EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 1, 1998, by and among Virata Limited, a corporation organized in
the United Kingdom ("Virata"), Virata Acquisition Sub, Inc., a Delaware
corporation ("Acquisition Sub"), RSA Communications, Inc., a Delaware
corporation ("RSA Communications"), and Xxxxxxx Xxxxxx, an individual
("Stockholder").
W I T N E S S E T H
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WHEREAS, the Boards of Directors of Virata, Acquisition Sub and RSA
Communications and Stockholder deem it to be desirable and in the best interests
of such parties that RSA Communications merge with and into Acquisition Sub (the
"Merger") in accordance with the terms and conditions set forth in this
Agreement and the Delaware General Corporation Law (the "DGCL").
WHEREAS, the Board of Directors of Virata, Acquisition Sub and RSA
Communications and Stockholder have approved this Agreement and the transactions
contemplated hereby.
WHEREAS, the Merger is intended to qualify as a tax free reorganization
under Sections 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986,
as amended (the "Code") and will be accounted for as a purchase.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing premises and of the
respective representations, warranties and covenants contained herein, the
parties hereto hereby agree as follows.
ARTICLE I
THE MERGER
1.1 Merger and Effect. Subject to the terms and conditions set forth in
this Agreement and the DGCL, at the Effective Time (as defined below), RSA
Communications shall merge with and into Acquisition Sub, the separate corporate
existence of RSA Communications shall cease and Acquisition Sub shall continue
its corporate existence under the laws of the State of Delaware as the surviving
corporation (the "Surviving Corporation") of the Merger. The Merger Shall have
the legal effect provided in Section 259(a) of the DGCL.
1.2 Effective Time. The Merger shall become effective at the time of the
filing (the "Effective Time") of the Certificate of Merger of RSA Communications
into Acquisition Sub (the "Certificate of Merger"), substantially in the form
attached hereto as Exhibit A, with the Delaware Secretary of State. Subject to
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the terms and conditions set forth in this Agreement, on
the Closing Date (as defined below), RSA Communications and Acquisition Sub
shall execute and file the Certificate of Merger with the Delaware Secretary of
State.
1.3 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Acquisition Sub prior to the Effective Time shall be
the Certificate of Incorporation and Bylaws of the Surviving Corporation
following the Effective Time until amended in accordance with the provisions
thereof and the DGCL. Acquisition Sub shall change its name to RSA
Communications, Inc. promptly following the Effective Time.
1.4 Directors and Officers. The directors of Acquisition Sub prior to the
Effective Time shall be the directors of the Surviving Corporation following the
Effective Time until their respective successors are duly elected by the
stockholders in accordance with the provisions of the Bylaws of the Surviving
Corporation and the DGCL. The officers of Acquisition Sub prior to the
Effective Time shall resign effective as of the Effective Time and Stockholder
shall become President, Xxxxxx Xxxxxx shall become Secretary, and Xxxxx Xxxxxx
shall become Assistant Secretary until their respective successors are duly
elected in accordance with the provisions of the Bylaws of the Surviving
Corporation and the DGCL.
1.5 Consideration. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, by virtue of the Merger and without any
further action on the part of Stockholder or the employees of RSA Communications
(the "RSA Employees"):
(a) Conversion of RSA Shares into Cash and Virata Ordinary Shares.
All of the issued and outstanding shares (the "RSA Shares") of common stock (the
"RSA Common Stock") of RSA Communications shall be canceled and converted into
the right to receive: (i) $1,332,850 (of which, $250,000 shall be delivered to
the Escrow Agent for application pursuant to the Escrow Agreement); (ii)
1,540,000 ordinary shares (the "Virata Ordinary Shares") of Virata; and (iii)
606,500 Series D Preference Shares (the "Series D Shares") of Virata;
(b) Conversion of RSA Units into Cash and Virata Acquisition Options.
All of the outstanding phantom stock units (the "RSA Units") of RSA
Communications shall be canceled and converted into the right to receive: (i)
$2,000,000 (less all withholdings for taxes and other governmental charges, of
which, $250,000 of the balance shall be delivered to the Escrow Agent for
application pursuant to the Escrow Agreement); and (ii) options to purchase
1,992,944 Virata Ordinary Shares (the "Virata Acquisition Options") under
Acquisition Sub's 1998 Non-Qualified Stock Plan (the "Virata Plan") at an
exercise price of $0.25 per share, and on substantially the other terms and
conditions set forth in the form of Nonqualified Stock Option Agreement (the
"Virata Nonqualified Stock Option Agreement") attached hereto as Exhibit B-1;
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such consideration shall be delivered to the holders of the RSA Units in respect
of, and pro rata in accordance with their ownership of, the RSA Units; and
(c) Escrow. Virata shall deliver the sum of $500,000, representing
$250,000 of the merger consideration payable to Stockholder and $250,000 from
the cash consideration for conversion of the RSA Units payable to the RSA Unit
holders (the "Escrow Account"), to Greater Bay Trust Company, as escrow agent
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(the "Escrow Agent"), to be held in escrow in
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accordance with the terms of this Agreement and that certain Escrow Agreement to
be entered into among Virata, Acquisition Sub and Stockholder, individually and
as representative of the holders of the RSA Units (the "Escrow Agreement"),
substantially in the form attached hereto as Exhibit C.
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1.6 Procedure. The consideration payable to Stockholder and the holders
of the RSA Units pursuant to Section 1.5 above shall be paid upon surrender of
the certificates evidencing the RSA Shares. Neither Stockholder nor any holder
of the RSA Units shall be entitled to receive any fractional Virata Ordinary
Share or any option to acquire a fractional Virata Ordinary Share, as the case
may be, and, in lieu thereof, any fractional amount shall be paid in cash. All
consideration paid upon surrender of such certificates shall be deemed to have
been delivered in full satisfaction of all rights pertaining to the RSA Shares
and the RSA Units. If, after the Effective Time, certificates representing any
shares of capital stock of RSA Communications or any securities or rights
convertible into or related to the capital stock of RSA Communications are
presented for any reason, they will be canceled and null and void, and the
holder thereof shall not be entitled to any consideration in respect thereof.
Such shares of capital stock of RSA Communications, any phantom stock units of
RSA Communications or any securities or rights convertible into or related to
the capital stock of RSA Communications shall not be entitled to any
consideration other than as provided in this Agreement.
1.7 Virata Employment Options. Subject to the terms and conditions set
forth in this Agreement, simultaneously with the Merger, Virata shall grant to
Stockholder and to employees of RSA Communications selected by Virata after
consultation with Stockholder prior to the Closing, options to purchase an
aggregate of 1,220,000 Virata Ordinary Shares (the "Virata Employment Options")
under Virata Corp.'s 1998 Stock Incentive Plan (the "Virata Stock Incentive
Plan") at an exercise price of $0.70 per share, and on substantially the other
terms and conditions set forth in the form of Incentive Stock Option Agreement
(the "Virata Incentive Stock Option Agreement") attached hereto as Exhibit B-2.
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In addition to the above, Virata shall grant to Stockholder and the holders of
RSA Units options to purchase an aggregate of 780,000 Virata Ordinary Shares (of
which, Stockholder shall receive options to purchase 390,000 Virata Ordinary
Shares, and the holders of the RSA Units shall receive options to purchase an
aggregate of 390,000 shares on a pro rata basis in proportion to the RSA Units
held by such holder) (the "Virata Additional Options") under the Virata Stock
Incentive Plan at an exercise price of $0.70 per share, and on substantially the
other terms and conditions set forth in the Virata Incentive Stock Option
Agreement, except that: (1) the vesting rate shall be 33% of the shares on the
first anniversary of the date of grant and one-thirty sixth (1/36) of the shares
each month thereafter until 100% vested and (2) such options shall become fully
vested upon the death, Permanent Disability, Constructive Discharge or
termination of the optionholder's employment by the Company for reasons other
than for Cause (as such terms are defined in the form of Employment Agreement
attached hereto as Exhibit E-1).
1.8 Repayment of PCSI Note. Subject to the terms and conditions set forth
in this Agreement, simultaneously with and as a condition concurrent to the
consummation of the Merger, Acquisition Sub shall pay the sum of $2,000,000 to
Pacific Communications Sciences, Inc. ("PCSI") by wire transfer of immediately
available funds in full satisfaction of the principal
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balance and all amounts owed by RSA Communications to PCSI under that certain
promissory note dated June 6, 1997 (the "PCSI Note").
1.9 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Hunton & Xxxxxxxx, One Hannover
Square, Xxxxxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxx Xxxxxxxx 00000, on June 30,
1998, or at such other place and on such other date as each of the parties
hereto may mutually agree (the "Closing Date").
1.10 Financial Statements. RSA Communications and Stockholder have
delivered the Financial Statements (as defined in Section 5.4) to Virata.
Virata shall have the Financial Statements audited by Coopers & Xxxxxxx LLP (the
"Accountants") as promptly as possible following the execution and delivery of
this Agreement and prior to the Closing Date (the "Audited Financial
Statements"). The cost of the audit by the Accountants shall be borne by
Virata. Virata shall deliver the Audited Financial Statements to RSA
Communications and Stockholder promptly following such audit. The amounts
reflected in the Audited Financial Statements shall be conclusive and binding on
Virata, Acquisition Sub, RSA Communications and Stockholder. In the event that
either net revenue or net assets shown in the Audited Financial Statements are
less than the corresponding amounts shown in the Financial Statements by greater
than 5%, then Virata and Acquisition Sub shall have the right to terminate this
Agreement pursuant to Article X.
1.11 Amendment to RSA Units Agreement. Prior to or on the Closing Date,
each holder of RSA Units shall execute and deliver an amendment to the agreement
governing his or her RSA Units (the "RSA Unit Amendment"), substantially in the
form attached hereto as Exhibit D, pursuant to which such holder shall: (a)
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agree to the conversion of such holder's RSA Units into the right to receive the
consideration set forth in Section 1.5 above and (b) appoint Stockholder as such
holder's representative with respect to any claim for indemnification pursuant
to Article IX.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
RSA Communications and Stockholder, jointly and severally, represent and
warrant to Virata and Acquisition Sub as follows:
2.1 Organization and Existence. RSA Communications is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. RSA Communications has the requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. RSA Communications is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the character or location of
the properties owned, leased or operated by RSA Communications or the nature of
the business conducted by RSA Communications makes such qualification or license
necessary, except where the failure to be so duly qualified or licensed would
not have a material adverse effect on the business, operations, financial
condition, results of operations or prospects of RSA Communications (a "Material
Adverse Effect"). Schedule 2.1 to this Agreement (a "Schedule" or the
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"Schedules") lists each jurisdiction in which RSA Communications is duly
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qualified or licensed to do business and the jurisdictions in which tangible
assets owned or used by RSA Communications are located.
2.2 Capital Stock, Etc.
(a) RSA Communications has an authorized capitalization and
outstanding shares as reflected in Schedule 2.2(a). All shares of RSA Common
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Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued by RSA Communications in compliance with all
applicable securities laws, rules and regulations, the Certificate of
Incorporation, Bylaws or other governing documents or the terms of any
stockholders agreement to which RSA Communications is a party or by which any of
its stockholders is bound. The RSA Shares constitute all of the issued and
outstanding shares of RSA Common Stock.
(b) Except as set forth in Schedule 2.2(b), there are no outstanding
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authorized, issued or effective subscriptions, options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans, phantom stock units
or other agreements of any character providing for the purchase, issuance or
sale of, or otherwise related to, any issued or unissued shares of capital stock
of RSA Communications.
(c) There are no voting trusts, stockholder agreements, proxies
coupled with interests, pooling agreements or other forms of agreement
restricting or controlling the voting of shares in RSA Communications, and no
Person (as defined below), whether a stockholder of RSA Communications or
otherwise, has by contract or any method other than the voting of shares any
veto power or other control over the activities of RSA Communications.
2.3 Authorization and Validity of Agreements. RSA Communications and
Stockholder each have full power, legal capacity and authority to execute and
deliver this Agreement and the other agreements contemplated by this Agreement,
to perform their respective obligations hereunder and thereunder and to complete
the transactions contemplated by or referenced in this Agreement. All corporate
actions necessary on the part of RSA Communications and its directors and
stockholders for the execution and delivery of this Agreement and the other
agreements contemplated by this Agreement, and the performance by RSA
Communications of its obligations under this Agreement and the other agreements
contemplated by this Agreement, have been taken. This Agreement and each of the
other agreements contemplated by this Agreement have been or will be duly
executed and delivered by RSA Communications and Stockholder on or prior to the
Closing Date and, assuming due execution of this Agreement and the other
agreements contemplated by this Agreement by Virata and Acquisition Sub, each is
(or upon execution and delivery will be) a valid and binding obligation of RSA
Communications and Stockholder enforceable against them in accordance with their
respective terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles. No other actions or proceedings on the part of RSA
Communications or Stockholder are necessary to authorize this Agreement or the
other agreements contemplated by this Agreement.
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2.4 Subsidiaries and Investments. RSA Communications does not own,
directly or indirectly, any capital stock or other ownership or proprietary
interest in any corporation, company, partnership, limited liability company,
business, association, trust, joint venture or other entity and has no
obligation to make any investments in or loans to any Person.
2.5 Financial Statements.
(a) Except as set forth in Schedule 2.5, the Financial Statements (as
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defined in Section 5.4): (i) are correct and complete in all material respects
and have been prepared in accordance with the books and records of RSA
Communications; (ii) have been prepared in accordance with GAAP consistently
applied throughout the periods covered; (iii) reflect and provide adequate
reserves in respect of all known liabilities of RSA Communications, including
all known contingent liabilities, as of their respective dates, each in
conformity with GAAP; and (iv) present fairly the financial condition of RSA
Communications at such dates and the results of its operations for the fiscal
periods then ended.
(b) RSA Communications: (i) keeps books, records and accounts that,
in reasonable detail, accurately and fairly reflect in all material respects the
transactions and dispositions of assets of RSA Communications; and (ii)
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorizations and (D)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. None of RSA Communications nor any employee or agent of RSA
Communications, directly or indirectly, has made any payment of funds of RSA
Communications or received or retained any funds in violation of any applicable
law, rule or regulation.
2.6 Accounts Receivable. The accounts receivable, book debts and other
debts owing to RSA Communications reflected in the Financial Statements and all
accounts receivable of RSA Communications arising since the dates of the
Financial Statements arose from bona fide transactions in the ordinary course of
business and are valid, enforceable and fully collectible accounts. Such
accounts receivable are not subject to any defense, set-off or counterclaim.
2.7 Absence of Liabilities. Except as set forth on Schedule 2.7, RSA
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Communications does not have, and as a result of the transactions contemplated
hereby will not have, any indebtedness, liabilities or obligations of any nature
(whether known or unknown, absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether or not required to be shown on a balance
sheet in accordance with GAAP), other than (i) the liabilities reflected on the
Financial Statements, (ii) incurred in the ordinary course of business
consistent with past practice since the dates of the Financial Statements and
(iii) Taxes (as defined below) which are to be prorated in accordance with the
terms of this Agreement.
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2.8 Books and Records. Except as set forth on Schedule 2.8, the minute
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books and other records of RSA Communications, as previously made available to
Virata and its representatives, contain accurate records of all resolutions,
written consents, meetings of, and actions taken by (including action taken by
written consent) the Board of Directors or other governing body of RSA
Communications and Stockholder. All such meetings were duly called and held,
all such corporate actions and written consents were duly taken or validly
given, and all such resolutions were duly passed. The stock certificate books,
register of stockholders, register of transfers, register of directors and
similar corporate records are complete, accurate and current in all material
respects. Concurrently with the consummation of the transactions contemplated
by this Agreement, all of the books and records of RSA Communications will be
delivered to Virata or its counsel.
2.9 No Material Changes. Except as set forth on Schedule 2.9, since the
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date of the Financial Statements, there has been no:
(a) material adverse change in the business, operations, financial
condition or results of operations of RSA Communications;
(b) material damage, destruction or loss to any asset or property,
tangible or intangible, of RSA Communications which materially adversely affects
the ability of RSA Communications to conduct its business;
(c) any sale, distribution, transfer or subjection to any lien or
encumbrance of any material assets of RSA Communications, except in the ordinary
and usual course of business;
(d) any increase in the salary or other direct or indirect
compensation or benefit payable or to become payable to any officer, director or
employee of RSA Communications, or the declaration, payment, commitment or
obligation of any kind for the payment of a bonus or other additional salary,
compensation or benefit, other than wage increases of non-officer employees in
accordance with past practices;
(e) declaration or payment of any dividends or other distributions to
stockholders in respect of RSA Common Stock or any redemption or repurchase of
RSA Common Stock, except as may have been agreed to in writing by Virata;
(f) any transaction by RSA Communications not in the ordinary and
usual course of business;
(g) any alteration in the manner in which RSA Communications keeps its
books, accounts or records or in the accounting practices therein reflected,
including the recognition and computation of revenues or expenses; or
(h) any capital expenditures or commitments for additions to property,
plant or equipment constituting capital assets outside the ordinary course of
business, consistent with past practice.
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2.10 Title to Properties; Encumbrances. RSA Communications does not own
any real property. Except as set forth on Schedule 2.10, and except for such
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properties and assets which have been sold or otherwise disposed of in the
ordinary course of business, RSA Communications has good and marketable title to
its material properties and assets, including, without limitation, the material
properties and assets reflected in the Financial Statements, subject to no
Liens, except for (i) Liens reflected in the Financial Statements, (ii) Liens
for current taxes, assessments or governmental charges or levies on property not
yet due or delinquent, and (iii) Liens described on Schedule 2.10 (Liens of the
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type described in clauses (i), (ii) and (iii) above are hereinafter sometimes
referred to as "Permitted Liens"). Except as set forth on Schedule 2.10, all
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equipment and other tangible personal property leased or owned by RSA
Communications are used, usable by or useful to RSA Communications in the
ordinary course of business and are in good operating condition and in a state
of good maintenance and repair, normal wear and tear excepted, comparable for
items of their type, usage and age. Except as disclosed on Schedule 2.10, no
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Person other than RSA Communications owns any tangible assets which are being
used in the ordinary course of RSA Communications' business. RSA Communications
owns all tangible and intangible assets which are materially necessary,
individually or in the aggregate, to operate its business.
2.11 Intellectual Property.
(a) Set forth on Schedule 2.11(a) is a list and description of all
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patents, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, tradename applications, copyrights,
copyright applications, computer software (other than "shrink-wrap licenses")
and other proprietary rights owned, licensed or used by RSA Communications. The
items listed on Schedule 2.11(a) and all research data, market reports,
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distribution methods, industrial designs, processes, supplier lists, customer
lists, trade secrets and other proprietary rights that RSA Communications owns,
licenses or uses are referred to as "Intellectual Property."
(b) (i) Except for the computer software listed in Schedule 2.11(b), RSA
Communications owns all right, title and interest in all of the computer
software listed in Schedule 2.11(a) and has not created a restriction on any of
its rights in such software.
(ii) With respect to all computer software listed in Schedule 2.11(b),
RSA Communications has licenses or other valid and enforceable rights to use
such computer software, with only those contractual restrictions on its ability
to assign, license or sub-license such licenses, or other rights to use
contained in the license agreements listed in Schedule 2.11(b).
(iii) With respect to all other Intellectual Property, RSA Communications
either owns or has adequate licenses or other valid and enforceable rights to
use such Intellectual Property in the manner in which it is currently used.
(iv) RSA Communications has taken adequate steps to protect any
Intellectual Property that it owns. Except for the implementation of any
function relating to X.00, X.00xxx, XXX Class 5, Improved Escape Sequence
("Xxxxxxxxxxxxx Patent") technology or any Industry
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Standard Function into RSA Communications software products, neither the
operations of RSA Communications nor the ownership, license, or use of the
Intellectual Property by RSA Communications infringes upon or conflicts with the
proprietary rights of any other Person (as defined below) in respect of the
Intellectual Property or otherwise and there is no pending or, to the knowledge
of RSA Communications or Stockholder, threatened claim to that effect or basis
for such claim. To the knowledge of RSA Communications or Stockholder, no Person
is infringing upon or conflicting with the rights of RSA Communications with
respect to the Intellectual Property and there is no pending or threatened claim
by RSA Communications against any Person to such effect. "Industry Standard
Function" means any function the implementation of which, either actual or
announced, has occurred with respect to a majority of the commercial
communication products in the served markets.
(c) Set forth on Schedule 2.11(c) are lists of (i) any agreement or
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arrangement pursuant to which RSA Communications licenses any Intellectual
Property to or shares any Intellectual Property with third parties and (ii) any
agreement or arrangement pursuant to which any third party licenses any
Intellectual Property to or shares any Intellectual Property with RSA
Communications (other than computer software identified on Schedule 2.11(b)).
RSA Communications, and to the knowledge of Stockholder and RSA Communications,
all third parties are in compliance in all material respects with the applicable
provisions of such agreements or arrangements.
(d) No information, records, systems or data required for the
administration or operation of RSA Communications' business are recorded on,
stored or maintained by any computerized system or program that is not
exclusively and beneficially owned by RSA Communications.
(e) No Person (as defined below) has, to the knowledge of RSA
Communications and Stockholder, asserted that RSA Communications' use of the
name "RSA Communications" infringes upon the rights of such Person.
2.12 Leases. Schedule 2.12 attached hereto contains a list of all leases
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for real or personal property to which RSA Communications is a party. Except as
otherwise set forth in Schedule 2.12, each lease set forth in Schedule 2.12 is
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in full force and effect; all rents and additional rents due to date from RSA
Communications on each such lease have been paid; RSA Communications is not in
default under any such lease; and, except as set forth on Schedule 2.12, there
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exists no event, occurrence, condition or act (including the consummation of the
transactions contemplated by this Agreement) which, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
become a default by RSA Communications under such lease. To the knowledge of
RSA Communications or Stockholder, no other party to any of the leases is in
default thereunder. RSA Communications has not entered into any sublease or
assignment related to any of such leases.
2.13 Contracts. Except as set forth on Schedule 2.13 or any other
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Schedule attached hereto, RSA Communications is not bound by any of the
following:
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(a) any agreement, license, contract or commitment that involves the
performance of services or the purchase or delivery of goods and/or materials or
services by it of an amount or value in excess of $25,000;
(b) any agreement, other than this Agreement and the agreements
contemplated hereby, not made in the ordinary course of business, for the sale
of goods or the performance of services for or by RSA Communications that is not
terminable upon notice of 30 days or less without cost or liability to RSA
Communications or any successor thereof;
(c) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution in
respect of its shares;
(d) any agreement, contract or commitment relating to capital expenditures
outside the ordinary course of business, consistent with past practice;
(e) any loan or advance to, or investment in, any individual, partnership,
joint venture, corporation, limited liability company, trust, unincorporated
organization, government or other entity (each a "Person"), any agreement,
contract or commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving a sharing of
profits;
(f) any agreement, guarantee or other contingent liability in respect of
any indebtedness or obligation of any Person;
(g) any consulting or employment agreement or contract for the employment
or retention of any officer, employee, consultant, independent contractor or
other Person on a full-time, part-time, project or consulting basis that is not
terminable upon notice of 30 days or less without cost or other liability to RSA
Communications or any successor thereof except for accrued vacation pay, in each
case not to exceed the value of vacation pay accrued in one year;
(h) any agreement, contract or commitment limiting the ability of RSA
Communications to engage in any line of business or to compete with any Person;
(i) any warranty, guaranty or other similar undertaking with respect to a
contractual performance extended by RSA Communications other than in the
ordinary course of business;
(j) any agreement pursuant to which RSA Communications has been appointed
or any Person has been appointed by RSA Communications as an agent, distributor,
licensee or franchisee;
(k) any bonus, pension, profit-sharing, retirement, stock purchase, stock
option, deferred compensation, incentive compensation, hospitalization,
insurance or similar plan, contract or understanding providing for employee
benefits (other than those expressly described in the Schedules hereto);
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(l) any contract for the purchase or sale of real property or capital or
fixed assets that involves obligations of more than $10,000 in the aggregate
during any fiscal year;
(m) any insurance contract naming RSA Communications as loss payee that is
not listed in the Schedules hereto;
(n) any agreement, mortgage, indenture, loan or credit agreement, security
agreement or other agreement or instrument relating to the borrowing or lending
of money or extension of credit or providing for the mortgaging or pledging of,
or otherwise placing a lien or security interest on, any assets or properties of
RSA Communications;
(o) option, warrant or other contract for the purchase of any debt or
equity security of any corporation, or for the issuance of any debt or equity
security, or the conversion of any obligation, instrument or security into debt
or equity securities, of RSA Communications;
(p) any settlement agreement of any administrative or judicial proceedings
within the past five years;
(q) any agreement relating to any Intellectual Property; or
(r) any agreement, contract or commitment which might reasonably be
expected to have a Material Adverse Effect.
Except as otherwise set forth on Schedule 2.13, each contract or agreement
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set forth on Schedule 2.13 or any other Schedule is in full force and effect and
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there exists no default or event of default by any party thereto or event,
occurrence, condition or act (including the consummation of the sale
contemplated hereby) which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default or event of
default thereunder by any party thereto. Complete and correct copies of each of
the contracts and agreements set forth on Schedule 2.13 or any other Schedule,
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including any amendments or supplements to such contracts and agreements, have
been made available to Virata.
2.14 Consents and Approvals; No Violations. Except as set forth in
Schedule 2.14, the execution and delivery of this Agreement by RSA
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Communications and Stockholder and the consummation of the transactions
contemplated hereby (a) will not violate or contravene any provision of the
Certificate of Incorporation or Bylaws of RSA Communications, (b) will not
violate or contravene any statute, rule, regulation, order or decree of any
government body or authority by which RSA Communications or Stockholder is
subject or by which any of their respective properties or assets are bound, (c)
will not require any filing with, or permit, consent or approval of, or the
giving of any notice to, any governmental or regulatory body, agency or
authority, or any other Person and (d) will not result in a violation or breach
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation, payment
or acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of RSA Communications or Stockholder under, any of the
terms, conditions or provisions of any agreement to which RSA Communications or
Stockholder
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is a party, or by which either of them or any of their respective
properties or assets may be bound.
2.15 Litigation.
(a) Except as set forth on Schedule 2.15, there is no action, suit,
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claim, proceeding, inquiry or investigation pending or, to the knowledge of RSA
Communications or Stockholder, threatened, against or affecting RSA
Communications, or the assets, properties, business or business prospects of RSA
Communications, at law or in equity, or before or by any arbitrator or any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, and neither RSA
Communications nor Stockholder knows of any basis for any of the foregoing. RSA
Communications is not in default with respect to any order, writ, injunction or
decree known to or served upon RSA Communications of or by any court or of or by
any arbitrator or any Federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Except as set forth on Schedule 2.15, there is no pending action or suit brought
-------------
by RSA Communications against any third party.
(b) There is no action, suit, claim, proceeding, inquiry or
investigation pending or, to the knowledge of RSA Communications or Stockholder,
threatened, at law or in equity, or before or by any arbitrator or any Federal,
state, local or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, relating to or involving the
transactions contemplated by this Agreement.
2.16 Taxes.
(a) Tax Returns. RSA Communications has timely filed or caused to be
timely filed, or will timely file or cause to be timely filed, with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes ("Returns") that are required to be filed by, or with respect to, RSA
Communications on or prior to the date of this Agreement. The Returns have
accurately reflected and will accurately reflect all liability for Taxes of RSA
Communications for the periods covered thereby. None of such Returns contains,
or will contain, a disclosure statement under Section 6662 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any similar provision of
state, local or foreign tax law. "Taxes" means all taxes, assessments, charges,
duties, fees, levies or other governmental charges, including, without
limitation, all Federal, state, local, foreign and other income, franchise,
profits, capital gains, capital stock, transfer, sales, use, occupation,
property, excise, severance, windfall profits, stamp, license, payroll,
withholding, and other taxes, assessments, charges, duties, fees, levies or
other governmental charges of any kind whatsoever (whether payable directly or
by withholding and whether or not requiring the filing of a Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity.
(b) Payment of Taxes. Except as described in Schedule 2.16 with
respect to underpayments of estimated taxes for fiscal 1998, all Taxes and Tax
liabilities of RSA
12
Communications (whether or not shown on any Return) for all
taxable years or periods that end on or before the Closing Date and, with
respect to any taxable year or period beginning before and ending after the
Closing Date ("Straddle Periods"), the portion of such taxable year or period
ending on and including the Closing Date, have been timely paid or adequately
provided for on the Financial Statements. For purposes of this representation,
all Taxes and Tax liabilities with respect to the income, property or operations
of RSA Communications that relate to a Straddle Period shall be apportioned
between the period prior to the Closing Date and the period following the
Closing Date as follows: (A) in the case of Taxes other than income Taxes and
sales and use Taxes, on a per diem basis, and (B) in the case of income Taxes
and sales and use Taxes, as determined from the books and records of RSA
Communications, to the portion of such period ending on the date Closing Date as
though the taxable year of RSA Communications terminated at the close of
business on the Closing Date, and based on accounting methods, elections and
conventions that do not have the effect of distorting income and expenses.
(c) Other Tax Matters.
(i) Schedule 2.16 sets forth (A) each taxable year or other taxable
-------------
period of RSA Communications for which an audit or other examination of Taxes by
the appropriate tax authorities of any nation, state or locality is currently in
progress (or scheduled as of the date of this Agreement to be conducted),
together with the names of the respective tax authorities conducting (or
scheduled to conduct) such audits or examinations and a description of the
subject matter of such audits or examinations, (B) the most recent taxable year
or other taxable period for which an audit or other examination relating to
Federal income taxes of RSA Communications has been finally completed and the
disposition of such audits or examinations, (C) the taxable years or other
taxable periods of RSA Communications for which a consent or waiver of the
applicable statute of limitations for applicable Taxes is outstanding, (D) the
amount of any proposed adjustments (and the principal reason therefor) relating
to any Returns for Tax liability of RSA Communications which have been proposed
or assessed by any taxing authority and (E) a list of all notices received by
RSA Communications from any taxing authority relating to any issue which could
affect the Tax liability of RSA Communications, which issue has not been finally
determined and which, if determined adversely to RSA Communications could result
in a Tax liability.
(ii) Except as set forth on Schedule 2.16, RSA Communications has
-------------
not been included in any "consolidated," "unitary" or "combined" Return provided
for under the laws of the United States, any foreign jurisdiction or any state
or locality with respect to Taxes for any taxable period for which the statute
of limitations has not expired. RSA Communications does not have any liability
for the Taxes of any person as defined in Section 7701(a)(1) of the Code or
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise;
(iii) Except as set forth on Schedule 2.16, all Taxes which RSA
-------------
Communications is, or was, required by law to withhold or collect have been duly
withheld or collected and have been timely paid over to the proper authorities
to the extent due and payable.
13
(iv) Except as disclosed on Schedule 2.16, there are no tax
-------------
sharing, allocation, indemnification or similar agreements or arrangements in
effect as between RSA Communications or any predecessor thereof and any other
party (including any predecessor thereof) under which Acquisition Sub or RSA
Communications could be liable for any Taxes or other claims of any party.
(v) RSA Communications is not a party to any agreement, contract,
arrangement or plan that would result in the payment by RSA Communications of
any "excess parachute payment" within the meaning of Section 280G of the Code.
(vi) No consent has been filed under Section 341(f) of the Code
with respect to RSA Communications.
(vii) Except as disclosed on Schedule 2.16, RSA Communications was
not acquired in a "qualified stock purchase" under Section 338(d)(3) of the
Code, and RSA Communications is not subject to any constructive elections under
Code Section 338 or the regulations thereunder.
(viii) RSA Communications is not required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar provisions of
other law or regulations) by reason of a change in accounting method.
(ix) None of the assets of RSA Communications is property that is
required to be treated as owned by any other person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of the Internal Revenue Code of
1954, as amended, and in effect immediately prior to the enactment of the Tax
Reform Act of 1986, none of the assets of RSA Communications is "tax exempt use
property" within the meaning of Section 168(h) of the Code and none of the
assets of RSA Communications secures any debt the interest on which is tax
exempt under Section 103 of the Code.
(x) No indebtedness of RSA Communications consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(xi) RSA Communications is not a "United States real property
holding company" within the meaning of Section 897 of the Code.
(xii) There currently are no excess loss accounts, deferred
intercompany gains or losses or other like items pertaining to RSA
Communications that could result in any Tax liability for RSA Communications.
(xiii) RSA Communications is not engaged in business in any tax
jurisdiction in which it does not file Returns for sales and use, income or
other Taxes.
(xiv) Neither RSA Communications nor Stockholder has asserted any
claim for indemnification under the Tax Indemnity Agreement, dated June 6, 1997,
by and
14
among Stockholder, RSA Communications and Cirrus Logic, nor, to the knowledge of
RSA Communications or Stockholder, is there any reasonable basis for any such
claim.
(xv) On the Closing Date, RSA Communications will hold
sufficient assets to satisfy the "substantially all" test of Section
368(a)(2)(D) of the Code.
2.17 Insurance. Schedule 2.17 contains an accurate and complete summary
-------------
description of all policies of property, fire and casualty, product liability,
workers compensation and other forms of insurance owned or held by RSA
Communications. RSA Communications has not received (i) any notice of
cancellation of any policy described in such Schedule or refusal of coverage
thereunder or (ii) any other indication that such policies are no longer in full
force or effect or that the issuer of any such policy is no longer willing or
able to perform its obligations thereunder. Since the date of the Financial
Statements, there has not been any material adverse change in the relationship
of RSA Communications with its insurers or in the premiums payable pursuant to
such policies.
2.18 Compliance with Laws; Permits. RSA Communications is in compliance
with all applicable laws, regulations, orders, judgments and decrees, except
where the failure to so comply would not have a Material Adverse Effect. RSA
Communications has all franchises, licenses, permits, certificates and other
authorizations from Federal, state, local or foreign governments or governmental
agencies, departments or bodies that are necessary for the conduct of its
business and which, if not obtained, would, individually or in the aggregate,
have a Material Adverse Effect. To the knowledge of RSA Communications or
Stockholder, there is no fact, error or omission relevant to any such franchise,
license, permit, certificate or other authorization that would permit the
revocation or withdrawal thereof. Subject to the receipt of any necessary
consents or filings, RSA Communications will continue to have the use and
benefit thereof and the rights granted thereby after the transactions
contemplated hereby have occurred.
2.19 Compensation of Employees. Schedule 2.19 is an accurate and complete
-------------
list showing the name, job title, duration of employment, salary, bonus and
fringe benefits of all persons employed by RSA Communications.
2.20 Employee Relations.
(a) Except as set forth on Schedule 2.20, RSA Communications is in
-------------
compliance in all material respects with all Federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, terms
and conditions of employment and wages and hours and has not, and is not,
engaged in any unfair labor practice;
(b) no unfair labor practice complaint against RSA Communications is
pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving RSA Communications which might
reasonably be expected to have a Material Adverse Effect;
15
(d) RSA Communications is not a party to a collective bargaining
agreement, and no collective bargaining agreement is currently being negotiated
by RSA Communications, and, to the knowledge of RSA Communications or
Stockholder, no labor organization is seeking to represent any employees of RSA
Communications; and
(e) no claim in respect of the employment of any employee has been
asserted in writing or asserted orally or overtly threatened against RSA
Communications which might reasonably be expected to have a Material Adverse
Effect.
(f) each employee of RSA Communications has entered into RSA
Communications' standard form of Employee Agreement attached hereto as Exhibit
-------
E-2, and such agreement is binding and enforceable against such employee in
---
accordance with its terms.
2.21. Employee Benefit Plans.
(a) Schedule 2.21 is an accurate and complete list of each employee
-------------
pension benefit plan, as defined in Section 3(2) of ERISA (the "Pension Plans"),
each employee welfare benefit plan, as defined in Section 3(1) of ERISA (the
"Welfare Plans", together with the Pension Plans, referred to as the "ERISA
Plans"), and each other employee benefit plan or arrangement not subject to
ERISA (the "Benefit Arrangements") currently (or during the five years preceding
the Closing Date) established, maintained or contributed to by RSA
Communications or any ERISA Affiliate. As used herein, the term "ERISA" means
the Employee Retirement Income Security Act of 1974, as amended, and any
regulations issued thereunder. As used herein, the term "ERISA Affiliate" means
a corporation which is a member of a controlled group of corporations with RSA
Communications within the meaning of Section 414(b) of the Code, a trade or
business (including a sole proprietorship, partnership, trust, estate or
corporation) which is under common control with RSA Communications within the
meaning of Section 414(c) of the Code, or a member of an affiliated service
group with RSA Communications within the meaning of Section 414(m) or Section
414(o) of the Code. Each ERISA Plan listed on Schedule 2.21 shall be correctly
-------------
categorized as either a Pension Plan, or a Welfare Plan, or a Benefit
Arrangement.
(b) RSA Communications has delivered or made available to Virata
true and correct copies of all ERISA Plans and Benefit Arrangements (and all
trust agreements, annuity contracts or other funding instruments relating
thereto and any relevant amendments) listed on Schedule 2.21 and all applicable
-------------
filings relating to the ERISA Plans and Benefit Arrangements listed on Schedule
--------
2.21 for the past two years, including Form 5500 filings, and, if the ERISA Plan
----
is intended to qualify under Section 401(a) of the Code, the most recent
determination letter received from the Internal Revenue Service (the "IRS"), the
most recent actuarial valuation reports, and any other relevant correspondence
from the IRS or Department of Labor.
(c) Except as disclosed in Schedule 2.21, (i) for each Pension Plan
-------------
that is intended to qualify under Section 401(a) of the Code, a favorable
determination letter has been received from the IRS addressing the tax-qualified
status of such plan and, to the knowledge of Stockholder and RSA Communications,
no event has occurred that would adversely affect such tax qualified status;
(ii) each ERISA Plan and Benefit Arrangement has been administered in all
16
material respects in compliance with its terms and with the applicable
provisions of ERISA, the Code and other laws; (iii) with respect to each ERISA
Plan and Benefit Arrangement, to the knowledge of Stockholder and RSA
Communications, no event has occurred, and there exists no condition or set of
circumstances in connection therewith, for which RSA Communications or its ERISA
Affiliates could, directly or indirectly, be subject to any liability under
ERISA, the Code or any other applicable law, except liability for benefit claims
and funding obligations in the ordinary course, (iv) all required employer
contributions to each ERISA Plan or Benefit Arrangement have been made when due
(or, in the case of employer contributions not yet due, have been accrued on RSA
Communications' financial statements and records); (v) there are not pending or,
to the knowledge or Stockholder and RSA Communications, threatened termination
proceedings, claims, suits, investigations or other proceedings against or
involving any ERISA Plan or Benefit Arrangement or asserting any rights to or
claims for benefits under any ERISA Plan or Benefit Arrangement for which RSA
Communications could, directly or indirectly, be subject to any liability; and
(vi) except to the extent required by Section 4980B of the Code or any similar
provision of state law, RSA Communications does not provide, and is not
obligated to provide, any health or welfare benefits to any retired or former
employees or to any active employee following such employee's retirement or
termination of service.
2.22 Interests in Customers, Suppliers, etc. Except as set forth on
Schedule 2.22, neither any officer or director of RSA Communications nor
-------------
Stockholder possesses, directly or indirectly, any financial interest in, or is
a director, officer or employee of, any Person which is a supplier, customer,
lessor, lessee, licensor, developer, competitor or potential competitor of RSA
Communications.
2.23 Environmental Laws and Regulations. Except as set forth on Schedule
--------
2.23:
----
(a) RSA Communications has not generated, used, treated or stored
any Hazardous Materials (as hereinafter defined) on any RSA Communications
Property (as hereinafter defined), and no Hazardous Materials have been
generated, used, treated or stored on or released or disposed on any RSA
Communications Property in each case in violation of any Environmental Law.
(b) RSA Communications is in compliance in all material respects
with Environmental Laws (as hereinafter defined) and the requirements of any RSA
Communications permits issued under such Environmental Laws with respect to any
RSA Communications Property.
(c) There are no pending or, to the knowledge of RSA Communications
or Stockholder, threatened Environmental Claims (as hereinafter defined) against
RSA Communications Property.
(d) For purposes of this Section 2.23, the following definitions
shall apply:
"Environmental Claims" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of non-
compliance, remediation or violation, investigations or proceedings relating in
any way to any Hazardous Materials,
17
Environmental Law or any permit issued to RSA Communications under any such
Environmental Law.
"Environmental Law" means any Federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended as of the date of this Agreement, and any judicial or
administrative interpretation thereof as of the date of this Agreement,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials.
"Hazardous Materials" means any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or words of similar
import, under any applicable Environmental Law.
"RSA Communications Property" means any real property and
improvements previously or currently owned, leased, used, operated or occupied
by RSA Communications.
2.24 Bank Accounts; Powers of Attorney. Set forth on Schedule 2.24 is an
-------------
accurate and complete list showing (a) the name and address of each bank in
which RSA Communications has an account or safe deposit box, the number of any
such account or any such box and the names of all persons authorized to draw
thereon or to have access thereto and (b) the names of all persons, if any,
holding powers of attorney from RSA Communications.
2.25 Broker's or Finder's Fees. No agent, broker, Person or firm acting
on behalf of RSA Communications or Stockholder is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated by this
Agreement.
2.26 Customers. No material customer of RSA Communications has indicated
to RSA Communications any intention to terminate or materially reduce its
existing contractual relationship with RSA Communications prior to the
completion of the projects in progress as of the date hereof between such
customer and RSA Communications.
2.27 Status of RSA Communications Real Property. To the knowledge of RSA
Communications or Stockholder, the use by RSA Communications of RSA
Communications Property (as defined in Section 2.23) is not in breach of any
building, zoning or other statute, bylaw, ordinance, regulation, covenant,
restriction or official plan, and RSA Communications has adequate rights of
ingress and egress for the operation of its business in the ordinary course.
There are no outstanding work orders, non-compliance orders, deficiency notices
or other such notices relative to RSA Communications Property, the other
properties and assets of RSA Communications or its business which have been
issued by any regulatory authority, police or fire department, sanitation,
environment, labor, health or other governmental authorities or agencies.
Except as disclosed on Schedule 2.27, to the knowledge of RSA Communications or
-------------
Stockholder, the buildings and structures comprising RSA Communications Property
are free of any structural defect. To the knowledge of RSA Communications or
Stockholder, the heating,
18
ventilating, plumbing, drainage, electrical and air conditioning systems and all
other systems used in RSA Communications Property are in good working order,
fully operational and free of any defect, except for normal wear and tear.
2.28 Non-Arm's Length Matters. Except as set forth in the Financial
Statements or in Schedule 2.22 or Schedule 2.28, RSA Communications is not bound
------------------------------
by any agreement with, is not indebted to, and no amount is owing to RSA
Communications from, Stockholder or any of RSA Communications' or Stockholder's
Affiliates (as defined in Section 501(b) of the Securities Act of 1933, as
amended (the "Securities Act")) or any officers, former officers, directors,
former directors, former stockholders, employees or former employees of RSA
Communications or any other Person not dealing at arm's length with RSA
Communications. Except as set forth on Schedule 2.28, since the respective
-------------
dates of the Financial Statements, RSA Communications has not made or authorized
any payments to Stockholder or any of RSA Communications' or Stockholder's
Affiliates, or any officers, former officers, directors, former directors,
former stockholders, employees or former employees of RSA Communications or to
any other Person not dealing at arm's length with RSA Communications, except for
salaries and other employment compensation payable to employees of RSA
Communications in the ordinary course of the routine daily affairs of its
business and at the regular rates payable to them.
2.29 Material Disclosures. No statement, representation or warranty made
by RSA Communications or Stockholder in this Agreement or in any certificate,
statement, list, schedule or other document furnished or to be furnished to
Virata or Acquisition Sub hereunder contains, or when so furnished will contain,
any untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
19
ARTICLE III
INVESTMENT REPRESENTATIONS AND WARRANTIES
Stockholder represents and warrants to Virata as follows: (a) Stockholder
is acquiring the Virata Ordinary Shares and the Series D Shares for his own
account for investment purposes only and not with a view to, or for resale in
connection with, any distribution thereof in violation of the Securities Act
(except that Stockholder intends to sell the Series D Shares in connection with
the Closing to one or more accredited investors (as defined below) acceptable to
Virata, and which sale Virata acknowledges shall not constitute a breach of the
representations and warranties of Stockholder in this Article III)); (b) by
reason of his business or financial experience, Stockholder has the capacity to
protect his own interests in connection with the transactions contemplated by
this Agreement and is able to bear the economic risks of an investment in the
Virata Ordinary Shares and the Series D Shares; (c) Stockholder understands that
no public market now exists for the Virata Ordinary Shares or the Series D
Shares and that no public market may ever exist for the Virata Ordinary Shares
or the Series D Shares; (d) Stockholder has been advised that the Virata
Ordinary Shares and the Series D Shares are deemed "restricted securities" as
that term is defined in Rule 144 promulgated under the Securities Act, that the
exemption from registration under Rule 144 as currently in effect will not be
available in any event for at least one year from the date of issuance, and even
then will not be available unless a public trading market then exists for the
Virata Ordinary Shares or the Series D Shares, adequate information concerning
Virata is then available to the public, and other terms and conditions of Rule
144 are complied with, and that any sale of the Virata Ordinary Shares or the
Series D Shares may be made by the Stockholder only in accordance with such
terms and conditions; and (e) Stockholder is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIRATA
Virata represents and warrants to RSA Communications and Stockholder as
follows:
4.1 Organization and Existence. Virata is a corporation duly organized,
validly existing and in good standing under the laws of the United Kingdom.
Virata has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Acquisition
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware.
4.2 Capital Stock, Etc. Virata has an authorized capitalization and
outstanding shares as reflected in Schedule 4.2. All shares of the capital
------------
stock of Virata have been duly authorized and validly issued and fully paid up.
Except as set forth in Schedule 4.2, there are no outstanding options, warrants
------------
or other rights to acquire shares of the capital stock of Virata. Virata is the
record holder of all of the issued and outstanding shares of capital stock of
Acquisition Sub.
4.3 Authorization and Validity of Agreements. Virata and Acquisition Sub
have full power, legal capacity and authority to execute and deliver this
Agreement and the other
20
agreements contemplated by this Agreement, to perform their respective
obligations hereunder and thereunder and to complete the transactions
contemplated by or referenced in this Agreement. All corporate actions necessary
on the part of Virata, Acquisition Sub and their respective directors and
stockholders for the execution and delivery of this Agreement and the other
agreements contemplated by this Agreement, and the performance by Virata and
Acquisition Sub of their respective obligations under this Agreement and the
other agreements contemplated by this Agreement, have been taken. This Agreement
and each of the other agreements contemplated by this Agreement have been duly
executed and delivered by Virata and Acquisition Sub and, assuming due execution
of this Agreement and the other agreements contemplated by this Agreement by RSA
Communications and Stockholder, each is a valid and binding obligation of Virata
and Acquisition Sub enforceable against them in accordance with their respective
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles. Except for the approval of this Agreement by the stockholders of
Virata, no actions or proceedings on the part of Virata or Acquisition Sub are
necessary to authorize this Agreement or the other agreements contemplated by
this Agreement.
4.4 Virata Private Placement Memorandum. Virata has furnished to
Stockholder, and will furnish to the holders of the RSA Units prior to the
Closing, copies of a private placement memorandum dated March 3, 1998, including
the supplements thereto dated April 23, 1998 and June 1, 1998 (the "Virata
Private Placement Memorandum"), prepared in connection with recent sales of the
capital stock of Virata. The Virata Private Placement Memorandum contains,
among other things, summary financial information of Virata for the nine month
period ended December 31, 1997, including balance sheet data as of December 31,
1997 and a statement of operations data for the nine month period ended December
31, 1997. Such summary financial information presents fairly the financial
condition of Virata at such date and the results of its operations for the
fiscal period then ended. Virata has provided Stockholder and the RSA Employees
with an opportunity to meet with management of Virata and ask questions
regarding Virata's business, financial condition and results of operations. No
statement, representation or warranty made by Virata in the Virata Private
Placement Memorandum or in any certificate, statement, list, schedule or other
document furnished in connection thereto contains, or when so furnished will
contain, any untrue statement of a material fact, or fails to state, or when so
furnished will fail to state, a material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
4.5 No Material Changes. Except as set forth in Schedule 4.5, since
------------
December 31, 1997, there has been no material adverse change in the business,
operations, financial condition, results of operations or prospects of Virata
(as used with respect to Virata, a "Material Adverse Effect").
4.6 Consents and Approvals; No Violations. Except as set forth in
Schedule 4.6, the execution and delivery of this Agreement by Virata and
------------
Acquisition Sub and the consummation of the transactions contemplated hereby (a)
will not violate or contravene any
21
provision of the Certificate of Incorporation or Bylaws of Virata or Acquisition
Sub, (b) will not violate or contravene any statute, rule, regulation, order or
decree of any government body or authority by which Virata or Acquisition Sub is
subject or by which any of their respective properties or assets are bound, (c)
will not require any filing with, or permit, consent or approval of, or the
giving of any notice to, any governmental or regulatory body, agency or
authority, or any other Person and (d) will not result in a violation or breach
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation, payment
or acceleration) under, or result in the creation of any Lien upon any of the
properties or assets of Virata under, any of the terms, conditions or provisions
of any agreement to which Virata is a party, or by which it or any of its
properties or assets may be bound.
4.7 Compliance with Laws; Permits. Virata is in compliance with all
applicable laws, regulations, orders, judgments and decrees, except where the
failure to so comply would not have a Material Adverse Effect. Virata has all
franchises, licenses, permits, certificates and other authorizations from
Federal, state, local or foreign governments or governmental agencies,
departments or bodies that are necessary for the conduct of its business and
which, if not obtained, would, individually or in the aggregate, have a Material
Adverse Effect. To the knowledge of Virata, there is no fact, error or omission
relevant to any such franchise, license, permit, certificate or other
authorization that would permit the revocation or withdrawal thereof. Subject
to the receipt of any necessary consents or filings, Virata will continue to
have the use and benefit thereof and the rights granted thereby after the
transactions contemplated hereby have occurred.
4.8 Broker's or Finder's Fees. No agent, broker, Person or firm acting on
behalf of Virata is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
4.9 Valid Issuance of Shares. The Virata Ordinary Shares and the Series D
Shares, when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration provided herein, and the Virata Ordinary Shares
issued upon exercise of the Virata Acquisition Options in accordance with the
terms and conditions of the Virata Plan, will be validly issued and fully paid
up.
4.10 Virata Tax Status. Virata or one or more of its "qualified
subsidiaries" (as defined in Treasury Regulation Section 1.367(a)-3(c)(5)(vii))
has been engaged in an active trade or business outside the United States,
within the meaning of Treasury Regulation Section 1.367(a)-2T(b)(2) and (3), for
the entire 36-month period immediately before the Merger, and neither Virata nor
any of its "qualified subsidiaries" has an intention to substantially dispose of
or discontinue such active trade or business.
ARTICLE V
MUTUAL COVENANTS
5.1 Due Diligence Reviews. Prior to the Closing Date, Virata, on the one
hand, and RSA Communications and Stockholder, on the other hand, directly or
through their respective
22
representatives, will provide each other with an opportunity to review the
properties, books and records of the other party and its financial and legal
condition to the extent the reviewing party deems necessary or advisable to
familiarize itself with such properties and other matters; provided, however,
-------- -------
that such review shall not affect the accuracy of the representations and
warranties made in this Agreement or the remedies of any party for breaches of
those representations and warranties. All information obtained pursuant to such
due diligence examination shall be kept confidential and subject to the terms of
this Agreement and the terms of the Mutual Nondisclosure Agreement, executed
February 24, 1998, previously executed by Virata, RSA Communications and
Stockholder.
5.2 PCSI Release. On the Closing Date, RSA Communications shall use its
best efforts to cause PCSI and Cirrus Logic, Inc. ("Cirrus Logic") to deliver to
RSA Communications and its successors by merger a full and unconditional release
(the "PCSI Release") of any and all liabilities or obligations that RSA
Communications or its successors may have to PCSI or Cirrus Logic, except for
any obligations RSA Communications may have to PCSI or Cirrus Logic under the
Technology Transfer and License Agreement, the Tax Indemnity Agreement, and the
Stock Purchase Agreement (including, without limitation, Section 1.1(b) of the
Stock Purchase Agreement, pursuant to which RSA Communications will pay 3% of
gross revenue in excess of $3 million for the fiscal year ended March 31, 1998),
between RSA Communications and Cirrus Logic, each dated as of June 6, 1997.
5.3 [Intentionally Omitted]
5.4 Audited Financial Statements. As soon as practicable after the date
hereof, RSA Communications shall furnish Virata with copies of: (i) the
financial statements for the fiscal year ended as of March 31, 1998, including a
balance sheet as of such date and a statement of operations and cash flows for
the fiscal year ended as of such date (the "1998 Financial Statements"); and
(ii) interim financial statements for each of the months of April 1998 and May
1998, including balance sheets as of the last day of each such month and
statements of operations and cash flows for each such month (the "Interim
Financial Statements") (collectively with the 1998 Financial Statements, the
"Financial Statements"). As promptly as possible following the execution and
delivery of this Agreement and prior to the Closing Date, Virata shall have the
Financial Statements audited by the Accountants and shall deliver the Audited
Financial Statements to RSA Communications and Stockholder promptly following
such audit.
5.5 Conduct of Business of RSA Communications. Prior to the Closing Date,
RSA Communications shall, and Stockholder shall cause RSA Communications to,
conduct its operations only according to its ordinary and usual course of
business; use its reasonable efforts to preserve intact its business
organization, keep available the services of its officers and employees and
maintain satisfactory relationships with licensors, suppliers, distributors,
customers, landlords, employees, agents and others having business relationships
with it; and confer with Virata concerning operational matters of a material
nature and report periodically to Virata concerning the business, operations and
finances of RSA Communications. Notwithstanding the immediately preceding
sentence, prior to the Closing Date, except as may be agreed to in writing by
Virata or as is otherwise permitted or required by this Xxxxxxxxx,
00
XXX Communications shall (a) maintain its Certificate of Incorporation and
Bylaws in their respective forms on the date of this Agreement, (b) refrain from
paying or increasing any bonuses, salaries or other compensation to any
director, officer, employee or Stockholder or entering into any employment,
severance or similar agreement with any director, officer or employee, except in
the ordinary course of business consistent with past practice, (c) refrain from
adopting or increasing any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit plan for or
with any of its employees, (d) refrain from entering into any material contract
or commitment except in the ordinary course of business, (e) refrain from
increasing its indebtedness for borrowed money, except current borrowings in the
ordinary course of business, (f) refrain from canceling or waiving any claim or
right of substantial value, (g) refrain from declaring or paying any dividends
or other distributions in respect of its capital stock or redeeming, purchasing
or otherwise acquiring any of its capital stock, (h) refrain from making any
material change in accounting methods or practices, except as required by law or
generally accepted accounting principles, (i) refrain from issuing or selling
any shares of capital stock or any other securities except pursuant to the
exercise of outstanding options, or issuing any securities convertible into, or
options, warrants or rights to purchase or subscribe to, or entering into any
arrangement or contract with respect to the issue and sale of, any shares of its
capital stock or any other securities, (j) refrain from selling, leasing or
otherwise disposing of any material asset or property, (k) refrain from making
any capital expenditure or commitment therefor, except in the ordinary course of
business or as permitted hereunder, (l) refrain from writing off as
uncollectable any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material, and (m) refrain from agreeing to
do any of the foregoing; except that RSA Communications may grant additional RSA
Units such that the total number of RSA Units will not exceed 6,000 at the
Effective Time.
5.6 Exclusive Dealing. Prior to the earlier of the Closing Date or, if
this Agreement is terminated pursuant to Section 10, the date of such
termination, neither RSA Communications, Stockholder, any director, officer,
employee, agent or representative of RSA Communications, nor any agent or
representative of Stockholder, will enter into any agreement, understanding or
arrangement, or engage in any discussion or negotiations, relating to any
Acquisition Proposal, or solicit or encourage the submission of any Acquisition
Proposal. RSA Communications and Stockholder shall promptly notify Virata in
writing of the receipt of any unsolicited Acquisition Proposal. The term
"Acquisition Proposal" refers to any proposal, plan, agreement, understanding or
arrangement contemplating (a) any merger, consolidation, reorganization,
recapitalization or similar transaction involving RSA Communications, (b) any
transfer or issuance of any capital stock or other securities of RSA
Communications, or (c) any transfer of any material asset of RSA Communications.
5.7 Commercially Reasonable Efforts. Prior to the Closing Date, Virata,
on the one hand, and RSA Communications and Stockholder, on the other hand,
shall cooperate and use their respective commercially reasonable efforts to
take, or cause to be taken, all appropriate actions and to make, or cause to be
made, all filings necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, their respective commercially
reasonable
24
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties as are
necessary for consummation of the transactions contemplated by the Agreement and
to fulfill the conditions to the sale contemplated hereby.
5.8 Taxes.
(a) (i) Virata shall have the exclusive authority and obligation
and shall be responsible for the correct and timely filing of all Tax Returns of
RSA Communications that relate to all Taxes for all periods ending on or prior
to the Closing Date ("Pre-Closing Tax Periods") and that are due after the
Closing Date. Virata shall provide Stockholder with drafts of any Tax Returns of
RSA Communications not filed by the Closing Date at least 20 days prior to the
due date for filing such Tax Returns, and such Tax Returns shall not be filed
without the prior written consent of Stockholder, which consent shall not be
unreasonably withheld or delayed.
(ii) Virata shall have the exclusive authority and obligation
and shall be responsible for the correct and timely filing of all Tax Returns of
the Surviving Corporation for all periods beginning after the Closing Date
("Post-Closing Tax Periods").
(b) (i) If there is an adjustment for any Pre-Closing Tax Period or
any portion of any Straddle Period that ends on or before the date of this
Agreement, which adjustment results in an increase in Taxes for such period
above the amount of Taxes reflected in a reserve for Tax liabilities (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the most recent balance sheet of RSA
Communications for periods prior to the date of this Agreement, then such
increase shall be subject to a claim for indemnification by Virata under Article
IX of this Agreement. However, notwithstanding the foregoing, Virata shall not
be entitled to make any claim for any increase in Taxes to the extent such
increase (above any reserve) arises from underpayment of estimated taxes for
fiscal year 1998 due to an inability of RSA to deduct in tax returns for such
period compensation payments accrued but not paid as of March 31, 1998, provided
that such accrued compensation payments are deductible in the next succeeding
tax year. Virata shall be responsible and liable for the timely payment of all
Taxes imposed on or with respect to the properties, income and operations of the
Surviving Corporation for all Post-Closing Tax Periods and those portions of any
Straddle Period beginning after the date of this Agreement.
(ii) If there is an adjustment for any Pre-Closing Period or any
portion of any Straddle Period that ends on or before the date of this
Agreement, which adjustment results in a decrease in Taxes for such period, then
such decrease, together with any interest payable thereon, shall reduce and
offset dollar for dollar any liability, whether or not yet paid, of the
Stockholder and the holders of the RSA Units for indemnification under Article
IX of this Agreement.
(c) (i) Stockholder, at its sole expense, shall have the exclusive
authority to represent the Surviving Corporation before any taxing authority or
any court regarding the Tax consequences of the operations of RSA Communications
for all Pre-Closing Tax Periods, including initiating any claim for refund for
any Tax, and Virata shall give Stockholder timely
25
notice of the pendency of any such proceeding and shall give Stockholder or
Stockholder's designated representatives all necessary and appropriate powers of
attorney to represent the Surviving Corporation in such proceedings; provided,
--------
however, that Stockholder shall not enter into any settlement of any contest or
-------
otherwise compromise any issue that affects or may affect the Tax liability of
the Surviving Corporation for any Straddle Period or Post-Closing Tax Period
without the prior written consent of Virata. Stockholder shall keep Virata fully
and timely informed with respect to the commencement, status and nature of any
administrative or judicial proceedings involving any Tax liability of the
Surviving Corporation for all Pre-Closing Tax Periods.
(ii) Except as provided in the foregoing paragraph (i), Virata
shall have the sole right to control any audit or examination by any taxing
authority, initiate any claim for refund or amend any Tax Return, and contest,
resolve and defend against any assessment for additional Taxes, notice of Tax
deficiency or other adjustment of Taxes of, or relating to, the Surviving
Corporation.
(d) Virata and the Surviving Corporation will cooperate with
Stockholder in complying with the reporting requirements contained in Treasury
Regulation Section 1.367(a)-3(c)(6).
5.9 Compliance with Rule 144. If Virata or Acquisition Sub shall become
subject to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, Virata or Acquisition Sub, as the case may be, shall use its reasonable
efforts to comply with the provisions of Rule 144 such that Stockholder can sell
his Virata Ordinary Shares under Rule 144 prior to the expiration of the holding
period described in Rule 144(k).
5.10 Further Assurances; Supplementary Action. Virata, on the one hand,
and RSA Communications and Stockholder, on the other hand, at their sole cost
and expense, will do such further acts and execute and deliver such further
documents as the other parties may reasonably require solely for the purpose of
assuring and confirming unto each party (i) the rights created hereby or
intended now or hereafter so to be created by this Agreement or (ii) the
validity of any documents of conveyance to be delivered hereunder.
5.11 Registration Rights. In the event that any holder of the Ordinary
Shares acquired upon exercise of the Virata Acquisition Options ( the
"Registrable Shares") is not permitted to sell his or her Registrable Shares
under Rule 701 promulgated under the Securities Act, Virata shall be required to
register the Registrable Shares on Form S-8 concurrently with the registration
on Form S-8 of the Virata Stock Incentive Plan.
ARTICLE VI
CONDITIONS TO VIRATA'S AND ACQUISITION SUB'S OBLIGATIONS
The obligation of Virata and Acquisition Sub to consummate the transactions
contemplated by this Agreement is conditioned upon satisfaction by RSA
Communications and Stockholder, prior to or on the Closing Date, of the
following conditions precedent and concurrent:
26
6.1 [Intentionally Omitted]
6.2 [Intentionally Omitted]
6.3 Virata Option Agreement and RSA Unit Amendment. Each holder of RSA
Units shall execute and deliver a Virata Nonqualified Stock Option Agreement
representing his or her Virata Acquisition Option and an RSA Unit Amendment.
6.4 Escrow Agreement. Stockholder, individually and in his capacity as
the representative of the holders of the RSA Units, shall execute and deliver
the Escrow Agreement.
6.5 Employment Agreements. Each of Xxxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxx
Xxxxxxx and Xxxxx Xxxxxxxx shall execute and deliver an employment agreement
with Acquisition Sub substantially in the form attached hereto as Exhibit E-1
-----------
(the "Employment Agreements").
6.6 Proceedings. All corporate and other proceedings in connection with
the transactions contemplated hereby shall have been taken by RSA Communications
and Stockholder and shall be satisfactory to Virata in its sole discretion.
6.7 PCSI Release. Each of PCSI and Cirrus Logic shall execute and deliver
to Virata, Acquisition Sub and RSA Communications the PCSI Release.
6.8 [Intentionally Omitted]
6.9 Stockholders, Third Party and Governmental Consents. The stockholders
of Virata shall approve this Agreement. Any consents, approvals or waivers
disclosed on any Schedule attached hereto or required in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, all consents, approvals, authorizations, exemptions and
waivers from governmental agencies, shall be obtained by Virata, RSA
Communications and Stockholder.
6.10 Opinion of Counsel. Virata and Acquisition Sub shall receive an
opinion of Hunton & Xxxxxxxx, counsel to RSA Communications and Stockholder,
dated as of the date of the Closing Date, substantially in the form attached
hereto as Exhibit F.
---------
6.11 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of Virata, RSA Communications or Stockholder,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated hereby.
6.12 Certificate; Good Standings; Secretary's Certificate. Virata and
Acquisition Sub shall receive (a) copies of the Certificate of Incorporation of
RSA Communications, including all amendments thereto, certified by the Secretary
of State of Delaware, (b) a certificate from the Secretary of State of Delaware
to the effect that RSA Communications is in good standing, has paid all
franchise taxes assessed to date and listing all charter documents of RSA
27
Communications on file, (c) a certificate from the Secretary of State or other
appropriate official of North Carolina and each other State in which RSA
Communications is qualified to do business to the effect that RSA Communications
is in good standing in such State and has paid all applicable taxes assessed to
date, (d) a copy of the Bylaws of RSA Communications, certified by the Secretary
of RSA Communications as being true and correct and in effect, and (e) copies of
the resolutions of the Board of Directors and Stockholder of RSA Communications
approving this Agreement, certified by the Secretary of RSA Communications as
being true and correct and in effect.
6.13 Stockholder's and Officers' Certificate. The representations and
warranties of RSA Communications and Stockholder contained in this Agreement
(including the Schedules and Exhibits) and any agreement, document or other
instrument delivered to Virata or Acquisition Sub in connection herewith shall
be true and correct in all respects on the Closing Date as if they had been made
on the Closing Date. RSA Communications and Stockholder shall perform and
comply with each agreement, covenant and obligation required to be performed or
complied with by RSA Communications or Stockholder under this Agreement prior to
or on the Closing Date. Virata and Acquisition Sub shall receive a certificate
executed by the President and Treasurer of RSA Communications and a certificate
executed by Stockholder to the effect of the immediately foregoing sentences.
6.14 Financial Statements. Virata shall not have exercised its right to
terminate this agreement under Section 1.10(a).
ARTICLE VII
CONDITIONS TO RSA COMMUNICATIONS'
AND STOCKHOLDER'S OBLIGATIONS
The obligations of RSA Communications and Stockholder to consummate the
transactions contemplated by this Agreement are conditioned upon satisfaction by
Virata, prior to or on the Closing Date, of the following conditions precedent
and concurrent:
7.1 Audited Financial Statements. Virata shall have the Financial
Statements audited by the Accountants and shall deliver the Audited Financial
Statements to Stockholder.
7.2 Proceedings. All corporate and other proceedings in connection with
the transactions contemplated hereby shall have been taken by Virata and
Acquisition Sub and shall be satisfactory to RSA Communications and Stockholder
in their sole discretion.
7.3 Third Party and Governmental Consents. Any consents, approvals or
waivers disclosed on any Schedule attached hereto or required in connection with
the consummation of the transactions contemplated by this Agreement, including,
without limitation, all consents, approvals, authorizations, exemptions and
waivers from governmental agencies, shall be obtained by Virata, RSA
Communications and Stockholder.
28
7.4 Opinion of Counsel. RSA Communications and Stockholder shall receive
an opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to Virata and Acquisition
Sub, dated as of the date of the Closing Date, substantially in the form
attached hereto as Exhibit G.
---------
7.5 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the knowledge of Virata, Stockholder or RSA Communications,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated hereby.
7.6 Certificate; Good Standings; Secretary's Certificate. RSA
Communications and Stockholder shall receive (a) copies of the Certificate of
Incorporation of Virata, including all amendments thereto, certified by the
appropriate governmental agency of the United Kingdom, (b) a copy of the Bylaws
of Virata, certified by the Secretary of Virata as being true and correct and in
effect, and (c) copies of the resolutions of the Boards of Directors and
stockholders of Virata and Acquisition Sub approving this Agreement, certified
by the Secretary of Virata as being true and correct and in effect.
7.8 Officers' Certificate. The representations and warranties of Virata
contained in this Agreement (including the Schedules and Exhibits) and any
agreement, document or other instrument delivered to Virata in connection
herewith shall be true and correct in all respects on the Closing Date as if
they had been made on the Closing Date. Virata shall perform and comply with
each agreement, covenant and obligation required to be performed or complied
with by Virata under this Agreement prior to or on the Closing Date. RSA
Communications and Stockholder shall receive a certificate executed by the Chief
Executive Officer and Chief Financial Officer of Virata to the effect of the
immediately foregoing sentences.
7.9 Agreement to Sell Stockholder's Series D Shares. Stockholder shall
have entered into agreement(s) ("Series D Agreement(s)") to sell the Series D
Shares received by Stockholder pursuant to Section 1.5(a), which Series D
Agreement(s) shall contain no substantial conditions other than (1) the Closing
of the transactions contemplated by this Agreement and (2) the closing of the
transactions contemplated by the Series D Agreement(s) to take place
concurrently with the Closing. The Closing of the transactions contemplated by
the Series D Agreement(s) shall take place concurrently with the Closing. The
purchaser(s) of the Series D Shares pursuant to the Series D Agreement(s) shall
be subject to Virata's approval (evidenced by acknowledgment at the Closing),
and Virata shall indemnify and hold Stockholder harmless for any cost, expense
or liability to such purchaser(s) arising from such sale(s), such as claims
arising under federal or state securities laws, other than claims resulting from
Stockholder's breach of any representation regarding Stockholder's execution and
delivery of the Series D Agreement(s), his title and right to sell the Series D
Shares and the absence of encumbrances on such shares created by or through
Stockholder, or Stockholder's failure to deliver the Series D Shares as required
by the Series D Agreement(s). Any representations to be made by Stockholder in
a Series D Agreement that would be within the scope of Virata's indemnification
obligation are subject to Virata's consent to inclusion, which consent will not
be unreasonably withheld.
29
7.10 Virata Option Agreement. Acquisition Sub shall execute and deliver a
Virata Nonqualified Stock Option Agreement to each holder of RSA Units.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS
The respective representations and warranties of RSA Communications and
Stockholder, on the one hand, and Virata, on the other hand, contained in
Article II and Article IV, respectively, of this Agreement shall survive the
Closing for a period of one year from the Closing Date; provided, however, that
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the representations and warranties of RSA Communications and Stockholder
contained in Section 2.16 with respect to Taxes shall survive until 30 days
after the expiration of the applicable statute of limitations period. The
representations and warranties of Stockholder contained in Article III of this
Agreement shall survive the Closing for an indefinite period.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
(a) Stockholder, individually and in his capacity as the
representative of the holders of the RSA Units, jointly and severally subject to
the allocation provisions set forth herein, hereby agrees to indemnify and hold
Virata, Acquisition Sub and their respective officers, directors, employees,
subsidiaries, Affiliates, successors, representatives and agents harmless from:
(i) Damages, losses, costs or expenses (including, without
limitation, reasonable attorneys' fees and expenses) ("Damages") incurred or
suffered as a result of or arising out of the failure of any representation or
warranty made by RSA Communications and Stockholder pursuant to this Agreement
to be true and correct;
(ii) Damages arising out of or related to the breach of any
covenant of RSA Communications or Stockholder in this Agreement; and
(iii) Damages arising out of or related to any Taxes
attributable to Pre-Closing Tax Periods in excess of any provision for Taxes set
forth in the Financial Statements, or except as otherwise provided in Section
5.8(b) ("Pre-Closing Taxes").
(b) Virata hereby agrees to indemnify and hold RSA Communications
and Stockholder and their officers, directors, employees, subsidiaries,
Affiliates, successors, representatives and agents harmless from:
(i) Damages incurred or suffered as a result of or arising
out of the failure of any representation or warranty made by Virata pursuant to
this Agreement to be true and correct;
30
(ii) Damages arising out of or related to the breach of any
covenant of Virata in this Agreement;
(iii) Damages arising out of or related to any Taxes
attributable to Post-Closing Tax Periods ("Post-Closing Taxes"); and
(iv) Claims for broker's or selling agent's commissions with
respect to transactions for the sale of Stockholder's Series D Shares under
Section 7.9.
9.2 Indemnification Procedure.
(a) Notice. Any party seeking indemnification (the "Indemnified
Party") from another party or parties (individually or collectively, the
"Indemnifying Party") with respect to any claim, demand, action, proceeding or
other matter pursuant to this Agreement (the "Claim") shall promptly notify the
Indemnifying Party in writing of the existence of the Claim, setting forth in
reasonable detail the facts and circumstances pertaining thereto, an estimate of
the amount then reasonably ascertainable of the alleged loss, expense or
liability against which the party is indemnified and the basis for the
Indemnified Party's right to indemnification.
(b) Third Party Claims. If any third party shall notify an
Indemnified Party with respect to any matter which may give rise to a Claim for
indemnification against the Indemnifying Party under this Agreement, then the
Indemnified Party shall promptly notify the Indemnifying Party thereof pursuant
to Section 9.2(a); provided, however, that no delay on the part of the
-------- -------
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any liability or obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is materially prejudiced by
such failure to give notice. If the Indemnifying Party notifies the Indemnified
Party within 30 days that it will assume the defense thereof:
(i) the Indemnifying Party shall defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party;
(ii) the Indemnified Party may retain separate counsel at its
sole cost and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate counsel to the extent the Indemnified
Party concludes based upon advice of counsel that a conflict of interest exists
between the Indemnified Party and Indemnifying Party that there may be one or
more legal defenses available to the Indemnified Party which are not available
to the Indemnifying Party, or available to the Indemnifying Party, but the
assertion of which would be adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter if such
judgment or settlement involves injunctive relief against, or an admission of
wrongdoing affecting, or any economic detriment to, the Indemnifying Party
without the written consent of the Indemnifying Party (not to be withheld
unreasonably); and
31
(iv) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably).
If the Indemnifying Party does not notify the Indemnified Party within 30 days
that it will assume the defense thereof, then the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate, without prejudice to any of its rights
hereunder. The Indemnified Party shall be entitled to reimbursement of
reasonable expenses included in Damages with respect to any Claim (including,
without limitation, the cost of defense, preparation and investigation relating
to such Claim) as such expenses are incurred by the Indemnified Party.
(c) Indemnified Party Claims. Claims asserted directly by the
Indemnified Party, rather than indirectly as a result of a claim against the
Indemnified Party by a third party, shall be resolved as follows:
(i) In the event that Indemnifying Party does not contest in
writing the Claim asserted in any notice delivered by the Indemnified Party to
the Indemnifying Party within 30 days of receipt of such notice, then such Claim
shall be deemed accepted and the amount of such Claim shall be paid to the
Indemnified Party within 30 days of the date of deemed acceptance; and
(ii) In the event that the Indemnifying Party contests in
writing the Claims asserted in any notice delivered by the Indemnified Party to
the Indemnifying Party within 30 days of receipt of such notice, then such Claim
shall be deemed contested and the parties, acting in good faith, shall attempt
to reach an agreement with respect to such Claim within 30 days of the date of
the deemed contest; if the parties cannot reach an agreement with respect to
such Claim within such 30-day period, then the Indemnified Party may seek any
remedy available its at law or in equity.
9.3 Limitations on Indemnification. No claim for indemnification may be
made after the Closing by the Indemnified Party unless the aggregate amount of
all losses resulting from Claims incurred by the Indemnified Party and otherwise
indemnified against hereunder exceeds $75,000, in which case the Indemnified
Party shall indemnify the Indemnified Party only to the extent such losses
exceed $75,000. All claims against the Escrow Account shall be allocable one-
half to Stockholder individually and one-half to the holders of the RSA Units
(as a group). The provisions for indemnification set forth in this Article IX
shall be the sole right and remedy of the parties for any and all Claims that
the parties hereto may have against one another hereunder or otherwise arising
under this Agreement or any agreement, document or instrument delivered
hereunder. The obligation of the Stockholder, individually and in his capacity
as representative of the holders of the RSA Units, to indemnify an Indemnified
Party hereunder in respect of any Claim shall be satisfied first from the Escrow
Account, to the extent that there are sufficient funds in the Escrow Account to
satisfy such Claim, and second directly by Stockholder (in which case,
Stockholder shall be obligated to pay
32
at least 55% of such Claim in cash, and the remainder may be satisfied by
returning the number of Virata Ordinary Shares (valued at the lesser of $0.70
per share or the fair market value of such Virata Ordinary Shares as determined
in good faith by Virata's Board of Directors) owned by Stockholder necessary to
satisfy the remainder of such Claim). Notwithstanding anything to the contrary
contained herein, the liability of Stockholder, individually and in his capacity
as representative of the holders of the RSA units, to any Indemnified Party in
respect of any and all Claims shall not exceed the sum of the entire amount of
Stockholder's consideration deposited into the Escrow Account and the other
consideration paid to Stockholder pursuant to Section 1.5(a) above, and the
liability of the holders of the RSA Units to any Indemnified Party in respect of
any and all Claims shall not exceed the entire amount of the RSA Unit holders'
consideration deposited into the Escrow Account. Notwithstanding anything to the
contrary contained herein, the liability of Virata to any Indemnified Party in
respect of any Claims shall not exceed the value (measured as of the Closing
Date) of the Virata Shares or Virata Acquisition Options received by such
Indemnified Party pursuant to Section 1.5 above, and the liability of Virata to
all Indemnified Parties in respect of all Claims shall not exceed the value
(measured as of the Closing Date) of the Virata Shares and Virata Acquisition
Options delivered by Virata pursuant to Section 1.5 above.
ARTICLE X
TERMINATION
This Agreement may be terminated at any time prior to the Closing only as
follows:
10.1 Mutual Consent. By the mutual consent of the Boards of Directors of
Virata, Acquisition Sub and RSA Communications and Stockholder.
10.2 Failure to Close. By any of the Boards of Directors of Virata,
Acquisition Sub, or RSA Communications or Stockholder if the Closing shall not
have occurred by the close of business on July 15, 1998; provided, however, that
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no party shall be permitted to terminate this Agreement under this Section 10.2
if the Closing shall not have occurred by such date as a result of such party's
breach of any representation, warranty, agreement or covenant contained herein.
10.3 By Virata and Acquisition Sub. By the Boards of Directors of Virata
and Acquisition Sub (a) at any time prior to June 12, 1998, if the results of
its due diligence examination of RSA Communications are not satisfactory to
Virata in its sole discretion, (b) upon the failure of any representation or
warranty made by RSA Communications and Stockholder pursuant to this Agreement,
(c) upon the breach of any covenant of RSA Communications or Stockholder in this
Agreement, (d) upon the default by RSA Communications or Stockholder in the
performance of any of their respective obligations hereunder or (e) upon the
fulfillment of the conditions set forth in Sections 1.10(a).
10.4 By RSA Communications and Stockholder. By the Board of Directors of
RSA Communications and Stockholder (a) at any time prior to June 15, 1998, if
the results of their due diligence examination of Virata are not satisfactory to
RSA Communications and Stockholder in their sole discretion, (b) upon the
failure of any representation or warranty made by Virata
33
pursuant to this Agreement, (c) upon the breach of any covenant of Virata in
this Agreement or (d) upon the default by Virata in the performance of any of
its obligations hereunder.
No termination of this Agreement under this Article X for any reason or in any
manner shall release any party hereto from its obligations pursuant to Section
11.13 hereof or from any liability or damage to the other parties hereto arising
out of or otherwise relating to any failure, breach or default by such party of
its representations and warranties, covenants or obligations hereunder, which
shall be limited to the non-breaching party's out of pocket expenses, including
reasonable attorneys' fees.
ARTICLE XI
MISCELLANEOUS
11.1 Knowledge. "To the knowledge of" a party and similar phrases means
to the knowledge of the party, after due inquiry of appropriate authorities and
of officers, directors, employees and other representatives of the party and
each of its predecessors and each of the subsidiaries and Affiliates of such
party and its predecessors.
11.2 Expenses. Each party shall bear its own expenses (including without
limitation its attorneys fees) in connection with the transactions contemplated
hereby regardless of whether such transactions are consummated; provided,
--------
however, that the fees and expenses of the Escrow Agent shall be borne by
-------
Virata, and that Stockholder, not the Surviving Corporation, agrees that
Stockholder shall be liable for any expenses of RSA Communications (including
without limitation its attorneys fees) in connection with the transactions
contemplated hereby; and provided, further, that Virata shall pay the first
-------- -------
$50,000 in legal expenses of Stockholder and RSA Communications relating to the
transactions contemplated hereby and Stockholder shall pay such legal expenses
of Stockholder and RSA Communications exceeding such amount. Notwithstanding
the above sentence, in the event that there are sufficient claims by Virata such
that any payments are made to Virata from the Escrow Account, then all fees and
expenses of the Escrow Agent shall be borne equally by Stockholder and the
holders of the RSA Units in accordance with the terms of the Escrow Agreement.
11.3 Governing Law. The interpretation and construction of this Agreement
and all matters relating hereto shall be governed by the laws of the State of
Delaware applicable to agreements executed and to be performed solely within
such State.
11.4 Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.5 Notices. Any notice or other communication required or permitted
under this Agreement shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail; postage prepaid, addressed as
follows:
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if to Virata or: Virata Limited
Acquisition Sub Mount Pleasant House
2 Xxxxx Xxxxxxxx
Xxxxxxxxxx Xxxx
Xxxxxxxxx XX0 0XX
Facsimile Number 44-1223-516-810
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
3100 Telesis Tower
Xxx Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Facsimile Number 000-000-0000
Attention: Xxxxxxx X. Xxxxx
if to RSA Communications: RSA Communication, Inc.
or Stockholder 000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Facsimile Number 000-000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to: Hunton & Xxxxxxxx
One Hannover Square
Xxxxxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile Number 000-000-0000
Attention: Xxxxxxx Xxxxxxx
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given as of
the date so delivered or sent by facsimile or on the fourth business day after
deposit in the U.S. mail.
11.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
11.8 Counterparts. This Agreement may be executed in counterparts, all of
which taken together shall constitute one instrument.
11.9 Entire Agreement. This Agreement, including the other documents
referred to herein and therein which form a part hereof and thereof, contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
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11.10 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by Virata, Acquisition Sub, RSA Communications
and Stockholder.
11.11 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
11.12 Third Party Beneficiaries. Except as specifically set forth in
Section 9.1, each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person other than the
parties hereto.
11.13. Confidentiality. Confidential, financial or proprietary
information disclosed by any party under this Agreement, as well as the
existence and terms of this Agreement, shall be considered confidential
information (the "Confidential Information") and shall not be disclosed by any
party hereto to any third party. Any party shall immediately notify the
affected party of any information that comes to its attention which might
indicate that there has been a loss of confidentiality with respect to the
Confidential Information. In the event that a party is requested or becomes
legally compelled (by statute, regulation or court order) to disclose any
Confidential Information, such party (the "Disclosing Party") shall provide the
affected party (the "Non-Disclosing Party") with prompt written notice of that
fact so that the other party may seek (with the cooperation and reasonable
efforts of the Disclosing Party) a protective order, confidential treatment or
other appropriate remedy. In such event, the Disclosing Party shall furnish
only that portion of the Confidential Information which is legally required and
shall exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Confidential Information to the extent reasonably
requested by the Non-Disclosing Party. The provisions of this Section 11.13
shall be in addition to, and not in substitution for, the provisions of any
separate confidentiality agreement executed by the parties hereto with respect
to the transaction contemplated hereby. Notwithstanding the provisions of this
Section 11.13 above, the parties may disclose their investment in Virata or the
Surviving Corporation, as the case may be, solely to their investors, lenders,
accountants, legal counsel or similar persons, in each case only where such
persons or entities have executed appropriate nondisclosure agreements. None of
the parties hereto shall issue or authorize the issuance of any press release or
make any other public announcement as to this Agreement or the transactions
contemplated hereby without obtaining the prior approval of the other parties
hereto and affording such parties the prior opportunity to review such release
or announcement.
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IN WITNESS WHEREOF, this Agreement has been duly executed by each of the
parties hereto as of the day and year first above written.
VIRATA LIMITED
By: /s/
--------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------
Title: President and CEO
-----------------------------------
By: /s/
--------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: Chief Financial Officer
-----------------------------------
VIRATA ACQUISITION SUB, INC.
By: /s/
--------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------
Title: President and CEO
-----------------------------------
By: /s/
--------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: Chief Financial Officer
-----------------------------------
RSA COMMUNICATIONS, INC.
By: /s/
--------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
By: /s/
--------------------------------------
Name: Xxxxx Xxxxxx
Title: Treasurer and Secretary
XXXXXXX XXXXXX
/s/
-----------------------------------------
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