date each remaining
Contingent Payment is due), an amount per share of Sand Common Stock, equal
to $866,667 payable on each Contingent Payment due date subsequent to the
event causing this adjustment divided by the Fully Diluted Number. If no
objections are raised within such sixty (60) day period, the Representative,
on behalf of all the Sand Shareholders shall be deemed to have accepted such
material modification or alteration and Phoenix's election with respect
thereto shall be final, binding and conclusive upon all of the parties hereto.
Phoenix shall deliver to Xxxxx Xxxxx, acting as
representative of the Sand Shareholders (the "REPRESENTATIVE") no later than
five days prior to the payment date of each year for a Contingent Payment, a
certificate signed by an officer of Phoenix containing a detailed summary of
all computations, including any adjustments, as described above, performed by
Phoenix in arriving at the Contingent Payment for such year (the
"CERTIFICATE"). The Representative shall have a period of sixty (60) days
after receipt of the Certificate to dispute any amounts reflected thereon;
provided, that the Representative shall notify Phoenix in writing of each
disputed item in reasonable detail and shall specify the amount thereof in
dispute within such sixty (60) day period. Phoenix agrees to cooperate with
any such confirmation request and make available to the Representative or his
designated accountant, at all reasonable times, for inspection and review,
the books and records of Phoenix relating to the Business Unit, including,
but not limited to, all worksheets for the period under review and the
aforementioned computations. If no objections are raised within such sixty
(60) day period, the Certificate and the Contingent Payment shall be final,
binding and conclusive upon all of the parties hereto. If, during his review
of the Certificate and accompanying worksheets and records, Representative or
his designated accountant disagrees with the computation prepared by Phoenix
and such disagreement cannot, with good faith effort, be promptly settled,
Phoenix and Representative shall appoint a mutually satisfactory independent
certified public accountant (the "Resolution Accountant") to review the
computations of both Phoenix and Representative. The determination of the
Resolution Accountant shall be delivered within ninety (90) days after the
appointment of the Resolution Accountant and shall be binding on Phoenix and
the Sand Shareholders. The fees and costs of the Resolution Accountant shall
be borne one-half by Phoenix and one-half by the Sand Shareholders. Within
three (3) business days after the Resolution Accountant makes his
determination, Phoenix shall pay the Sand Shareholders the aggregate amount
by which the Contingent Payment is increased thereby or the Sand Shareholders
shall reimburse Phoenix the aggregate amount by which the Contingent Payment
is decreased thereby. Alternatively, Phoenix may deduct any amounts payable
to Phoenix under this Section 1.6(b)(iv) from the Contingent Payments.
(c) CANCELLATION OF PHOENIX-OWNED STOCK. Any share of Sand
Common Stock held in the treasury of Sand or owned by Merger Sub, Phoenix or
any direct or indirect wholly
7
owned subsidiary of Sand or of Phoenix immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(d) STOCK OPTIONS. At the Effective Time, all options to
purchase Sand Common Stock ("SAND STOCK OPTIONS") then outstanding under
Sand's Non-Qualified Stock Option Plan and 1998 Stock Plan (together, the
"SAND STOCK OPTION PLANS") shall be assumed by Phoenix and shall continue to
have, and be subject to, the same terms and conditions as set forth in the
Sand Stock Option Plan and/or any agreements pursuant to which such Sand
Stock Options were granted as in effect immediately prior to the Effective
Time, except that (A) each Sand Stock Option shall be exercisable for that
number of whole shares of Phoenix Common Stock equal to the number of shares
underlying such Sand Stock Option immediately prior to the Effective Time,
multiplied by the Option Exchange Ratio and rounded down to the nearest whole
number of shares of Phoenix Common Stock and (B) the price at which each
such Sand Stock Option is exercisable shall be divided by the Option Exchange
Ratio and rounded up to the nearest cent. Phoenix will cause such assumed
Sand Stock Options to be registered on form S-8 within 20 days of the
Effective Time and shall have reserved at the Effective Time a sufficient
number of its shares of Common Stock for issuance upon exercise of the
assumed Sand Stock Options.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock,
no par value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Common Stock, no par value, of the Surviving Corporation. Each certificate of
shares of Merger Sub Common Stock shall continue to evidence ownership of
such share of Common Stock of the Surviving Corporation.
(f) ADJUSTMENTS TO OPTION EXCHANGE RATIO. The Option Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution
of securities convertible into Phoenix Common Stock or Sand Common Stock),
reorganization, recapitalization or other like change with respect to Phoenix
Common Stock or Sand Common Stock occurring on or after the date hereof and
prior to the Effective Time.
5. As of the Effective Time all certificates representing shares of
Sand Common, issued and outstanding immediately prior to the Effective Time,
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Sand Common shall cease to have any rights
with respect thereto except the right to receive the appropriate portion of
the Merger Consideration upon surrender of such certificate.
6. Any shares ("Dissenting Shares") of any holder of Sand Common who
has demanded and perfected appraisal rights for such shares in accordance
with the California General Corporation Law and who, as of the Effective
Time, has not effectively withdrawn or lost such appraisal rights, shall not
be converted into Merger Consideration but shall be converted into the right
to receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to the California General Corporation Law.
If, after the Effective Time, any Dissenting Shares shall lose
8
their status as Dissenting Shares, then as of the occurrence of the event
which causes the loss of such status, such shares shall be converted into
Merger Consideration in accordance with Section 4 hereof.
7. The conversion of Sand Common as provided by this Merger Agreement
shall occur automatically at the Effective Time of the Merger without action
by the holders thereof. Each holder of Sand Common shall thereupon be
entitled to receive Merger Consideration in accordance with Section 4 hereof.
Promptly after the Effective Time, such shareholder shall be entitled to
receive the Merger Consideration under this Merger Agreement upon surrender
as set forth in the Reorganization Agreement of such shareholder's
certificates which immediately prior to the Effective Time represented
outstanding shares of Sand Common Stock.
All Merger Consideration paid in accordance with Section 7 hereof
delivered upon the surrender for exchange of shares of Sand Common in
accordance with the terms hereof shall be deemed to have been delivered in
full satisfaction of all rights pertaining to such Sand Common. If, after the
Effective Time of the Merger, certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Section 7.
9. At the Effective Time of the Merger, the separate existence of
Merger Sub shall cease, and Sand shall succeed, without other transfer, to
all of the rights and properties of Merger Sub and shall be subject to all
the debts and liabilities thereof in the same manner as if Sand had itself
incurred them.
10. Upon the Merger becoming effective, the Articles of Incorporation
of the Surviving Corporation shall be amended in full to read as set forth in
EXHIBIT A attached hereto.
11. (a) Notwithstanding the approval of this Merger Agreement by
the shareholders of Sand and Merger Sub, this Merger Agreement may be
terminated at any time prior to the Effective Time of the Merger by mutual
agreement of the Boards of Directors of Phoenix and Sand.
(b) Notwithstanding the approval of this Merger Agreement by
the shareholders of Sand and Merger Sub, this Merger Agreement shall
terminate forthwith in the event that the Reorganization Agreement shall be
terminated as therein provided at any time prior to the Effective Time of the
Merger.
(c) In the event of the termination of this Merger Agreement
as provided above, this Merger Agreement shall forthwith become void and
there shall be no liability on the part of Sand, Phoenix or Merger Sub or
their respective officers or directors, except as otherwise provided in the
Reorganization Agreement.
(d) This Merger Agreement may be signed in one or more
counterparts, each of which shall be deemed an original and all of which
shall constitute one agreement.
9
(e) This Merger Agreement may be amended by the parties hereto
any time before or after approval hereof by the shareholders of Sand and
Merger Sub, but, after such approval, no amendments shall be made which by
law require the further approval of such shareholders without obtaining such
approval. This Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as
of the date first written above.
PHOENIX ACQUISITION CORPORATION
----------------------------------
Xxxx Xxx, President
----------------------------------
Xxxxxx X. Xxxxxxx, Secretary
SAND MICROELECTRONICS, INC.
----------------------------------
Xxxxx Xxxxx, President
----------------------------------
, Secretary
10
EXHIBIT A
ARTICLES OF INCORPORATION
OF
PHOENIX ACQUISITION CORPORATION
ARTICLE I
The name of this corporation is "Phoenix Acquisition Corporation."
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
ARTICLE III
The name and address in the State of California of this corporation's
initial agent for service of process is:
Xxxxx Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
ARTICLE IV
This corporation is authorized to issue one class of stock, designated
Common Stock. The total number of shares of Common Stock which this
corporation is authorized to issue is One Thousand (1,000).
ARTICLE V
(a) LIMITATION OF DIRECTOR'S LIABILITY. The liability of the directors
of this corporation for monetary damages shall be eliminated to the fullest
extent permissible under California law.
(b) INDEMNIFICATION OF CORPORATE AGENTS. The corporation is authorized
to indemnify the directors and officers to the fullest extent permissible
under California law.
(c) REPEAL OR MODIFICATION. Any amendment, repeal or modification of
the foregoing provision of this Article V shall not adversely affect any
right of indemnification or limitation of liability of an agent of this
corporation relating to acts or omissions occurring prior to such amendment,
repeal or modification.
11
OFFICERS' CERTIFICATE
OF
SAND MICROELECTRONICS, INC.
Xxxxx Xxxxx, President, and , Secretary, of Sand
Microelectronics, Inc., a corporation duly organized and existing under the
laws of the State of California (the "Corporation"), do hereby certify:
1. They are the duly elected, acting and qualified President and the
Secretary, respectively, of the Corporation.
2. The authorized capital stock of the Corporation consists of
shares of Common Stock, no par value, of which there were
shares outstanding and entitled to vote on the Agreement of Merger in the
form attached, and shares of Preferred Stock, no par value, of
which no shares are issued or outstanding or entitled to vote on the
Agreement of Merger in the form attached.
3. The Agreement of Merger in the form attached was duly approved by
the board of directors and shareholders of the Corporation in accordance with
the General Corporation Law of the State of California.
4. The shareholder approval was by the holders of % of the
outstanding shares of the Corporation. The required vote was a majority of
the outstanding shares of Common Stock, no part value, of the Corporation.
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed in Xxx Xxxx, Xxxxxxxxxx, xx , 0000.
-------------------------------------
Xxxxx Xxxxx, President
-------------------------------------
, Secretary
OFFICERS' CERTIFICATE
OF
PHOENIX ACQUISITION CORPORATION
Xxxx Xxx, President and Xxxxxx X. Xxxxxxx, Secretary, of Phoenix
Acquisition Corporation, a corporation duly organized and existing under the
laws of the State of California (the "Corporation"), do hereby certify that:
1. They are duly elected, acting and qualified President and the
Secretary, respectively, of the Corporation.
2. There is only one authorized class of shares of the Corporation,
consisting of 1,000 shares of Common Stock, no par value, and the total
number of issued and outstanding shares is 1,000, all of which are held by
Phoenix Technologies, Ltd, a Delaware corporation ("Phoenix").
3. The Agreement of Merger in the form attached was approved by the
board of directors and the shareholder of the Corporation in accordance with
the General Corporation Law of the State of California.
4. The shareholder approval was 100% of the outstanding shares of the
Corporation. The required vote was a majority of the outstanding shares of
Common Stock, no par value, of the Corporation.
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed in Xxx Xxxx, Xxxxxxxxxx, xx , 0000.
-------------------------------------
Xxxx Xxx, President
-------------------------------------
Xxxxxx X. Xxxxxxx, Secretary
EXHIBIT C
FORM OF NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made as of the
Effective Date (as defined below) by and among Phoenix Technologies Ltd., a
Delaware corporation ("Phoenix") and September 17, 1998the undersigned
shareholder (the "Shareholder") of Sand Microelectronics, Inc., a California
corporation ("Company").
WHEREAS, Phoenix, the Company and certain shareholders of the Company
have entered into an Agreement and Plan of Reorganization dated as of
, 1998 (the "Merger Agreement") which provides that the Phoenix will
pay cash at certain times and in certain amounts (the "Merger Consideration")
and shares of Phoenix Common Stock in exchange for shares of the Company's
capital stock (the "Shares") and that certain options to purchase capital
stock of the Company shall be assumed or replaced with options to purchase
shares of Common Stock of Phoenix (collectively, the "Merger"). The Company
is intended to become a part of the Virtual Chips business unit of Phoenix
(the "Business Unit"), upon consummation of the Merger. The closing date of
the Merger shall be the "Effective Date" of this Agreement.
WHEREAS, as a result of the Merger, the Shareholder shall receive from
Phoenix significant Merger Consideration in exchange for Shares held by the
Shareholder pursuant to the terms of the Merger Agreement and pursuant to the
terms of this Agreement.
WHEREAS, as a condition to the Merger, and to preserve the value of the
business being acquired by Phoenix after the Merger, the Merger Agreement
contemplates, among other things, that the Shareholder will enter into this
Agreement and that this Agreement will become effective on the Effective Date.
NOW THEREFORE, in consideration of the mutual promised made herein,
Phoenix and the Shareholder (collectively referred to as the "Parties")
hereby agree as follows:
1. COVENANT NOT TO COMPETE OR SOLICIT.
(a) Beginning on the Effective Date and ending on the third
anniversary of the Effective Date (the "Non-Competition Period"), Shareholder
shall not directly or indirectly (other than on behalf of Phoenix or the
Company), without the prior written consent of Phoenix, engage anywhere in
the "Restricted Territory" in (whether as an employee, agent, consultant,
advisor, independent contractor, proprietor, partner, officer, director or
otherwise), or have any ownership interest in (except for ownership of one
percent (1%) or less of any entity whose securities have been registered
under the Securities Act of 1933 or Section 12 of the Securities Exchange Act
of 1934), or participate in the financing, operation, management or control
of, any "Business" (other than Phoenix), that engages or participates in a
"Competing Business Purpose." For the purposes of this Section 1(a), the term
"Business" shall mean any firm, partnership, corporation, entity or any
division or business unit thereof,
and the term "Competing Business Purpose" shall mean any Business whose
"Primary Source of Revenue" is from the license or sale of "Competing
Products." For purposes of this Section 1(a), "Primary Source of Revenue"
shall mean greater than 50% of the revenue of the Business, and "Competing
Products" shall mean products that are "Sufficiently Defined" ("Sufficiently
Defined" shall mean that there exists a general set of features and functions
describing the product in internal documents or business plans), designed or
developed by the Company or the Business Unit during the period of
Shareholder's employment with the COmpany or the Business Unit. Current
examples of Competing Products include semiconductor intellectual property
cores, models and test environments based on interconnect standards such as
PCI, USB and IEEE 1394. The term "Competing Business Purpose" does not
include Businesses whose Primary Source of Revenue is derived from the design,
manufacture, distribution or services related thereto of semiconductor
devices, systems or software other than Competing Products. By way of current
example, Competing Business Purpose would include the IP business units within
Mentor Graphics and Synopsys and would not include companies such as AMD,
Cirrus Logic, Cisco Systems, Fujitsu, Hewlett Packard, Hitachi, Intel
Corporation, LSI Logic, Lucent Technologies, Microsoft, Netscape, Sony and
Sun Microsystems. The term "Restricted Territory" shall mean each and every
country, province, state, city or other political subdivision of the world in
which the Company or Phoenix is currently engaged or during the term of this
Agreement engages in business or otherwise sells its products, including
India.
(b) During the Non-Competition Period, Shareholder shall not
directly or indirectly, solicit, encourage or take any other action which is
intended to induce or encourage, or has the effect of inducing of
encouraging any employee of Phoenix or the Company to terminate his or her
employment with Phoenix or the Company, excluding any general solicitation by
the Shareholder or his affiliates for employment publicized by newspaper or
other means of general dissemination which does not specifically target
Phoenix or the Company's employees.
(c) The covenants contained in paragraph (a) shall be construed
as a series of separate covenants, one for each country, province, state, city
or other political subdivision of the Restricted Territory. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenant contained in paragraph (a). If, in any judicial
proceeding, a court refuses to enforce any of such separate covenants (or
any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the
event that the provisions of this Section 1 are deemed to exceed the time,
geographic or scope limitations permitted by applicable law, then such
provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.
(d) Shareholder acknowledges that (i) the goodwill associated with
the existing business, customers and assets of the Company prior to the
Merger is an integral component of the value of the Company to Phoenix and is
reflected in the value of the Merger Consideration and (ii) Shareholder's
agreement as set forth herein is necessary to preserve the value of the Company
for Phoenix following the Merger. Shareholder also acknowledges that the
limitations of time, geography and scope of activity agreed to in this
Agreement are reasonable because, among other things, (i) the Company and
Phoenix are engaged in a highly competitive industry, (ii) Shareholder has
had unique
-2-
access to, and will continue to have access to, the trade secrets and
know-how of the Company, including without limitation the plans and strategy
(and, in particular, the competitive strategy) of the Company, (iii)
Shareholder is receiving significant consideration for the Shareholder's
Shares in connection with the Merger and (iv) in the event Shareholder's
employment with Phoenix or the Company ended, the Shareholder believes he
would be able to obtain suitable and satisfactory employment without
violation of this Agreement.
(e) Shareholder's obligations under this Agreement shall remain in
effect if Shareholder's employment with Phoenix or the Company is terminated.
(f) In the event Phoenix believes that Shareholder is in violation
of Sections 1(a) or 1(b) of this Agreement, Phoenix will give Shareholder
written notice of the violation so that Shareholder shall have an opportunity
to cure the alleged breach by taking action promptly that is reasonably
acceptable to Phoenix, such as ceasing the objectionable activity or reaching
an agreement with Phoenix concerning the scope of the activity. If
Shareholder takes such reasonably acceptable action within thirty days of
receiving notice from Phoenix, then no breach of this Agreement shall be
deemed to have occurred; provided, however, that Phoenix shall not be
required to give the foregoing notice to Shareholder if the violation by its
nature cannot be cured.
2. ARBITRATION
(a) The parties agree that any dispute or controversy arising out
of, relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall be
settled by binding arbitration to be held in Santa Xxxxx County, California
in accordance with the American Arbitration Association Commercial
Arbitration Rules, and Supplemental Procedures for Large Complex Disputes
(together the "Rules"). The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.
(b) At the request of either party, the arbitrator will enter an
appropriate protective order to maintain the confidentiality of information
produced or exchanged in the course of the arbitration proceedings.
(c) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to rules of conflicts of law.
(d) The parties agree that it would be impossible or inadequate to
measure and calculate the other party's damages from any breach of the
covenants set forth in this Agreement. Accordingly, each party agrees that if
it breaches any provision of this Agreement, the other party will have
available, in addition to any other right or remedy otherwise available, the
right to injunctive relief restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement.
-3-
(e) Either party may apply to any court of competent jurisdiction
for a temporary restraining order, preliminary injunction or other interim or
conservatory relief, as necessary, without breach of this arbitration
agreement without any abridgment of the powers of the arbitrator(s).
(f) SHAREHOLDER HAS READ AND UNDERSTANDS THIS SECTION 2, WHICH
DISCUSSES ARBITRATION. THE SHAREHOLDER UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, SHAREHOLDER AGREES, EXCEPT AS SET FORTH IN SECTION 2(d) AND 2(e)
ABOVE, TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION
WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF SHAREHOLDER'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES ARISING OUT OF, RELATING
TO OR IN CONNECTION WITH THIS AGREEMENT.
3. MISCELLANEOUS
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This
Agreement shall be governed by the laws of the State of California without
reference to rules of conflicts of law. Shareholder hereby consents to the
personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.
(b) SEVERABILITY. If any portion of this Agreement is held by an
arbitrator or a court of competent jurisdiction to conflict with any
federal, state or local law, or to be otherwise invalid or unenforceable,
such portion of this Agreement shall be of no force or effect and this
Agreement shall otherwise remain in full force and effect and be construed as
if such portion had not been included in this Agreement.
(c) NO ASSIGNMENT. Because the nature of the Agreement is specific
to the actions of the Shareholder, the Shareholder may not assign this
Agreement. This Agreement shall inure to the benefit of Phoenix and its
successors and assigns.
(d) NOTICE. All notices or communication required or permitted
under this Agreement shall be made in writing and delivered personally to the
other party or sent by certified or registered mail, return receipt requested
and postage prepaid or express courier with confirmation of delivery to the
following addresses (or such other address for a party as shall have been
specified by like notice):
(i) if to Phoenix or the Company, to:
Phoenix Technologies Ltd.
000 X. Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Vice President and
General Counsel
Telephone: (000) 000-0000
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(ii) if to Shareholder, to:
Xxxxx Xxxxx
0000 Xxxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
(e) ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding of the Parties and supersedes all prior
discussions, agreements and understandings relating to the subject matter
hereof. This Agreement may not be changed or modified, except by an agreement
in writing executed by Phoenix and Shareholder.
(f) WAIVER OF BREACH. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as
or be construed to be a waiver of any other previous or subsequent breach of
this Agreement.
(g) HEADINGS. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(h) COUNTERPARTS. This Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.
(i) TERM. The term of this Agreement is three (3) years from the
Effective Date or such shorter period as may be applicable under Section 1(c)
of this Agreement.
(j) LEGAL REPRESENTATION. Shareholder acknowledges that: (A) he
has read this Agreement; (B) he understands that Phoenix has been represented
in the preparation, negotiation, and execution of this Agreement by Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to Phoenix; (C) he has been represented in
the preparation, negotiation, and execution of this Agreement by legal
counsel of his own choice or has voluntarily declined to seek such counsel;
(D) he understands the terms and consequences of this Agreement and is fully
aware of the legal and binding effect of this Agreement.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
PHOENIX TECHNOLOGIES LTD. SHAREHOLDER
By:
-------------------------- -------------------------------
Name: Name:
Title:
[NON-COMPETIITON AGREEMENT]
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EXHIBIT D
PHOENIX TECHNOLOGIES LTD.
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of
, 1998, by Phoenix Technologies Ltd., a Delaware corporation
("Phoenix"), for the benefit of shareholders of Sand Microelectronics, Inc.,
a California corporation ("Sand"), acquiring shares of Phoenix Common Stock
pursuant to that Agreement and Plan of Reorganization, dated as of
September 18, 1998 (the "Reorganization Agreement"), among Phoenix, Sand and
Phoenix Sub Corporation, a California corporation and wholly-owned subsidiary
of Phoenix ("Merger Sub"), and pursuant to the related Agreement of Merger (the
"Agreement of Merger") between Sand and Merger Sub and in consideration of
such shareholders approving the Reorganization Agreement and the transactions
contemplated thereby.
1. DEFINITIONS. As used in this Declaration:
a. "Effective Time" means the time of acceptance by the
California Secretary of State of the Agreement of Merger.
b. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
c. "Holder" means: a shareholder of Sand to whom shares of
Common Stock of Phoenix are issued pursuant to the Reorganization Agreement
and the Agreement of Merger, and any transferee by inheritance or gift.
d. "Registrable Securities" means for each Holder the number of
shares of Phoenix Common Stock issued to such Holder pursuant to the
Reorganization Agreement rounded to the nearest integral amount, and for all
Holders the sum of the Registrable Securities held by them.
e. "Securities Act" means the Securities Act of 1933, as amended.
f. "SEC" means the Securities and Exchange Commission.
Terms not otherwise defined herein have the meanings given to them in
the Reorganization Agreement.
2. PHOENIX REGISTRATION.
a. If Phoenix shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising any registration rights, other than a registration relating solely
to employee benefit plans or a registration relating solely to an SEC
Rule 145 transaction or a registration on any registration form which does
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
convering the sale of Registrable Securities, Phoenix will:
(1) promptly give to each Holder written notice thereof
(which, to the extent then known and applicable, shall include a list of the
jurisdictions in which Phoenix intends to attempt to qualify such securities
under the applicable blue sky or other state securities laws); and
(2) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all of the Registrable Securities specified in
a written request or requests made by any Holder within fifteen (15) days
after receipt of the written notice from Phoenix described in clause (a)
above, except as set forth in Section 2(b) below. Such written request may
specify all or a part of a Holder's Registrable Securities.
b. If the registration of which Phoenix gives notice is for a
registered public offering involving an underwriting, Phoenix shall so advise
the Holders as a part of the written notice given pursuant to Section 2a(1).
In such event the right of any Holder to registration pursuant to Section 2a
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
Phoenix) enter into an underwriting agreement in customary form with the
Underwriter selected for underwriting by Phoenix. Notwithstanding any other
provision of this Section 2b, if the Underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
Underwriter may limit the number of securities of the Holders to be included
in the secondary portion of the registration and underwriting to not less
than twenty percent (20%) of the Registrable Securities which Holders have
requested be included therein. Phoenix shall so advise all such Holders
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be
allocated among all such Holders on a pro rata basis on the basis of the
number of their shares of Phoenix Common Stock. If any Holder disapproves of
the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to Phoenix and the Underwriter. Any Registrable Securities, or
other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
c. In the event that for any reason the Registrable Securities
are not freely tradable by the Holders under the Securities Act one year
following the date hereof (except for any volume or manner of sale
restrictions under Rule 144 under the Securities Act imposed on any Holder by
virtue of any affiliate status with Phoenix follwoing the date hereof), then
Phoenix agrees to cause to be filed and be declared effective by the first
year anniversary of the date hereof a Registration Statement on Form S-3
covering the sale of the Registrable Securities, and to keep such
Registration Statement effective until the earlier of the second anniversary
of the date hereof or until termination of Registration Rights pursuant to
Section 7 of this Declaration.
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d. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to this Declaration shall
be borne by Phoenix, and all Selling Expenses shall be borne by the holders
of the securities to be registered pro rata on the basis of the number of
their shares so registered.
3. EXPENSES. Phoenix shall pay all of the out-of-pocket expenses
incurred, other than underwriting discounts and commissions, in connection
with any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all SEC, Nasdaq National Market and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees, and the reasonable fees and disbursements of Phoenix's
outside counsel and independent accountants and a single counsel for all of
the Holders.
4. INDEMNIFICATION. In the event of any offering registered pursuant
to this Declaration:
a. Phoenix will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Declaration,
and each underwriter, if any, and each person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment
or supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading, or any violation by Phoenix of any rule or regulation promulgated
under the Securities Act, or state securites laws, or common law, applicable
to Phoenix in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, for any legal and any
other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that Phoenix will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based
in any untrue statement or omission or alleged untrue statement or omission,
made in reliance upon and in conformity with written information furnished to
Phoenix in an instrument duly executed by such Holder or underwriter and
stated to be specifically for use therein.
b. Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify Phoenix, each of its
directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of Phoenix's securities covered by such a
registration statement, each person who controls Phoenix or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the
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meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse Phoenix, such
Holders, such directors, officers, legal counsel, independent accountants,
underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to Phoenix by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the gross proceeds before expenses and
commissions to each such Holder of Registrable Securities sold as
contemplated herein.
c. Each party entitled to indemnification under this Section 4
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Declaration, except to
the extent, but only to the extent, that the Indemnifying Party's ability to
defend against such claim or litigation is impaired as a result of such
failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect
to such claim or litigation.
d. The obligations of Phoenix and each Holder under this Section 4
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Declaration and otherwise.
5. REPORTS UNDER EXCHANGE ACT. Phoenix agrees to:
a. use its commercially reasonable efforts to file with the SEC
in a timely manner all reports and other documents required of Phoenix under
the Securities Act and the Exchange Act; and
b. furnish to each Holder, forthwith upon request (i) a written
statement by Phoenix that it has complied with the reporting requirements of
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of Phoenix and (iii) such other information as may
be
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reasonably requested in availing each Holder of any rule or regulation of the
SEC which permits the selling of any such securities pursuant to Rule 144.
6. AMENDMENT OF REGISTRATION RIGHTS. Holders of a majority of the
Registrable Securities from time to time outstanding may, with the consent of
Phoenix, amend the registration rights granted hereunder.
7. TERMINATION. The registration rights set forth in this Declaration
shall terminate with respect to a Holder at such time as all of the
Registrable Securities then held by such Holder can be sold by such Holder in
a three-month period in accordance with Rule 144 under the Securities Act.
8. THIRD PARTY BENEFICIARIES. It is intended that the shareholders of
Phoenix be third party beneficiaries to this Declaration.
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