EXHIBIT
SECURITIES PURCHASE AGREEMENT
by and among
Paradigm Technology, Inc.,
NewLogic Corp.,
and Certain Securityholders of NewLogic Corp.
dated as of
April 22, 1996
TABLE OF CONTENTS
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ARTICLE I PURCHASE, SALE AND SURRENDER OF SECURITIES...........................................1
1.1 Purchase, Sale and Surrender of Securities...........................................1
1.2 The Agreement of Merger..............................................................1
1.3 Purchase Price.......................................................................2
1.4 Other NewLogic Securities............................................................3
ARTICLE II POST-CLOSING CONSIDERATION...........................................................3
2.1 Post-Closing Consideration...........................................................3
2.2 Determination of Amount..............................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEWLOGIC...........................................4
3.1 Organization, Standing and Power.....................................................5
3.2 Capital Structure....................................................................5
3.3 Subsidiaries.........................................................................7
3.4 Authority............................................................................7
3.5 Financial Statements.................................................................8
3.6 Payables; Receivables................................................................8
3.7 Compliance with Laws.................................................................9
3.8 No Defaults..........................................................................9
3.9 Litigation......................................................................... 10
3.10 Conduct in the Ordinary Course..................................................... 10
3.11 Absence of Undisclosed Liabilities................................................. 12
3.12 Documents and Information Supplied................................................. 12
3.13 Certain Agreements................................................................. 12
3.14 Plans.............................................................................. 12
3.15 Major Contracts.................................................................... 13
3.16 Taxes.............................................................................. 15
3.17 Intellectual Property.............................................................. 16
3.18 Service Provider Agreements........................................................ 19
3.19 Restrictions on Business Activities................................................ 19
3.20 Title to Properties; Absence of Liens and
Encumbrances; Condition of Equipment............................................... 19
3.21 Environmental Matters.............................................................. 19
3.22 Insurance.......................................................................... 20
3.23 Labor Matters...................................................................... 20
3.24 Personnel.......................................................................... 20
3.25 Third-Party Consents............................................................... 21
3.26 Related Party Transactions......................................................... 21
3.27 Brokers or Finders; Professional Fees.............................................. 21
3.28 Permit Application................................................................. 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS.................................. 22
4.1 Authority.......................................................................... 22
4.2 Title to Securities................................................................ 23
4.3 Third-Party Consents............................................................... 23
4.4 Brokers or Finders; Professional Fees.............................................. 23
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARADIGM......................................... 23
5.1 Organization; Standing and Power................................................... 23
5.2 Authority.......................................................................... 24
5.3 Paradigm Financial Statements...................................................... 25
5.4 Litigation......................................................................... 25
5.5 Reports............................................................................ 25
5.6 Compliance with Laws............................................................... 25
5.7 Material Contracts................................................................. 26
5.8 Taxes.............................................................................. 26
5.9 Restrictions on Business Activities................................................ 26
5.10 Governmental Authorizations and Licenses........................................... 26
5.11 Environmental Matters.............................................................. 27
5.12 Questionable Payments.............................................................. 27
5.13 Brokers or Finders; Professional Fees.............................................. 27
5.14 Permit Application................................................................. 28
5.15 Section 368(a) Reorganization...................................................... 28
ARTICLE VI COVENANTS OF NEWLOGIC.............................................................. 28
6.1 Maintenance of Business............................................................ 28
6.2 Conduct of Business................................................................ 28
6.3 Necessary Consents................................................................. 29
6.4 Access to Information.............................................................. 30
6.5 Further Assurances................................................................. 30
6.6 Exclusivity; Acquisition Proposals................................................. 30
6.7 Breach of Representations, Warranties,
Agreements and Covenants........................................................... 31
6.8 Legal Conditions to the Sale or Surrender
of the Securities.................................................................. 31
6.9 Post-Closing Covenants............................................................. 32
6.10 Public Announcements............................................................... 33
ARTICLE VII COVENANTS OF PARADIGM.............................................................. 33
7.1 Necessary Consents................................................................. 33
7.2 Access to Information.............................................................. 33
7.3 Further Assurances................................................................. 34
7.4 Public Announcements............................................................... 34
7.5 Breach of Representations, Warranties,
Agreements and Covenants........................................................... 34
7.6 Legal Conditions to the Sale of the
Securities......................................................................... 34
7.7 3(a)(10) Fairness Hearing.......................................................... 35
7.8 Listing of Shares.................................................................. 35
ARTICLE VIII COVENANTS OF SECURITYHOLDERS....................................................... 35
8.1 Necessary Consents................................................................. 35
8.2 Further Assurances................................................................. 35
8.3 No Transfer........................................................................ 36
8.4 Breach of Representations Warranties,
Agreements and Covenants........................................................... 36
8.5 Limited Resales.................................................................... 36
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ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF
PARADIGM........................................................................... 36
9.1 Certificates for Securities........................................................ 36
9.2 Representations and Warranties True................................................ 37
9.3 Covenants Performed................................................................ 37
9.4 Certificates....................................................................... 37
9.5 Opinion of Counsel for NewLogic.................................................... 37
9.6 No Violations; No Actions.......................................................... 37
9.7 No Material Adverse Effect......................................................... 37
9.8 Proceedings and Documents.......................................................... 37
9.9 Schedules.......................................................................... 37
9.10 Required Consents.................................................................. 38
9.11 Accountants' Opinion............................................................... 38
9.12 Employment, Noncompetition and Proprietary
Information Agreements............................................................. 38
9.13 Tax Forms.......................................................................... 38
9.14 Signature Pages.................................................................... 38
9.15 Other Purchase Agreements.......................................................... 39
9.16 Securities Laws.................................................................... 39
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF
NEWLOGIC AND OF THE SECURITYHOLDERS................................................ 39
10.1 Representations and Warranties True................................................ 39
10.2 Covenants Performed................................................................ 39
10.3 No Violations; No Actions.......................................................... 39
10.4 Proceedings and Documents.......................................................... 40
10.5 Required Consents.................................................................. 40
10.6 Certificate........................................................................ 40
10.7 Opinion of Counsel for Paradigm.................................................... 40
10.8 Tax Opinion........................................................................ 40
10.9 3(a)(10) Fairness Hearing.......................................................... 40
10.10 Accountants' Opinion............................................................... 40
ARTICLE XI CLOSING............................................................................ 41
11.1 Time and Place..................................................................... 41
11.2 Deliveries of NewLogic or the
Securityholders.................................................................... 41
(a) Certificates and Instruments............................................ 41
(b) Corporate Documents..................................................... 41
(c) Certificates of Good Standing and
Qualification........................................................... 41
(d) Resolutions............................................................. 41
(e) Books and Records....................................................... 41
(f) Consents................................................................ 41
(g) Opinion of Counsel...................................................... 41
(h) NewLogic Certificate.................................................... 42
(i) FIRPTA.................................................................. 42
(j) Other Documents......................................................... 42
(k) Option Exercise Price................................................... 42
11.3 Deliveries of Paradigm............................................................. 42
(a) Payment of the Consideration............................................ 42
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(b) Resolutions............................................................. 42
(c) Consents................................................................ 42
(d) Opinion of Counsel...................................................... 42
(e) Paradigm Certificate.................................................... 42
(f) 3(a)(10) Permit......................................................... 43
(g) Other Documents......................................................... 43
ARTICLE XII COVENANT OF SETTLEMENT AND GENERAL RELEASE......................................... 43
12.1 Settlement and General Release of the
Paradigm Released Parties.......................................................... 43
12.2 Settlement and General Release of the
Securityholders Released Parties................................................... 45
ARTICLE XIII INDEMNIFICATION.................................................................... 46
13.1 Survival of Representations, Warranties,
Covenants and Agreements........................................................... 46
13.2 Indemnification.................................................................... 47
13.3 Procedure for Indemnification with Respect
to Third-Party Claims.............................................................. 49
13.4 Procedure For Indemnification with Respect
to Non-Third Party Claims.......................................................... 50
ARTICLE XIV TERMINATION........................................................................ 51
14.1 Termination........................................................................ 51
14.2 Breakup Fee........................................................................ 53
14.3 Bridge Loan........................................................................ 53
ARTICLE XV MISCELLANEOUS PROVISIONS........................................................... 53
15.1 Notice............................................................................. 53
15.2 Entire Agreement................................................................... 54
15.3 Binding Effect; Assignment......................................................... 54
15.4 Expenses of Transaction............................................................ 54
15.5 Waiver; Consent.................................................................... 54
15.6 Third-Party Beneficiaries.......................................................... 55
15.7 Counterparts....................................................................... 55
15.8 Severability....................................................................... 55
15.9 Governing Law...................................................................... 55
15.10 Other Remedies..................................................................... 55
15.11 Mutual Drafting.................................................................... 55
15.12 Tax Matters........................................................................ 55
Schedules
A Schedule of Securityholders
1.3(a) Payments to Securityholders
1.4 Other NewLogic Securityholders
2.1 Post Closing Consideration Table
2.2 NewLogic Products
3.2 NewLogic Stock Ledger
11.2(k) Option Exercise Payments
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Exhibits
1.2 Agreement of Merger
1.3(b) Escrow Agreement
9.5 Form of BP&H Opinion
9.12(a) Form of Employment Letter Agreement
9.12(b) Form of Non-Competition Agreement
9.12(c) Form of Proprietary Information Agreement
10.7 Form of PM&S Opinion
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of this
22nd day of April, 1996, by and among PARADIGM TECHNOLOGY, INC., a Delaware
corporation ("Paradigm"), NEWLOGIC CORP., a Delaware corporation ("NewLogic"),
and the securityholders of NewLogic listed on Schedule A to this Agreement who
have executed and delivered a signature page to this Agreement (collectively,
the "Securityholders"),
W I T N E S S E T H:
WHEREAS, Paradigm desires to acquire NewLogic in a transaction intended
to qualify as a tax-free reorganization pursuant to section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), pursuant to which NewLogic will
merge with and into Paradigm, and Paradigm will receive all of the capital stock
of NewLogic, as the surviving entity of the Merger; and
WHEREAS, in furtherance thereof, Paradigm will pay to each
Securityholder shares of Common Stock of Paradigm for their securities or for
the surrender of their securities and, as an inducement to certain
Securityholders to enter into this Agreement, certain of these Securityholders
shall be entitled to receive additional consideration after the Closing:
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE, SALE AND SURRENDER OF SECURITIES
1.1 Purchase, Sale and Surrender of Securities. Upon the terms and
subject to the conditions of this Agreement, the Securityholders shall sell to
Paradigm and Paradigm shall purchase from the Securityholders all of the shares
of capital stock of NewLogic held by the Securityholders, and the
Securityholders shall surrender all unexercised options and other rights to
purchase such shares held by the Securityholders (collectively, the
"Securities") at the Closing (as defined in Section 11.1 hereof).
1.2 The Agreement of Merger. At the Closing, NewLogic shall be merged
with and into Paradigm by a statutory merger (the "Merger") in accordance with
the Delaware General Corporation Law ("Corporation Law") on the terms and
subject to the conditions set forth herein and pursuant to an agreement of
merger in the form attached hereto as Exhibit 1.2 (the "Agreement of Merger").
The Agreement of Merger will be executed and delivered by NewLogic and Paradigm
prior to the Closing and will be filed with the Secretary of State of the State
of Delaware at or simultaneous with the Closing in accordance with section 251
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of the Corporation Law. The Merger shall be effective (the "Effective Time of
Merger") as of the time of the filing of the Agreement of Merger with the
Delaware Secretary of State on the Closing Date, at which time NewLogic shall
cease to exist, and Paradigm shall be the surviving entity. At the Effective
Time of Merger, the Securities shall by virtue of the Merger and without any
action on the part of the Securityholders, be converted into the number of
shares of common stock of Paradigm as set forth in the Agreement of Merger.
1.3 Purchase Price. As consideration for the Securities, Paradigm shall
pay to the Securityholders an aggregate of 314,395 shares of the Common Stock of
Paradigm (collectively, the "Stock Consideration") and an aggregate of
$165,068.05 in cash (the "Cash Consideration"), together with the post-closing
consideration in accordance with Article (collectively, the "Purchase Price"),
as follows:
(a) 176,307 shares of Common Stock of Paradigm, shall be distributed at
the Closing to the Securityholders set forth on Schedule 1.3(a) and in the
amounts set forth next to each Securityholder's name on such schedule;
(b) 138,088 shares of Common Stock of Paradigm (the "Escrowed Shares"),
shall be delivered irrevocably to a financial institution or other independent
party to be mutually agreed upon by Paradigm and NewLogic prior to the Closing,
as escrow agent (the "Escrow Agent"), pursuant to an escrow agreement
substantially in the form attached as Exhibit 1.3(b) hereto (the "Escrow
Agreement"). The Escrowed Shares shall be issued in the record name of Xxxx
Xxxxx, as trustee (the "Securityholders Trustee") of the voting trust created
pursuant to an agreement by and among each of the Securityholders and the
Trustee for the purpose of administering the rights of the Securityholders with
respect to the Escrowed Shares (the "Voting Trust Agreement"). The Escrowed
Shares will be held by the Escrow Agent for purposes of securing the
indemnification obligations of the Securityholders as set forth in Article of
this Agreement and in the Escrow Agreement. In accordance with the Escrow
Agreement, 41,426 shares of Common Stock of Paradigm (together with any
dividends or distributions paid thereon), net of any offsets made in
satisfaction of such indemnification obligations ("Offsets"), shall be released
by the Escrow Agent to the Securityholders Trustee on the first anniversary of
the Closing, and thirty-five percent (35%) of the Stock Consideration, or 96,662
shares of Common Stock of Paradigm (together with any dividends or distributions
paid thereon), net of any Offsets, shall be released by the Escrow Agent to the
Securityholders Trustee on the second anniversary of the Closing.
(c) The Cash Consideration shall be paid to the Securityholders set
forth on Schedule 1.3(a), or to NewLogic on behalf of such Securityholders, and
in the amounts set forth next to
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each such Securityholder's name on such schedule, by check or wire transfer.
1.4 Other NewLogic Securities. Schedule 1.4 attached hereto sets forth
the name and number of NewLogic shares of capital stock and options or other
rights to acquire such capital stock held by each person other than the
Securityholders. On or before the Closing Date, Paradigm shall purchase and
acquire from each securityholder named on Schedule 1.4 all of the NewLogic
securities held by such Securityholders, for consideration consisting entirely
of cash, pursuant to one or more purchase agreements separate from this
Agreement.
ARTICLE II
POST-CLOSING CONSIDERATION
2.1 Post-Closing Consideration. Subsequent to the Closing, in
accordance with Section 2.2 below, all of the Securityholders set forth in the
attached Schedule 2.1 shall be entitled to receive additional cash consideration
as set forth in Section 2.2 of this Agreement (the "Gross Margin Payments").
2.2 Determination of Amount.
(a) Each such Securityholder set forth in Schedule 2.1 then employed by
Paradigm (or otherwise providing services to Paradigm substantially equivalent
to those provided immediately prior to the termination of such employment) at
the time of the distribution shall be entitled to cash consideration, if any,
equal to the product of (i) twelve and one-half percent (12.5%) of the NewLogic
Product Gross Margin generated from and after the Closing until December 31,
1997, times (ii) the percentage set forth next to such Securityholder's name on
such Schedule 2.1 (the "Percentage Interest").
(b) Each such Securityholder set forth in Schedule 2.1 then employed by
Paradigm (or otherwise providing services to Paradigm substantially equivalent
to those provided immediately prior to the termination of such employment) at
the time of the distribution shall be entitled to cash consideration, if any,
equal to the product of (i) five percent (5%) of the NewLogic Product Gross
Margin generated from and after January 1, 1998 until June 30, 1998, times (ii)
such Securityholder's Percentage Interest.
(c) In the event that a Securityholder set forth on Schedule 2.1 for
any reason is not employed by Paradigm (or otherwise providing services to
Paradigm substantially equivalent to those provided immediately prior to the
termination of such employment) at the time of any Gross Margin Payments, such
Securityholder's Gross Margin Payment shall be allocated and distributed among
the remaining eligible Securityholders pro rata based on their Percentage
Interest in such amount (after
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reallocating pro rata among them the Percentage Interest of the departed
Securityholder).
(d) "NewLogic Product Gross Margin" shall be defined as the gross
margin generated from the sale of NewLogic (or any legal successor in interest
to NewLogic) Products (defined below) as determined by Paradigm applying the
criteria used by Paradigm with respect to the sale of Paradigm products. The
NewLogic products subject to this Section 2.2 (the "Products") shall be as set
forth in the attached Schedule 2.2 Paradigm shall act in good faith in
determining the NewLogic Product Gross Margin on any sales of Products and in
developing and marketing the sale of the Products during the periods described
in Sections 2.2(a) and 2.2(b) above. Subject to Subsection 2.2(f) below, Gross
Margin Payments due under this Section 2.2 shall be paid to eligible
Securityholders, when earned, in quarterly payments on each of April 15, July
15, October 15 and January 15.
(e) The Securityholders holding a majority in interest of the Stock
Consideration or their duly authorized agents shall have the right, (i) during
normal business hours and following reasonable prior written notice to Paradigm,
to conduct audits with respect to the applicable books and records in the
possession or under the control of Paradigm reasonably relating to the Products
for the purpose of verifying Paradigm's determination of the NewLogic Product
Gross Margin, and (ii) to modify the allocation of the Percentage Interests set
forth on Schedule 2.1 among eligible Securityholders or third parties, upon
prior written notice to Paradigm.
(f) The parties hereto acknowledge that NewLogic has on the date hereof
an uncollected, unearned milestone payment receivable in the amount of $600,000
relating to its research and development contract with Winbond Electronics Corp.
dated January 1, 1996 (the "R&D Milestone Payment"). Notwithstanding the
provisions of this Section 2.2, from and after the Closing date, no Gross Margin
Payments shall be distributed to eligible Securityholders except to the extent
such Gross Margin Payments in the aggregate exceed the then-current balance of
the R&D Milestone Payment. In the event, following the full offset of Gross
Margin Payments against the R&D Milestone Payment as set forth above, any
portion of the R&D Milestone Payment is collected by Paradigm, such amount shall
be promptly distributed to the eligible Securityholders pursuant to their
Percentage Interests.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWLOGIC
Except as specifically set forth in the NewLogic disclosure schedule
certified by the President and Chief Executive Officer of NewLogic and delivered
by NewLogic to Paradigm prior to the
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execution of this Agreement (the "NewLogic Disclosure Schedule"), NewLogic
represents and warrants to Paradigm that the representations and warranties set
forth in this Article are true and correct as of the date hereof. All
disclosures set forth in such NewLogic Disclosure Schedule shall be deemed
representations and warranties of NewLogic. As used in this Agreement, (a)
"Business Condition" with respect to NewLogic shall refer to NewLogic's
financial condition, business, prospects, results of operations and assets as
presently conducted or as proposed to be conducted; (b) a disclosure or result
will be deemed "material and adverse" if it gives or could give rise to a
substantial diminution in the economic value of NewLogic as presently conducted
or as proposed to be conducted; and (c) "to the knowledge of NewLogic" and like
phrases shall, unless otherwise qualified, refer to the knowledge of NewLogic's
executive officers and directors following reasonable inquiry.
3.1 Organization, Standing and Power. NewLogic is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now being conducted.
NewLogic is qualified to do business as a foreign corporation in the states of
Washington and California, and is not required to qualify as a foreign
corporation in any other jurisdiction except where the failure to so qualify
would not have a material adverse effect on the Business Condition of NewLogic.
NewLogic has delivered or made available to Paradigm complete and correct copies
of its (a) Certificate of Incorporation and Bylaws, (b) minutes of all of
directors' and stockholders' meetings, which are complete and accurate as of the
date hereof, (c) stock certificate books and all other records of NewLogic,
which collectively correctly set forth the record ownership of all outstanding
shares of capital stock and all rights to purchase capital stock of NewLogic and
(d) form of stock certificates, option agreements and rights to purchase shares
of capital stock of NewLogic.
3.2 Capital Structure.
(a) The authorized capital stock of NewLogic consists of 10,765,000
shares of Common Stock, $0.01 par value per share, and 4,235,000 shares of
Preferred Stock, $0.01 par value per share, of which 60,000 authorized shares
are designated Series A Preferred Stock, 3,750,000 authorized shares are
designated Series B-1 Preferred Stock and 425,000 authorized shares are
designated Series B-2 Preferred Stock. As of the date of this Agreement, there
were issued and outstanding: 2,375,380 shares of NewLogic common stock
("NewLogic Common Stock"); no shares of NewLogic Series A Preferred Stock;
1,825,000 shares of NewLogic Series B-1 Preferred Stock convertible into shares
of Common Stock at the rate of one (1) share of NewLogic Common Stock for each
share of NewLogic Series B-1 Preferred Stock; and no shares
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of NewLogic Series B-2 Preferred Stock. As of the date of this Agreement, there
were an aggregate of (i) 4,235,000 shares of NewLogic Common Stock reserved for
issuance upon conversion of the NewLogic Preferred Stock, and (ii) 826,780
shares of Common Stock reserved for issuance upon the exercise of outstanding
NewLogic options to acquire NewLogic Common Stock (the "NewLogic Options").
There are currently outstanding options to purchase 826,780 shares of NewLogic
Common Stock and 973,220 shares of NewLogic Common Stock available for grant
under options. There are no outstanding shares of NewLogic capital stock or any
other right to receive or purchase equity securities of NewLogic (collectively,
"NewLogic capital stock"), other than shares of NewLogic Common Stock and
NewLogic Series B-1 Preferred Stock and the NewLogic Options.
(b) All outstanding shares of NewLogic capital stock are, and any
shares of NewLogic capital stock issued upon exercise of any NewLogic Option
(subject to receipt of the exercise price as provided therein) will be, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, NewLogic's Certificate of Incorporation or Bylaws or any
agreement to which NewLogic is a party or by which NewLogic may be bound. All
outstanding NewLogic securities have been issued in compliance with applicable
federal and, to the Company's knowledge, based on written information provided
by the Securityholders, state securities laws. Other than as described herein,
there are no options, warrants, calls, conversion rights, commitments or
agreements of any character to which NewLogic is a party or by which NewLogic
may be bound that do or may legally obligate NewLogic to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of NewLogic capital
stock or that do or may legally obligate NewLogic to grant, extend or enter into
any such option, warrant, call, conversion right, commitment or agreement.
(c) Schedule 3.2 contains a complete and accurate list of, and the
number of shares owned of record by, the holders of outstanding NewLogic Common
Stock, NewLogic Series B-1 Preferred Stock and NewLogic Options. Schedule 3.2 is
complete and accurate on the date hereof, and an updated Schedule 3.2 to be
attached hereto will be complete and accurate as of the Closing Date.
(d) All NewLogic Options have been issued in accordance with NewLogic's
stock equity plans and, to the Company's knowledge, based on written information
provided by the Securityholders, all state securities laws. The NewLogic stock
equity plans and all amendments thereto have been approved by all requisite
NewLogic securityholder action. NewLogic does not have in effect any stock
appreciation rights plan and no stock appreciation rights are currently
outstanding.
(e) Except as set forth in NewLogic's Certificate of Incorporation and
except for any restrictions imposed by appli-
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cable state and federal securities laws, there is no right of first refusal,
co-sale right, right of participation, right of first offer, option or other
restriction on transfer applicable to any shares of NewLogic Common Stock.
(f) NewLogic is not a party or subject to any agreement or
understanding, and, to the best of NewLogic's knowledge, there is no agreement
or understanding between or among any persons that affects or relates to the
voting or giving of written consent with respect to any outstanding security of
NewLogic.
3.3 Subsidiaries. NewLogic does not own or control, directly or
indirectly, any corporation, partnership, business, trust or other entity.
3.4 Authority.
(a) NewLogic has all requisite corporate power and authority to enter
into this Agreement, to execute, deliver and perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement, the performance by NewLogic of its obligations
hereunder and the consummation of the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate action on the part
of NewLogic, including approval by its Board of Directors. No NewLogic
shareholder vote is required in connection with the transactions set forth in
this Agreement. This Agreement is a legal, valid and binding obligation of
NewLogic enforceable against NewLogic in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(b) Subject to satisfaction of the conditions set forth in this
Agreement, to NewLogic's knowledge, the execution, delivery and performance of
this Agreement does not and the performance and consummation of the transactions
contemplated hereby will not, conflict with or result in any material violation
of any material statute, law, rule, regulation, judgment, order, decree, or
ordinance applicable to NewLogic or its properties or assets, or conflict with
or result in any conflict with, breach or violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, forfeiture or acceleration of any material obligation
or the loss of a material benefit under, or result in the creation of a lien or
encumbrance on any of the properties or assets of NewLogic pursuant to (i) any
provision of the Certificate of Incorporation or Bylaws of NewLogic or (ii) any
agreement, contract, note, mortgage, indenture, lease, instrument, permit,
concession, franchise or license to which NewLogic is a party or by which
NewLogic or any of its properties or assets may be bound or affected except such
violations that would not
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have a material and adverse effect on the Business Condition of NewLogic.
(c) No consent, approval, order or authorization of, or registration,
declaration of, or qualification or filing with, any court, administrative
agency, commission, regulatory authority or other governmental or administrative
body or instrumentality, whether domestic or foreign (a "Governmental Entity"),
is required by or with respect to NewLogic in connection with the execution,
delivery and performance of this Agreement by NewLogic or the consummation by
NewLogic of the transactions contemplated hereby, except for such consents,
approvals, orders, authorizations, registrations, declarations, qualifications
or filings (i) as may be required under state securities or Blue Sky laws in
connection with the transactions set forth herein and (ii) the failure of which
to obtain would not have a material and adverse effect on the Business Condition
of NewLogic.
3.5 Financial Statements. NewLogic has furnished to Paradigm a complete
and accurate copy of its audited balance sheet as of June 30, 1995 and its
audited statements of operations, changes in stockholders' equity (deficit) and
cash flow for the period ended June 30, 1995 (collectively, the "NewLogic
Audited Financial Statements"). The NewLogic Audited Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied and fairly present the financial position of
NewLogic as and at the dates thereof and NewLogic's results of operations and
cash flows for the periods then ended. NewLogic has furnished to Paradigm a
complete and accurate copy of its unaudited balance sheet as of March 31, 1996
and its unaudited statement of operations and cash flow for the nine (9) months
ended March 31, 1996 (collectively, the "NewLogic Unaudited Financial
Statements," collectively with the NewLogic Audited Financial Statements, the
"NewLogic Financial Statements"). The NewLogic Unaudited Financial Statements
have been prepared in accordance with GAAP consistently applied, subject to
normal year-end adjustments and except for the absence of footnotes, and fairly
present the financial position of NewLogic as and at the date thereof and
NewLogic's results of operations and cash flows for the period then ended.
3.6 Payables; Receivables.
(a) The NewLogic Disclosure Schedule sets forth a listing of accounts
payable and accounts receivable of NewLogic in the aggregate and by creditor as
of March 31, 1996.
(b) NewLogic's revenue recognition policies with respect to the
NewLogic Financial Statements have been made in accordance with GAAP. NewLogic
maintains a standard system of accounting in accordance with GAAP. All of
NewLogic's general ledgers, books and records are located at NewLogic's
principal
-8-
place of business. NewLogic does not have any of its records, systems, controls,
data or information recorded, stored, maintained, operated or otherwise wholly
or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) that (including
all means of access thereto and therefrom) are not under the exclusive ownership
and direct control of NewLogic. NewLogic's financial reserves are adequate to
cover claims already incurred.
3.7 Compliance with Laws. To NewLogic's knowledge, NewLogic is in
compliance and has conducted its business and operations so as to comply with
all laws, ordinances, rules and regulations, judgments, decrees or orders of any
Governmental Entity, except to the extent that failure to comply would not have
a material and adverse effect on NewLogic's Business Condition. To NewLogic's
knowledge, there are no judgments or orders, injunctions, decrees, stipulations
or awards (whether rendered by a court or administrative agency or by
arbitration) against NewLogic or against any of its properties or businesses,
and, to NewLogic's knowledge, none are pending or threatened, which individually
or in the aggregate would have a material and adverse effect on the Business
Condition of NewLogic. NewLogic has not during the past eighteen (18) months
received any governmental notice from any Governmental Entity for any violation
of United States laws or regulations. NewLogic has all permits, licenses,
orders, authorizations, registrations, concessions, certificates, approvals and
other instruments of any Governmental Entity (the "Government Licenses") (each
of which is in full force and effect) necessary for the conduct of its business
which other than those the lack of which would individually or in the aggregate
have a material and adverse effect on the Business Condition of NewLogic.
NewLogic is in compliance with the terms, conditions, limitations, restrictions,
standards, prohibitions, requirements and obligations of such Government
Licenses except where the failure to so comply would not have a material and
adverse effect on the Business Condition of NewLogic. NewLogic has made all
filings and registrations and the like necessary or required by law to conduct
its business except where its failure to do so would not have a material and
adverse effect on NewLogic's Business Condition. To NewLogic's knowledge, there
is not now pending, nor is there threatened, any action, suit, investigation or
proceeding against NewLogic before any Governmental Entity with respect to the
Government Licenses, nor is there any issued or outstanding notice, order or
complaint with respect to the violation by NewLogic of the terms of any
Government License or any rule or regulation applicable thereto other than those
that would not have a material adverse effect on the Business Condition of
NewLogic.
3.8 No Defaults. NewLogic is not, and it has not received notice that
it is or would be with the passage of time (x) in violation of any provision of
its Certificate of Incorporation or Bylaws or (y) to NewLogic's knowledge, in
default or xxxxx-
-9-
tion of (a) any term, condition or provision of any judgment, decree, order,
injunction or stipulation applicable to NewLogic, or (b) any term or condition
of any agreement, note, mortgage, indenture, law, statute, rule, regulation,
contract, lease, instrument, permit, concession, franchise or license to which
NewLogic is a party or by which NewLogic or its properties or assets may be
bound, except for defaults or violations that would not have a material and
adverse effect on the Business Condition of NewLogic.
3.9 Litigation. To NewLogic's knowledge, there is no action, suit,
proceeding, claim, arbitration or investigation pending or threatened against
NewLogic or any of its officers or directors which, if determined adversely to
NewLogic or such officers or directors, would have an adverse effect on
NewLogic's Business Condition. There is no action, suit, proceeding or
investigation by NewLogic currently pending or which it intends to initiate.
NewLogic has delivered or made available to Paradigm correct and complete copies
of all correspondence prepared by its counsel for NewLogic's independent public
accountants in connection with the last completed audit of NewLogic's financial
statements and any such correspondence since the date of the last such audit.
3.10 Conduct in the Ordinary Course. Since March 31, 1996, NewLogic has
conducted its business in the ordinary course and there has not occurred:
(a) Any material and adverse change in the Business Condition of
NewLogic from that reflected in the Financial Statements other than changes in
the ordinary course of business;
(b) Any amendments or changes in the Certificate of Incorporation or
Bylaws of NewLogic;
(c) Any material damage, destruction or loss, whether covered by
insurance or not, affecting the Business Condition of NewLogic;
(d) Any issuance, redemption, repurchase or other acquisition of shares
of capital stock of NewLogic (other than issuances pursuant to exercise of
NewLogic Options, repurchases of NewLogic Common Stock at cost in the ordinary
course under the terms of preexisting agreements), or any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to NewLogic capital stock;
(e) Other than compensation increases not exceeding five percent (5%)
in any individual case and annual bonuses not exceeding fifteen percent (15%) in
any individual case, any increase in or modification of the compensation or
benefits payable or to become payable by NewLogic to any of its service
-10-
providers or changes pursuant to employment agreements currently in effect;
(f) Any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement (including, without
limitation, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its service providers;
(g) Any (i) sale of the property or assets of NewLogic individually in
excess of $10,000 or in the aggregate in excess of $25,000, other than inventory
sales in the ordinary course of business consistent with past practice or (ii)
mortgage, pledge, transfer of a security interest in, or lien created by it, or
other encumbrance with respect to any of its material properties or assets,
except liens arising under existing lease financing arrangements, liens arising
in the ordinary course of NewLogic's business and liens for taxes not yet due or
payable, in each case or in the aggregate, which are not material to the
Company;
(h) Any (i) incurrence, assumption or guarantee by NewLogic of any debt
for borrowed money other than trade indebtedness incurred in the ordinary course
of business consistent with past practice; (ii) waiver or compromise by it of a
valuable right or of a debt owed to it except that which is not material to its
Business Condition, (iii) satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by it, except that which is not
material to its Business Condition; (iv) issuance or sale of any securities
convertible into or exchangeable for debt securities of NewLogic; or (v)
issuance or sale of options or other rights to acquire from NewLogic, directly
or indirectly, debt securities of NewLogic or any securities convertible into or
exchangeable for any such debt securities;
(i) Any making of any loan, advance or capital contribution to, or
investment in, any person other than advances made in the ordinary course of
business of NewLogic;
(j) Any entry into, amendment of, relinquishment, termination or
nonrenewal by NewLogic of any contract, lease, commitment or other right or
obligation other than in the ordinary course of business consistent with past
practice;
(k) Any transfer or grant of a right under the NewLogic Intellectual
Property Rights (as defined in Section 3.17) other than those transferred or
granted in the ordinary course of business;
(l) Any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of NewLogic;
-11-
(m) Any resignation or termination of employment of any of its key
employees; and NewLogic, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such employee; or
(n) Any agreement or arrangement made by NewLogic to take any action
which, if taken prior to the date hereof, would have made any representation or
warranty set forth in this Section 3.10 untrue or incorrect in any material
respect as of the date when made.
3.11 Absence of Undisclosed Liabilities. Except as disclosed or
reflected in the NewLogic March 31, 1996 balance sheet and except for
liabilities and obligations arising after March 31, 1996 in the ordinary course
of business which are not material, NewLogic has no liabilities or obligations
(whether absolute, accrued or contingent, and whether or not determined or
determinable) of a character which, under GAAP, should be accrued, shown,
disclosed, reserved or indicated in an audited balance sheet of NewLogic
(including the footnotes thereto).
3.12 Documents and Information Supplied. To NewLogic's knowledge, the
copies of all instruments, agreements, other documents and information delivered
by NewLogic and its professional advisors to Paradigm or its counsel and
accountants are and will be true, accurate and complete in all material respects
as of the date of delivery thereof.
3.13 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
result in any material payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any service provider of NewLogic under any Plan (as defined in Section 3.14
below) or otherwise, (b) materially increase any benefits otherwise payable
under any Plan, or (c) result in the acceleration of the time of payment or
vesting of any material benefits.
3.14 Plans. All plans, programs, policies, commitments or other
arrangements (whether or not set forth in a written document) maintained by or
on behalf of NewLogic that provide deferred or incentive compensation, stock
options or other stock purchase rights, severance or termination pay, medical,
dental, life, disability or accident benefits (whether or not insured), profit
sharing or retirement benefits to, or for the benefit of, any active, former or
retired service provider of NewLogic or their spouses or dependents and all
collective bargaining agreements covering such service providers are listed in
the NewLogic Disclosure Schedule (collectively, the "Plans"). NewLogic has
furnished or made available to Paradigm copies of the Plans and related Plan
documents. All applicable governmental filings and reports required with respect
to such Plans have been correctly prepared and timely filed with the appropriate
agencies. No
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Plan is covered by Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or section 412 of the Code. Each Plan has been
maintained and administered in all respects in compliance with its terms and
with the requirements prescribed by all statutes, orders, rules and regulations,
which are applicable to such Plan, except to the extent noncompliance would not
have a material adverse effect on the operation of such Plan. To the knowledge
of NewLogic, no suit, administrative proceeding, action or other litigation has
been brought, or is threatened, against or with respect to any such Plan. The
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or other service provider of NewLogic to
severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) other than with respect to NewLogic Options, accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee or service provider.
3.15 Major Contracts. Except as set forth in the NewLogic Disclosure
Schedule, NewLogic is not a party to or subject to:
(a) Any union contract or any employment or consulting contract or
arrangement, written or oral, with any director, officer or affiliate, other
than indemnification agreements, stock option or stock purchase agreements or
proprietary information agreements;
(b) Any OEM agreement, distribution agreement, volume purchase
agreement or other similar agreement, or joint venture contract or arrangement
or any other agreement which has involved or is expected to involve a sharing of
profits with other persons or provides for payments of more than $25,000 per
annum;
(c) Any lease for personal property involving payments of more than
$10,000 per annum, or any lease for real property;
(d) Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, leasehold obligations or otherwise;
(e) Any license agreement, either as licensor or licensee other than
license agreements entered into in the ordinary course of business;
(f) Any contract containing covenants purporting to materially limit
the freedom of NewLogic to compete in any line of business in any geographic
area;
-13-
(g) Any agreement of indemnification, except indemnification provided
in the ordinary course of business or for officers and directors pursuant to
state law;
(h) Any agreement, contract or commitment relating to capital
expenditures in excess of $25,000;
(i) Any agreement, contract or commitment relating to the disposition
or acquisition by NewLogic of any assets in excess of $25,000 or any NewLogic
Intellectual Property Rights (as defined herein);
(j) Any agreement providing for minimum payment or resale obligations,
ongoing support or research and development obligations, or warranty obligations
on the part of NewLogic, except arrangements entered into in the ordinary course
of business or arrangements involving payments of less than $25,000 per annum;
(k) Any agreement for the provision of products or services to any
Governmental Entity, except customer agreements entered into in the ordinary
course of business or arrangements involving payments of less than $25,000 per
annum;
(l) Any agreement requiring a commitment of NewLogic resources or
personnel to market, distribute or license third-party products or technology,
whether on a best-efforts basis or otherwise or arrangements involving payments
of less than $25,000 per annum; or
(m) Any other agreement, contract, letter of intent, memorandum of
understanding or commitment which is material to NewLogic.
Each material agreement, contract, mortgage, indenture, plan, lease,
instrument, permit, concession, franchise, arrangement, license and commitment
to which NewLogic is a party or by which it is bound (i) is valid and binding on
NewLogic in all material respects, (ii) to the knowledge of NewLogic is in full
force and effect, (iii) has not been materially breached by NewLogic or, to the
best knowledge of NewLogic, any other party thereto, and (iv) contains no
material liquidated damages, penalty or similar provision. NewLogic has not been
notified that any party to any such contract, agreement or instrument intends to
cancel, withdraw, modify or amend in any material respect such contract,
agreement or instrument. NewLogic has performed all obligations required to be
performed by it on or prior to the date hereof under each contract, obligation,
commitment, agreement, undertaking, arrangement or lease referred to in this
Agreement or any exhibit hereto, and is not actually aware of any facts from
which it should reasonably conclude that it will not be able to perform all
obligations required to be performed by it subsequent to the date hereof under
each such agreement, other than failures to perform that would not have a
material and adverse effect on the Business Condition of NewLogic.
-14-
3.16 Taxes. All Tax returns, statements, reports and forms (including
without limitation estimated Tax returns and reports and information returns and
reports) required to be filed with any Tax authority with respect to any Taxable
period ending on or before the Closing, by or on behalf of NewLogic
(collectively, the "NewLogic Returns"), have been or will be completed and filed
when due (including any extensions of such due date), and all amounts shown due
thereon on or before the Closing have been or will be paid on or before such
date. The NewLogic Unaudited Financial Statements (a) fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through March
31, 1996, and (b) properly accrue in accordance with GAAP all liabilities for
Taxes payable after March 31, 1996 with respect to all transactions and events
occurring on or prior to such date. All information set forth in the notes to
the NewLogic Financial Statements relating to Tax matters is true, complete and
accurate in all material respects. To NewLogic's knowledge, no material Tax
liability since March 31, 1996 has been incurred other than in the ordinary
course of business and adequate provision has been made for all Taxes since that
date in accordance with GAAP. NewLogic has withheld and paid to the applicable
financial institution or Tax authority all amounts required to be withheld.
NewLogic has not granted any extension or waiver of the limitation period
applicable to any NewLogic Returns. To NewLogic's knowledge, there is no claim,
audit, action, suit, proceeding, or investigation now pending or threatened
against or with respect to NewLogic in respect of any Tax or assessment. No
notice of deficiency or similar document of any Tax authority has been received
by NewLogic, and there are no liabilities for Taxes (including liabilities for
interest, additions to Tax and penalties thereon and related expenses) with
respect to the issues that have been raised (and are currently pending) by any
Tax authority that would, if determined adversely to NewLogic, adversely affect
the liability of NewLogic for Taxes. NewLogic is in full compliance with all the
terms and conditions of any Tax exemptions or other Tax-sharing agreement or
order of a foreign government and the consummation of the transactions set forth
herein will not have any adverse effect on the continued validity and
effectiveness of any such Tax exemption or other Tax-sharing agreement or order.
Neither NewLogic nor any person on behalf of NewLogic has entered into or will
enter into any agreement or consent pursuant to section 341(f) of the Code.
NewLogic is not party to any joint venture, partnership, or other arrangement or
contract which could be treated as a partnership for federal income tax
purposes. NewLogic is not currently and never has been subject to the reporting
requirements of section 6038A of the Code. There is no agreement, contract or
arrangement to which NewLogic is a party that could, individually or
collectively, result in the payment of any amount that would not be deductible
by reason of sections 280G (as determined without regard to section 280G(b)(4),
162 (other than 162(a)) or 404 of the Code. NewLogic is not a party to or bound
by any Tax indemnity, Tax sharing or Tax allocation agreement which includes a
-15-
party other than NewLogic nor does NewLogic owe any amount under any such
Agreement. NewLogic has previously provided or made available to Paradigm true
and correct copies of all NewLogic Returns. Except as may be required as a
result of the consummation of the transactions set forth herein, NewLogic has
not been and will not be required to include any material adjustment in Taxable
income for any Tax period (or portion thereof). For purposes of this Agreement,
the following terms have the following meanings: "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any and all taxes including, without
limitation, (i) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits, value
added, net worth, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any Governmental Entity (a "Tax authority")
responsible for the imposition of any such tax (domestic or foreign), (ii) any
liability for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any Taxable period or as the result of being a transferee or successor
thereof and (c) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied obligation to
indemnify any other person.
3.17 Intellectual Property.
(a) To NewLogic's knowledge, without inquiry, NewLogic owns or is
licensed or is otherwise entitled to exercise, without restriction, all rights
to all patents, trademarks, trade names, service marks, copyrights, mask works,
trade secrets and other intellectual property rights, and any applications or
registrations therefor, and all inventions, mask work layouts, net lists,
schematics, technical drawings, technology, know-how, processes, formulas,
algorithms, computer software programs, documentation, and all other tangible
and intangible information or material in any form, used or currently proposed
to be used in the business of NewLogic as currently conducted or as proposed to
be conducted, without any conflict with or infringement of the rights of others.
(b) The Intellectual Property Disclosure Schedule lists: (i) all
copyrights, patents, patent applications, trademarks, service marks and trade
names owned by or exclusively licensed to NewLogic ("NewLogic Intellectual
Property Rights"); (ii) the jurisdiction(s) in which an application for patent
or application for registration of each such NewLogic Intellectual Property
Right has been made, including the respective application numbers and dates;
(iii) the jurisdiction(s) in which each such NewLogic Intellectual Property
Right has been patented or registered, including the respective patent or
registration numbers
-16-
and dates; (iv) all licenses, sublicenses and other agreements to which NewLogic
is a party and pursuant to which any other party is authorized to use, exercise,
or receive any benefit from any NewLogic Intellectual Property Right; and (v)
all parties to whom NewLogic has delivered copies of NewLogic's source code,
whether pursuant to an escrow arrangement or otherwise, or parties who have the
right to receive such source code. NewLogic has delivered or made available to
Paradigm copies of all licenses, sublicenses, and other agreements identified
pursuant to clause (iv) above.
(c) To NewLogic's knowledge, without inquiry, NewLogic is the owner or
exclusive licensee of, with all right, title and interest in and to (free and
clear of any liens, encumbrances or security interests), the NewLogic
Intellectual Property Rights and has the rights to use, sell, license, assign,
transfer, convey or dispose thereof or the products, processes and materials
covered thereby. NewLogic has taken all commercially reasonable steps, including
without limitation the filing and prosecution of patent, copyright, and
trademark applications to perfect and protect its interest in the NewLogic
Intellectual Property Rights in all countries in which NewLogic does business;
and NewLogic has the exclusive right to file, prosecute, and maintain such
applications and the patents and registrations that issue therefrom.
(d) To NewLogic's knowledge, all patents and registered trademarks,
service marks and trade names and registered copyrights held by NewLogic are
valid and enforceable. To NewLogic's knowledge, there has not been and there is
not now any unauthorized use, infringement or misappropriation of any of the
NewLogic Intellectual Property Rights by any third party, including, without
limitation, any service provider of NewLogic.
(e) NewLogic has not brought any actions or lawsuits alleging (i)
infringement of any NewLogic Intellectual Property Rights or (ii) breach of any
license, sublicense or other agreement authorizing another party to use the
NewLogic Intellectual Property Rights. No person has asserted or, to NewLogic's
knowledge, threatened to assert any claims with respect to the NewLogic
Intellectual Property Rights (i) contesting the right of NewLogic to use,
exercise, sell, license, transfer or dispose of any NewLogic Intellectual
Property Rights or any products, processes or materials covered thereby or (ii)
challenging the ownership, validity or enforceability of any of the NewLogic
Intellectual Property Rights. No NewLogic Intellectual Property Right is subject
to any outstanding order, judgment, decree, stipulation or agreement related to
or restricting in any manner the licensing, assignment, transfer or conveyance
thereof by NewLogic.
(f) The Intellectual Property Disclosure Schedule separately lists: (i)
all copyrights, patents, patent applications, trademarks, service marks, trade
names, and other company,
-17-
product or service identifiers licensed to NewLogic ("In- licensed Intellectual
Property Rights"); (ii) all licenses, sublicenses and other agreements to which
NewLogic is a party and pursuant to which NewLogic is authorized to use,
exercise, or receive any benefit from any In-Licensed Intellectual Property
Right. NewLogic has delivered or made available to Paradigm copies of all
licenses, sublicenses, and other agreements identified pursuant to clause (ii)
above. NewLogic is in compliance with all material terms and conditions of all
such licenses, sublicenses, and other agreements. NewLogic has no knowledge of
any assertion, claim or threatened claim that NewLogic has breached any terms or
conditions of such licenses, sublicenses, or other agreements. To the knowledge
of NewLogic, no In-Licensed Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement related to or
restricting in any manner the use or licensing thereof by NewLogic.
(g) NewLogic is not, nor will be as a result of the execution and
delivery of this Agreement or the performance of NewLogic's obligations
hereunder, in violation of, or lose or in any way impair any material rights
pursuant to any license, sublicense or agreement described in the Intellectual
Property Disclosure Schedule.
(h) NewLogic knows of no claims to the effect that the manufacture,
marketing, license, sale or use of any product or service as now used or offered
or proposed for use or sale by NewLogic infringes any copyright, patent, trade
secret, or other intellectual property right of any third party or violates any
license or agreement with any third party. NewLogic has not entered into any
agreement to indemnify any other person against any charge of infringement of
any third party intellectual property right, NewLogic Intellectual Property
Right or In-Licensed Intellectual Property Right.
(i) NewLogic has taken all commercially reasonable steps to protect and
preserve the confidentiality of all inventions, algorithms, formulas,
schematics, technical drawings, ideas, know-how, processes not otherwise
protected by patents or patent applications, source code, program listings, and
trade secrets ("Confidential Information"), including without limitation the
marking of such Confidential Information with appropriate "Proprietary" or
"Confidential" legends, the establishment of policies for the handling,
disclosure, and use of Confidential Information, and the acquisition of valid
written nondisclosure agreements from any party receiving Confidential
Information. All Confidential Information is presently and as of the Closing
will be located at NewLogic's address as set forth in this Agreement. No person
other than NewLogic has used, divulged or appropriated Confidential Information
except for the benefit of NewLogic. No person has used, divulged or appropriated
Confidential Information to the detriment of NewLogic other than pursuant to the
terms of written agreements between NewLogic and
-18-
such other persons. NewLogic has delivered or made available to Paradigm copies
of all nondisclosure agreements or other agreements relating to the handling,
disclosure, and use of Confidential Information.
3.18 Service Provider Agreements. To NewLogic's knowledge, no service
provider of NewLogic currently is in violation of any material term of any
employment agreement (whether written or verbal), patent or trademark disclosure
agreement or any other contract or agreement relating to the relationship of any
such service provider with NewLogic. Each employee or consultant-inventor has
executed a written agreement validly assigning his or her rights to NewLogic on
all inventions, pending patent applications, all patents issued, and all other
intellectual property rights developed by such service provider while working
for NewLogic. NewLogic does not believe that it is or will be necessary for
NewLogic to utilize any inventions of any of its service providers (or people it
currently intends to hire) made prior to their employment by or relationship
with NewLogic.
3.19 Restrictions on Business Activities. To NewLogic's knowledge,
there is no agreement, judgment, injunction, order or decree binding upon
NewLogic or which has or could reasonably be expected to have the effect of
prohibiting or significantly impairing any material business practice of
NewLogic, any material acquisition of property by NewLogic, or the continuation
in all material respects of the business of NewLogic as currently conducted or
as currently proposed to be conducted.
3.20 Title to Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) NewLogic does not own any real property.
(b) All of the existing NewLogic real property leases have been
previously delivered or made available to Paradigm. The NewLogic Disclosure
Schedule sets forth a complete and accurate list of all real property leased by
NewLogic.
(c) NewLogic has valid leasehold interests in all of its material
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens (other than liens for taxes that are not yet
delinquent), charges, pledges, security interests or other encumbrances, except
as reflected in the NewLogic Financial Statements and except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not and are not reasonably likely to
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby.
3.21 Environmental Matters. To NewLogic's knowledge, NewLogic is in
substantial compliance with all applicable
-19-
federal, state or local laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or waste, except to the extent noncompliance with such laws has not had and
would not reasonably be expected to have a material and adverse effect on the
Business Condition of NewLogic.
3.22 Insurance. The NewLogic Disclosure Schedule lists all material
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of NewLogic, and the
amounts of coverage under each such policy and bond of NewLogic. NewLogic has
not been refused any requested coverage and no material claim made by NewLogic
has been denied by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid, and NewLogic is
otherwise in full compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage) except
where the failure to be in compliance would not have a material and adverse
effect on the Business Condition of NewLogic. NewLogic does not know of any
threatened termination of, the invalidation of any coverage of or material
premium increase with respect to, any of such material policies.
3.23 Labor Matters. To NewLogic's knowledge, NewLogic is in compliance
in all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment and wages and hours and occupational safety and health and employment
practices, and NewLogic is not engaged in any unfair labor practice. NewLogic
has not received any notice from any Governmental Entity and, to NewLogic's
knowledge, there has not been asserted before any Governmental Entity, any
claim, action or proceeding to which NewLogic is a party and, to NewLogic's
knowledge, there is neither pending nor threatened any investigation or hearing
concerning NewLogic arising out of or based upon any such laws, regulations or
practices.
3.24 Personnel.
(a) NewLogic has supplementally provided to Paradigm a list identifying
all current directors, officers, employees, independent contractors and
consultants of NewLogic, setting forth the job title of, and salary (including
bonuses and commissions) payable to each such person. The employment of each of
NewLogic's employees is "at will" employment. NewLogic does not have any
contractual obligation (i) to provide any particular form or period of notice
prior to termination, or (ii) to pay any of such employees any severance
benefits in connection with their termination of employment or service. In
addition, no severance pay will become due to any NewLogic employees under any
NewLogic agreement, plan or program as a result of the transactions set forth in
this Agreement. NewLogic has not entered into any consulting agreements with any
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service provider who owes services to or are owed compensation by NewLogic for
services provided in excess of $10,000.
(b) NewLogic has no outstanding obligation (whether contractual,
statutory, at law or in equity) to pay to its former employee Xxxxx XxxXxxxxxx
any compensation, severance or other benefits or other payments, or to issue Xx.
XxxXxxxxxx any shares of capital stock of or other equity interest in NewLogic,
and NewLogic has incurred no other liability to Xx. XxxXxxxxxx, other than an
obligation to sell to Xx. XxxXxxxxxx, upon the timely and valid exercise of his
purchase right, up to 24,000 shares of NewLogic Common Stock, which the parties
acknowledge and agree possess a maximum aggregate monetary value of $15,609. Xx.
XxxXxxxxxx on the date hereof has no right, title or interest in or to (i) any
of NewLogic's products, patents, trademarks, trade names, service marks,
copyrights, mask works, trade secrets or other intellectual property rights, or
any applications or registrations therefor, or (ii) any inventions, mask work
layouts, schematics, technical drawings, technology, processes, formulas,
algorithms, computer software programs, documentation or other tangible or
intangible information or material in any form, used or proposed to be used in
the business of NewLogic as currently conducted or as proposed to be conducted,
that were created or developed by Xx. XxxXxxxxxx, in whole or in part, during
the period he was employed by or provided services to NewLogic. The parties
agree that any liability of Paradigm to Xx. XxxXxxxxxx arising from the breach
of this Section 3.24(b) shall be a 13.2(a) Indemnifiable Claim (defined in
Section 13.2(a) below).
3.25 Third-Party Consents. To NewLogic's knowledge, no consent or
approval is needed from any third party in order to effect the sale or surrender
of the Securities or any of the other transactions contemplated hereby.
3.26 Related Party Transactions. No employee, officer or director of
NewLogic or member of his or her immediate family is indebted to NewLogic, nor
is NewLogic indebted (or committed to make loans or extend or guarantee credit)
to any of them. To NewLogic's knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which NewLogic is
affiliated or with which NewLogic has a business relationship, or any firm or
corporation that competes with NewLogic, except that the employees, officers or
directors of NewLogic and members of their immediate families may own stock in
publicly traded companies that may compete with NewLogic. No member of the
immediate family of any officer or director of NewLogic is directly interested
in any material contract with NewLogic.
3.27 Brokers or Finders; Professional Fees. No agent, broker,
investment banker or other firm or person is, or will be, pursuant to any
agreement made or entered into by NewLogic, entitled to any broker's or finder's
fee or any other commission
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or similar fee in connection with any of the transactions contemplated by this
Agreement.
3.28 Permit Application. The information supplied by NewLogic on its
behalf and on behalf of the Securityholders for inclusion in the application for
issuance of a permit pursuant to section 25121 of the California Corporations
Code pursuant to which the Stock Consideration will be qualified shall not at
the time the fairness hearing is held pursuant to section 25142 of the
California Corporations Code and the time the qualification of such securities
is effective under section 25122 of the California Corporations Code contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS
Each Securityholder represents and warrants to Paradigm that the
representations and warranties set forth in this Article are true and correct as
of the date hereof. The representations and warranties of each Securityholder
are made by and on behalf of that Securityholder alone, and are not made by or
on behalf of any other Securityholder.
4.1 Authority.
(a) Such Securityholder has all requisite power and authority to enter
into this Agreement, to execute, deliver and perform its obligations hereunder,
including the surrender of any NewLogic Options to be surrendered by such
Securityholder, and to consummate the transactions contemplated hereby. This
Agreement is a legal, valid and binding obligation of such Securityholder,
enforceable against such Securityholder in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(b) Subject to satisfaction of the conditions set forth in this
Agreement, to such Securityholder's knowledge, the execution and delivery of
this Agreement does not and the performance and consummation of the transactions
contemplated hereby will not, conflict with or result in any material violation
of any material statute, law, rule, regulation, judgment, order, decree, or
ordinance applicable to such Securityholder or any material agreement affecting
such Securityholder or the Securities held by such Securityholder.
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(c) No consent, approval, order or authorization of, or registration,
declaration of, or qualification or filing with, any Governmental Entity is
required by or with respect to such Securityholder in connection with the
execution, delivery and performance of this Agreement by such Securityholder or
the consummation by such Securityholder of the transactions contemplated hereby,
except for such consents, approvals, orders, authorizations, registrations,
declarations, qualifications or filings as may be required under state
securities or Blue Sky laws in connection with the transactions set forth
herein.
4.2 Title to Securities. Good and marketable and unencumbered title to
all of the Securities held by such Securityholder shall pass to Paradigm upon
consummation of the transactions set forth in this Agreement.
4.3 Third-Party Consents. Except as contemplated by Section 4.1(c), no
consent or approval is needed from any third party in order to effect the sale
or surrender of the Securities held by such Securityholder.
4.4 Brokers or Finders; Professional Fees. No agent, broker, investment
banker, or other firm or person is, or will be, pursuant to any agreement made
or entered into by a Securityholder, entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARADIGM
Except as described in the Paradigm disclosure schedule certified by
the President of Paradigm and delivered by Paradigm to NewLogic prior to the
execution of this Agreement (the "Paradigm Disclosure Schedule"), Paradigm
represents and warrants to NewLogic that the representations and warranties set
forth below are true and correct as of the date hereof. As used in this
Agreement, (a) "Business Condition" with respect to Paradigm shall mean the
financial condition, business, prospects, results of operations and assets of
Paradigm and all of its subsidiaries taken as a whole as presently conducted or
as proposed to be conducted; (b) a disclosure or result will be deemed "material
and adverse" only if, individually or when aggregated with other disclosures or
results, it gives or could give rise to a substantial diminution in the economic
value of Paradigm and (c) "to the knowledge of Paradigm" and like phrases shall,
unless otherwise qualified, refer to the knowledge of Paradigm's executive
officers and directors upon reasonable inquiry.
5.1 Organization; Standing and Power. Paradigm is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has
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all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. Paradigm is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on
Paradigm's Business Condition.
5.2 Authority.
(a) Paradigm has all requisite corporate power and authority to enter
into this Agreement, to execute, deliver and perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement, the performance by Paradigm of its obligations
hereunder and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Paradigm, including approval by its Board of Directors. No vote of Paradigm
shareholders is required in connection with the transactions set forth in this
Agreement. This Agreement is a legal, valid and binding obligation of Paradigm
enforceable against Paradigm in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) Subject to satisfaction of the conditions set forth in this
Agreement, to Paradigm's knowledge the execution and delivery of this Agreement
does not and the performance and consummation of the transactions contemplated
hereby will not, conflict with or result in any material violation of any
material statute, law, rule, regulation, judgment, order, decree, or ordinance
applicable to Paradigm or conflict with or result in any conflict with, breach
or violation or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation, forfeiture or
acceleration of any material obligation or the loss of a material benefit under,
or result in the creation of a lien or encumbrance on any of the properties or
assets of Paradigm pursuant to (i) any provision of its Certificate of
Incorporation or Bylaws, or (ii) any agreement, contract, note, mortgage,
indenture, lease, instrument, permit, concession, franchise or license to which
Paradigm is a party or by which Paradigm or any of its properties or assets may
be bound or affected, except such violations that would not have a material and
adverse effect on the Business Condition of Paradigm.
(c) No consent, approval, order or authorization of, or registration,
declaration, qualification, or filing of or with, any Governmental Entity is
required by or with respect to Paradigm in connection with the execution and
delivery of this Agreement or the consummation by Paradigm of the transactions
contemplated hereby, except for (i) the filing of documents
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with, and the obtaining of orders from, any state securities or "blue sky"
authorities and the making of such reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as are required in connection with the
transactions contemplated by this Agreement and (ii) the failure of which to
obtain would not have a material and adverse effect on the Business Condition of
Paradigm.
5.3 Paradigm Financial Statements. The financial statements of Paradigm
included in the annual, quarterly or other reports filed by Paradigm with the
Securities and Exchange Commission (the "SEC") (the "Paradigm Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) and fairly present the consolidated financial position of Paradigm
and its consolidated subsidiaries at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal, recurring
audit adjustments).
5.4 Litigation. To the knowledge of Paradigm, there is no action, suit,
proceeding, arbitration, investigation or claim pending or threatened against
Paradigm which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated hereby.
5.5 Reports. Paradigm has previously made available to NewLogic
complete and accurate copies, as amended or supplemented, of (a) its Annual
Report on Form 10-K filed with the SEC for the year ended December 31, 1995 (the
"1995 10-K"), and (b) all other reports and filings made with the SEC since the
filing of the 1995 10-K (such reports and other filings, together with any
amendments or supplements thereto, are collectively referred to herein as the
"Paradigm Reports"). As of their respective dates, the Paradigm Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
5.6 Compliance with Laws. To Paradigm's knowledge, Paradigm is in
compliance and has conducted its business so as to comply with all laws,
ordinances, rules and regulations, judgments, decrees or orders of any
Governmental Entity, except to the extent that any failure to comply,
individually or in the aggregate, would not have a material adverse effect on
the Business Condition of Paradigm. To Paradigm's knowledge, there are no
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency
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or by arbitration) against Paradigm or any of its properties or businesses, and,
to the knowledge of Paradigm, none are pending or threatened, which individually
or in the aggregate would have a material and adverse effect on the Business
Condition of Paradigm.
5.7 Material Contracts. Except to the extent not material to the
Business Condition of Paradigm, each agreement, contract, mortgage, indenture,
plan, lease, instrument, permit, concession, franchise, arrangement, license and
commitment to which Paradigm or any of its subsidiaries is a party or by which,
to its knowledge, it is bound (a) is valid and binding on Paradigm in all
material respects, (b) to the knowledge of paradigm, is in full force and
effect, and (c) has not been breached by Paradigm or to the knowledge of
Paradigm, any other party thereto. To the knowledge of Paradigm, no party to any
such contract, agreement or instrument intends to cancel, withdraw, modify or
amend such contract, agreement or arrangement, except to the extent such action
would not have a material and adverse effect on the Business Condition of
Paradigm.
5.8 Taxes.
(a) All Tax returns, statements, reports and forms (including estimated
Tax returns and reports and information returns and reports) required to be
filed with any Tax authority with respect to any Taxable period ending on or
before the consummation of the transactions set forth herein, by or on behalf of
Paradigm (collectively, the "Paradigm Returns"), have been or will be filed when
due (including any extensions of such due date), and all amounts shown to be due
thereon on or before the Closing have been or will be paid on or before such
date, except to the extent such failure to file or pay has not had and would not
have a material and adverse effect on the Business Condition of Paradigm.
(b) The consolidated financial statements of Paradigm contained in
Paradigm's Annual Report to Stockholders for the year ended December 31, 1995
fully accrue all actual and contingent liabilities for Taxes with respect to all
periods through the date thereof in accordance with GAAP.
5.9 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Paradigm which has or would
have the effect of prohibiting or significantly impairing any material business
practice of Paradigm, any material acquisition of property by Paradigm, or the
continuation in all material respects of the business of Paradigm as currently
conducted or as currently proposed to be conducted.
5.10 Governmental Authorizations and Licenses. Paradigm is the holder
of all licenses, authorizations, permits, concessions, certificates and other
franchises of any Governmental
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Entity required to operate its business (collectively, the "Paradigm Government
Licenses") which Paradigm Government Licenses are in full force and effect, and
is in material compliance with the terms, conditions, limitations, restrictions,
standards, prohibitions, requirements and obligations of such Paradigm
Government Licenses except to the extent failure to hold and maintain such
Paradigm Government Licenses or to so comply would not have a material and
adverse effect on the Business Condition of Paradigm. To the knowledge of
Paradigm, there is not now pending, nor is there threatened, any action, suit,
investigation or proceeding against Paradigm before any Governmental Entity with
respect to the Paradigm Government Licenses, nor is there any issued or
outstanding notice, order or complaint with respect to the violation by Paradigm
of the terms of any Paradigm Government License or any rule or regulation
applicable thereto, except to the extent that any such action would not have a
material and adverse effect on the Business Condition of Paradigm.
5.11 Environmental Matters. Paradigm is, to its knowledge, in
substantial compliance with all applicable federal, state or local laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or waste, except to the extent
noncompliance with such laws has not had and would not reasonably be expected to
have a material and adverse effect on the Business Condition of Paradigm.
5.12 Questionable Payments. Neither Paradigm nor, to its knowledge, any
director, officer or other employee, agent or representative of Paradigm has (a)
made any payments or provided services or other favors in the United States of
America or in any foreign country in order to obtain preferential treatment or
consideration by any Governmental Entity with respect to any aspect of the
business of Paradigm; or (b) made any political contributions which, to the best
knowledge of Paradigm, would not be lawful under the laws of the United States
or the foreign country in which such payments were made. Neither Paradigm nor,
to its knowledge, any director, officer or other employee, agent or
representative of Paradigm or any customer or supplier of any of them has been
the subject of any inquiry or investigation by any Governmental Entity in
connection with payments or benefits or other favors to or for the benefit of
any governmental or armed services official, agent, representative or employee
with respect to any aspect of the business of Paradigm or with respect to any
political contribution.
5.13 Brokers or Finders; Professional Fees. Other than as reflected in
that certain letter agreement between Paradigm and Bentley Hall & Company, no
agent, broker, investment banker or other firm or person is, or will be,
pursuant to any agreement made or entered into by Paradigm, entitled to any
broker's or finder's fee or any other commission or similar fee in
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connection with any of the transactions contemplated by this Agreement.
5.14 Permit Application. The information supplied by Paradigm for
inclusion in the application for issuance of a permit pursuant to section 25121
of the California Corporations Code pursuant to which the Stock Consideration
will be qualified shall not at the time the fairness hearing is held pursuant to
section 25142 of the California Corporations Code and the time the qualification
of such securities is effective under section 25122 of the California
Corporations Code contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5.15 Section 368(a) Reorganization. Subject in each case to the
assumptions, conditions and representations set forth and relied on in the Tax
Opinion delivered pursuant to Section 10.8 below, the transactions contemplated
hereby will constitute, with respect to the Stock Consideration, a
reorganization within the meaning of section 368(a) of the Code.
ARTICLE VI
COVENANTS OF NEWLOGIC
6.1 Maintenance of Business. During the period from the date hereof to
the Closing, NewLogic shall carry on and use all commercially reasonable efforts
to preserve in all material respects its business, operations and facilities,
the goodwill of the business, operations and facilities and relationships with
its employees and all significant customers, suppliers, agents, licensees and
others with respect to the business, operations and facilities in substantially
the same manner as NewLogic did prior to the date hereof. If NewLogic becomes
aware of a deterioration in a relationship with any such employee or significant
customer, supplier, licensee or agent with respect to the business, operations
and facilities, NewLogic will promptly bring such information to the attention
of Paradigm and will use all commercially reasonable efforts to restore such
relationship.
6.2 Conduct of Business. From the date hereof until the Closing, except
as expressly permitted hereby, NewLogic shall not without Paradigm's prior
written consent:
(a) incur any indebtedness for money borrowed or guarantee any
indebtedness or obligation of any other party except in the ordinary course;
(b) set aside or pay any dividend or distribution of assets to, or
repurchase any of its stock from any of its shareholders;
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(c) issue or grant any securities or securities convertible into common
stock or grant or issue any options, warrants or rights to subscribe for its
common stock or securities convertible into its common stock;
(d) enter into, amend or terminate any employment or consulting
agreement or any similar agreement or arrangement;
(e) increase or modify the compensation payable or to become payable to
any of its officers, directors, employees or agents, or adopt or amend any
employee benefit plan or arrangement;
(f) acquire or dispose of by sale, lease, license or other means, any
properties or assets used in its business except in the ordinary course of
business;
(g) waive or commit to waive any rights of substantial value;
(h) permit any material change in the manner in which its books and
records are maintained;
(i) create or suffer to be imposed any material lien, mortgage,
security interest or other charge on or against its properties or assets;
(j) enter into, amend or terminate any lease of real or personal
property otherwise than in the ordinary course of business;
(k) amend its Certificate of Incorporation or Bylaws;
(l) engage in any activities or transactions outside the ordinary
course of its business;
(m) make any material amendments or changes in any instruments or
agreements delivered by it or its representatives to Paradigm or its counsel;
(n) grant any severance or termination pay to any director, officer,
employee or consultant, except mandatory payments made pursuant to standard
written agreements outstanding on the date hereof (with any such agreement or
arrangement to be disclosed in the NewLogic Schedule); or
(o) transfer to any person or entity any rights to the NewLogic
Intellectual Property Rights.
6.3 Necessary Consents. Prior to the Closing, at the request and
direction of Paradigm, NewLogic will use its commercially reasonable efforts to
obtain such written consents and take such other actions as may be reasonably
necessary or appropriate to allow the continuation of its businesses in all
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material respects by Paradigm after the Closing as conducted on the date hereof.
6.4 Access to Information. NewLogic shall give to Paradigm and its
accountants, legal counsel and other representatives full and complete access,
during normal business hours throughout the period from the date hereof to the
Closing, to all of the properties, books, contracts, commitments and records
relating to the business, assets and liabilities of NewLogic, and will furnish
Paradigm, its accountants, legal counsel and other representatives during such
period all such information concerning its affairs as Paradigm may reasonably
request.
6.5 Further Assurances. NewLogic will use all commercially reasonable
efforts to perform and fulfill all obligations to be performed and fulfilled
under this Agreement, and to cause all the conditions precedent to the
consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. Notwithstanding the foregoing, NewLogic will use its
best efforts to ensure that all Securityholders will enter into this Agreement
promptly following the issuance of the fairness determination described in
Section 5.14 above. NewLogic shall cooperate with Paradigm in such actions and
in securing requisite approvals and shall deliver such further documents as
Paradigm may reasonably request as necessary to evidence such transactions.
6.6 Exclusivity; Acquisition Proposals. Until the earliest to occur of
May 15, 1996, valid termination of this Agreement, or the Closing:
(a) NewLogic shall not knowingly, and shall not knowingly cause or
permit, directly or indirectly, through any officer, director, agent or
representative (including, without limitation, investment bankers, attorneys,
accountants and consultants), or otherwise:
(i) solicit, initiate or further the submission of proposals
or offers from, or enter into any agreement with, any firm,
corporation, partnership, association, group (as defined in section
13(d)(3) of the Exchange Act) or other person or entity, individually
or collectively (including, without limitation, any managers or
employees of NewLogic or any affiliates), other than Paradigm (a "Third
Party"), relating to any acquisition or purchase of all or any
significant portion of the assets of, or any equity interest in,
NewLogic or any merger, consolidation or business combination with
NewLogic;
(ii) other than in the ordinary course of business,
participate in any discussions or negotiations regarding, or furnish to
any Third Party any
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confidential information with respect to NewLogic or Paradigm in
connection with any acquisition or purchase of all or any significant
portion of the assets of, or any equity interest in, NewLogic or any
merger, consolidation or business combination with NewLogic; or
(iii) cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any Third Party to
undertake or seek to undertake any acquisition or purchase of all or
any significant portion of the assets of, or any equity interest in,
NewLogic or any merger, consolidation or business combination with
NewLogic.
(b) In the event that, prior to termination of this Agreement or the
Closing, NewLogic receives any offer or indication of interest from any Third
Party relating to any acquisition or purchase of all or any portion of the
assets of, or any equity interest in, NewLogic or any merger, consolidation or
business combination with NewLogic, NewLogic shall promptly notify Paradigm in
writing, and shall in any such notice, set forth in reasonable detail the
identity of the Third Party, the terms and conditions of any proposal and any
other information requested of NewLogic by the Third Party or in connection
therewith.
(c) NewLogic shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Third Party conducted
prior to the date of this Agreement with respect to any of the foregoing.
(d) In the event the Fairness Hearing (defined in Section 7.7 below)
has not occurred by May 15, 1996, the exclusive dealing covenants set forth in
this Section 6.6 shall automatically be extended for ten (10) day periods until
the earlier to occur of the Closing or the valid termination of this Agreement.
6.7 Breach of Representations, Warranties, Agreements and Covenants.
NewLogic shall not knowingly take, or knowingly fail to take, any action which
from the date hereof through the Closing would cause or constitute a material
breach of any of its representations, warranties, agreements and covenants set
forth in this Agreement. Promptly after becoming aware of the actual, pending or
threatened occurrence of any event which would cause or constitute such a
material breach or inaccuracy, NewLogic shall give notice thereof to Paradigm
and shall use all commercially reasonable efforts to prevent or promptly remedy
such breach or inaccuracy.
6.8 Legal Conditions to the Sale or Surrender of the Securities.
NewLogic shall take, and shall cause to be taken, all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
NewLogic with respect
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to the consummation of the transactions set forth herein and will promptly
cooperate with and furnish information to Paradigm in connection with any such
requirements imposed upon Paradigm in connection with the consummation of the
transactions set forth herein. NewLogic shall take, and shall cause to be taken,
all reasonable actions to obtain (and to cooperate with Paradigm in obtaining)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity required to be obtained or made by NewLogic (or by Paradigm)
in connection with the consummation of the transactions set forth herein or the
taking of any action contemplated thereby or by this Agreement, to lift or
rescind any injunction or restraining order or other order materially and
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby as NewLogic deems advisable in good faith, and to effect all
necessary registrations and filings and submissions of information as NewLogic
deems advisable in good faith required by any Governmental Entity, and to
fulfill all conditions to this Agreement.
6.9 Post-Closing Covenants.
(a) Commencing from and after the Closing, and for a period of two (2)
years following the Closing, no Securityholder shall voluntarily resign his or
her employment with or Service Provision for Paradigm (or any legal
successor-in-interest to Paradigm), or act or fail to act in such a manner as to
give rise to such Securityholder's termination for "Cause" (as defined below) by
Paradigm (or any such successor-in-interest). The parties agree that a
Securityholder's resignation of employment from, or termination of employment
for Cause by, Paradigm, on or before the second anniversary of the Closing Date,
shall constitute a Breach (as defined in Section 13.2) of this Section 6.9(a).
Nothing in this Section 6.9(a) shall in any way prohibit Paradigm from
terminating the employment of one or more Securityholders for any reason, with
or without Cause. For purposes of this Section 6.9(a), "Cause" shall mean (i)
any act of personal dishonesty taken by the Securityholder in connection with
his/her responsibilities as an employee of Paradigm and intended to result in
his/her substantial personal enrichment, (ii) such Securityholder's conviction
of a felony which Paradigm reasonably determines had or will have a material
detrimental effect on Paradigm's reputation or business, (iii) a grossly
negligent or willful act by such Securityholder which constitutes gross
misconduct and which is injurious to Paradigm, or (iv) continued violations by
such Securityholder of his/her obligations which are demonstrably willful or
grossly negligent on his/her part after there has been delivered to such
Securityholder a written demand for performance from Paradigm which describes
the basis for Paradigm's belief that he/she has not substantially performed
his/her duties. In addition, for purposes of this Section 6.9(a), in the event
Paradigm, without Cause and without the affected Securityholder's consent, (A)
substantially reduces the amount of such Securityholder's base compensation,
other than any such reduction which is part
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of, and generally consistent with, a general reduction of salaries of employees
holding similar positions, (B) materially adversely affects his/her working
conditions at Paradigm in a manner that disproportionately adversely affects
such Securityholder, as compared to other Paradigm employees generally, or (C)
unilaterally and substantially changes his/her title and duties, such
Securityholder's resignation of employment will be treated as a termination of
employment by Paradigm without Cause; provided, however, that with respect to
acts described in subsections (B) and (C) above, such Securityholder's
resignation will not be treated as a constructive termination unless Paradigm
fails to restore his/her prior working conditions, title or duties in all
material respects within thirty (30) days after notice to the President of
Paradigm setting forth in reasonable detail the respects in which he/she
believes the act constitutes constructive termination.
(b) The parties acknowledge that the Business Condition of NewLogic
would be materially adversely affected by the failure to replace its chip
architect, the position held until recently by Xxxxxxxx Xxxx. Prior to the
expiration of sixty (60) days from the date hereof, the Securityholders, or any
of them, shall identify, recruit and cause to be hired by Paradigm, pursuant to
employment terms reasonably acceptable to Paradigm, an individual with
credentials, expertise and experience reasonably similar in scope and subject
matter to NewLogic's prior chip architect. Paradigm's decision whether to employ
any such individual shall be made by Paradigm in its sole discretion. The
parties agree that the failure to complete such recruitment and hiring within
the time frame specified above shall constitute a Breach (as defined in Section
13.2) of this Section 6.9(b).
6.10 Public Announcements. NewLogic will consult in advance with
Paradigm concerning the timing and content of any announcement, press release or
public statement concerning the transactions set forth in this Agreement and
will not make any such announcement, release or statement without Paradigm's
prior written consent.
ARTICLE VII
COVENANTS OF PARADIGM
7.1 Necessary Consents. Prior to the Closing, Paradigm will obtain such
consents and take such other actions as may be necessary or appropriate to allow
the consummation of the transactions contemplated hereby.
7.2 Access to Information. Paradigm shall give NewLogic and its
accountants, legal counsel and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of the
properties, books, contracts, commitments and records relating to the business,
assets
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and liabilities of Paradigm, and will furnish NewLogic, its accountants, legal
counsel and other representatives during such period all such information
concerning its affairs as NewLogic may reasonably request; provided, that any
furnishing of such information pursuant hereto or any investigation by NewLogic
shall not affect NewLogic's right to rely on the representations, warranties,
agreements and covenants made by Paradigm in this Agreement.
7.3 Further Assurances. Paradigm will use all commercially reasonable
efforts to perform and fulfill all obligations on its part to be performed and
fulfilled under this Agreement, and to cause all the conditions precedent to the
consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. Paradigm shall cooperate with NewLogic in such
actions and in securing requisite approvals and shall deliver such further
documents as NewLogic may reasonably request as necessary to evidence such
transactions.
7.4 Public Announcements. Paradigm will consult in advance with
NewLogic concerning the timing and content of any announcement, press release or
public statement concerning the transactions set forth in this Agreement and
will not make any such announcement, release or statement without NewLogic's
consent; provided, however, that Paradigm may make any public statement
concerning the transactions set forth in this Agreement without NewLogic's
consent, if, in the reasonable opinion of counsel for Paradigm, such statement
or announcement is required or advisable to comply with applicable law, statute,
rule or regulation.
7.5 Breach of Representations, Warranties, Agreements and Covenants.
Paradigm shall not knowingly take, or knowingly fail to take, any action which
from the date hereof through the Closing would cause or constitute a material
breach of any of its representations, warranties, agreements and covenants set
forth in this Agreement. In the event of, and promptly after becoming aware of,
the actual, pending or threatened occurrence of any event which would cause or
constitute such a material breach or inaccuracy, Paradigm shall give notice
thereof to NewLogic and shall use its commercially reasonable efforts to prevent
or promptly remedy such breach or inaccuracy.
7.6 Legal Conditions to the Sale of the Securities. Paradigm shall
take, and shall cause to be taken, all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on Paradigm with
respect to the consummation of the transactions set forth herein and will
promptly cooperate with and furnish information to NewLogic in connection with
any such requirements imposed upon NewLogic in connection with the consummation
of the transactions set forth herein. Paradigm shall take, and shall cause to be
taken, all reasonable
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actions to obtain (and to cooperate with NewLogic in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity required to be obtained or made by Paradigm (or by NewLogic) in
connection with the consummation of the transactions set forth herein or the
taking of any action contemplated thereby or by this Agreement, to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby as
Paradigm deems advisable in good faith, and to effect all necessary
registrations and filings and submissions of information as Paradigm deems
advisable in good faith required by any Governmental Entity, and to fulfill all
conditions to this Agreement.
7.7 3(a)(10) Fairness Hearing. As promptly as practicable and in no
event later than May 15, 1996, Paradigm, with the cooperation of NewLogic and
the Securityholders, shall prepare and file a permit application under section
25121 of the California Corporate Securities Law of 1968, as amended (the
"Corporations Code") with the California Department of Corporations with respect
to the transactions contemplated by this Agreement and Paradigm shall request a
fairness hearing pursuant to section 25142 of the Corporations Code ("Fairness
Hearing"). Paradigm shall pay all costs and expenses associated with the
Fairness Hearing. Paradigm shall provide notice of the Fairness Hearing to the
Securityholders in accordance with the requirements of the Corporations Code.
7.8 Listing of Shares. As soon as practicable following the Closing,
Paradigm shall take any action reasonably required to be taken to cause the
Stock Consideration to be issued in this transaction to be approved for listing
on the Nasdaq National Market.
ARTICLE VIII
COVENANTS OF SECURITYHOLDERS
8.1 Necessary Consents. Prior to the Closing each Securityholder will
obtain such written consents and take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby.
8.2 Further Assurances. Each Securityholder will use all commercially
reasonable efforts to perform and fulfill all obligations to be performed and
fulfilled under this Agreement, and to cause all conditions precedent to the
consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. Each Selling Securityholder shall execute and deliver
to Paradigm on or before the Closing each agreement and certificate applicable
to such Securityholder set forth in Sections 9.1, 9.12, 9.13 and below. Each
Securityholder shall cooperate with NewLogic and Paradigm
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in such actions and in securing requisite approvals and shall deliver such
further documents as NewLogic and Paradigm may reasonably request in writing as
necessary to evidence such transactions.
8.3 No Transfer. As long as this Agreement is in effect, each
Securityholder agrees not to sell, offer for sale, assign, transfer or otherwise
encumber any of the Securities to any third party other than Paradigm. Each
Securityholder also waives any rights of first offer or refusal or similar
rights that it has with respect to the transfer of any NewLogic security by any
NewLogic securityholder to Paradigm.
8.4 Breach of Representations Warranties, Agreements and Covenants.
Each Securityholder shall not knowingly take, or knowingly fail to take, any
action which from the date hereof through the Closing would cause or constitute
a material breach of any of its representations, warranties, agreements and
covenants set forth in this Agreement or a material breach of NewLogic's
covenants set forth in Section 6.9. Promptly after becoming aware of the actual,
pending or threatened occurrence of any event which would cause or constitute
such a material breach or inaccuracy, such Securityholder shall give notice
thereof to NewLogic and to Paradigm and shall use all commercially reasonable
efforts to prevent or promptly remedy such material breach or inaccuracy. The
parties agree that a Securityholder's resignation of employment from, or
termination of employment for Cause by, Paradigm, on or before the second
anniversary of the Closing Date, shall constitute a Breach (as defined in
Section 13.2) of this Section 8.4 and Section 6.9.
8.5 Limited Resales. Unless and until the Stock Consideration is
effectively registered under the 1933 Act or a valid exemption from such
registration is available (other than that provided under section 3(a)(10) of
the 1933 Act), each of the Securityholders agrees, for so long as Rule 144 under
the 1933 Act shall apply to such Securityholder, to sell the Stock Consideration
in accordance with the terms and conditions of paragraphs (e)(1), (g) and (h) of
Rule 144 under the 1933 Act.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARADIGM
The obligations of Paradigm to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, at or before the Closing, of
all the following conditions, unless waived in writing by Paradigm:
9.1 Certificates for Securities. Paradigm shall have received from the
Securityholders all written certificates and other documents evidencing the
Securities.
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9.2 Representations and Warranties True. All representations and
warranties of NewLogic and of the Securityholders in this Agreement, the
NewLogic Disclosure Schedule and the schedules and exhibits hereto, and in any
written statement or certificate that shall be delivered to Paradigm under this
Agreement, shall be true and correct in all material respects on and as of the
Closing Date as if made on the date thereof.
9.3 Covenants Performed. NewLogic and the Securityholders shall have
performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
NewLogic and the Securityholders, as applicable, on or before the Closing Date.
9.4 Certificates. Paradigm shall have received a certificate from
NewLogic, dated the Closing Date, certifying, in such detail as Paradigm and its
counsel may reasonably request, that the conditions specified in this Article
have been satisfied.
9.5 Opinion of Counsel for NewLogic. Paradigm shall have received a
final opinion from Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for NewLogic, dated
the Closing Date and in substantially the form attached hereto as Exhibit 9.5
(the "BP&H Opinion").
9.6 No Violations; No Actions. Consummation of the transactions
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or Governmental Entity having competent jurisdiction and no action
or proceeding shall have been instituted or threatened by any person, entity or
Governmental Entity which, in any such case, in the sole reasonable judgment of
Paradigm, has a reasonable probability of resulting in (a) the obtaining of
material damages from Paradigm; or (b) an order, judgment or decree restraining,
prohibiting or rendering unlawful the consummation of the transactions
contemplated by this Agreement.
9.7 No Material Adverse Effect. During the period from March 31, 1996
to the Closing, there shall not have been any material and adverse effect on the
Business Condition of NewLogic.
9.8 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions, including without limitation the
Escrow Agreement and Securityholders' investment representation certificates,
shall be in form and substance reasonably satisfactory to Paradigm and its
counsel, and Paradigm shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
9.9 Schedules. If necessary or appropriate, NewLogic shall have updated
or amended all schedules and other disclosure
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required by this Agreement and Paradigm shall be satisfied with its due
diligence investigation and review of such updates, amendments and/or additional
disclosure.
9.10 Required Consents. All consents, filings, registrations, legend
removal permits, approvals and waivers from third parties and governmental
authorities necessary for the consummation of the transactions as contemplated
hereby shall have been obtained or timely filed, as applicable.
9.11 Accountants' Opinion. Paradigm shall have received an opinion of
its independent accountants, in form reasonably acceptable to Paradigm,
confirming certain accounting treatment and Purchase Price allocation matters
material to the transactions contemplated under this Agreement.
9.12 Employment, Noncompetition and Proprietary Information Agreements.
(a) Each person listed on Schedule 2.1 attached hereto shall have
accepted in writing an employment letter agreement from Paradigm in
substantially the form attached hereto as Exhibit 9.12(a) (the "Employment
Letter Agreement"), with such other changes as the officers of NewLogic and
Paradigm deem to be appropriate.
(b) Each of Messrs. Xxxxxxxx, Xxxxx and Xxxxxxx shall have entered into
a three (3) year Non-Competition Agreement with Paradigm in substantially the
form attached hereto as Exhibit (the 9.12(b) "Non-Competition Agreements"), with
such other changes as the officers of NewLogic and Paradigm deem to be
appropriate.
(c) Each person listed on Schedule 2.1 shall have executed and
delivered to Paradigm a proprietary information and inventions agreement in
substantially the form attached hereto as Exhibit 9.12(c) (the "Proprietary
Information Agreements"), which shall not exclude any inventions that would have
been assigned to NewLogic had such Proprietary Information Agreement been
executed and delivered to NewLogic on the date such Securityholder's employment
with NewLogic commenced.
9.13 Tax Forms. Each of the Securityholders shall have provided to
Paradigm an executed Form W-8 or Form W-9 properly reporting the transactions
set forth in this Agreement.
9.14 Signature Pages. Each of Messrs. Xxxxxxxx, Xxxxx and Xxxxxxx and
at least six (6) of the seven (7) other persons listed on Schedule 2.1 hereto
shall have entered into this Agreement by executing and delivering to Paradigm
(a) a Signature Page to this Agreement in the form attached hereto and (b) each
agreement or certificate applicable to such Securityholder or other person as
set forth in Section 9.12 above.
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9.15 Other Purchase Agreements. Nichimen and each other securityholder
of NewLogic not executing this Agreement shall have executed and delivered to
Paradigm a securities purchase agreement (the "Investor Securities Purchase
Agreement") in form and substance satisfactory to Paradigm.
9.16 Securities Laws. Paradigm shall have received any and all permits,
authorizations, approvals and orders under federal and state securities laws for
the issuance of the Stock Consideration including, without limitation, approval
of the California Commissioner of Corporations pursuant to section 25142 of the
California Corporate Securities Law without the imposition of any conditions
adverse to Paradigm or the Securityholders or which would require Paradigm to
amend its Articles of Incorporation, Bylaws or any contract.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF NEWLOGIC
AND OF THE SECURITYHOLDERS
The obligations of NewLogic and of the Securityholders to consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or before the Closing, of all the following conditions, unless waived in
writing by NewLogic and by the Securityholders:
10.1 Representations and Warranties True. All representations and
warranties by Paradigm in this Agreement and the schedules and exhibits hereto,
and in any written statement or certificate that shall be delivered to NewLogic
or to the Securityholders by Paradigm under this Agreement shall be true and
correct in all material respects on and as of the Closing as though such
representations and warranties were made on and as of that date.
10.2 Covenants Performed. Paradigm shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by Paradigm on or before the Closing.
10.3 No Violations; No Actions. Consummation of the transactions
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency which, in any such case, in the sole reasonable judgment of
NewLogic or the Securityholders, has a reasonable probability of resulting in
(a) the obtaining of material damages from NewLogic or from the Securityholders,
or (b) an order, judgment or decree restraining, prohibiting or rendering
unlawful the consummation of the transactions contemplated by this Agreement.
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10.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions, including without limitation the
Escrow Agreement, shall be in form and substance reasonably satisfactory to
NewLogic, the Securityholders and its or their counsel, and NewLogic and the
Securityholders shall have received all such counterpart originals or certified
or other copies of such documents as it may reasonably request.
10.5 Required Consents. All consents, filings, registrations, legend
removal permits, approvals and waivers from third parties and governmental
authorities necessary to the transactions as contemplated hereby shall have been
obtained or timely filed, as applicable.
10.6 Certificate. The Securityholders and NewLogic shall have received
a certificate from Paradigm, dated the Closing Date, certifying in such detail
as NewLogic, the Securityholders and its or their counsel may reasonably request
that the conditions specified in this Article that have to be satisfied by
Paradigm have been satisfied.
10.7 Opinion of Counsel for Paradigm. NewLogic and the Securityholders
shall have received an opinion from Pillsbury Madison & Sutro LLP, counsel for
Paradigm, dated the Closing Date, in substantially the form attached hereto as
Exhibit 10.7 (the "PM&S Opinion").
10.8 Tax Opinion. NewLogic and the Securityholders shall have received
a written opinion from Pillsbury Madison & Sutro LLP, counsel to Paradigm, dated
the Closing Date, to the effect that the transactions contemplated hereby will
constitute a reorganization within the meaning of section 368(a) of the Code,
which opinion shall be in a form reasonably acceptable to NewLogic and its
counsel (the "Tax Opinion"). In rendering the Tax Opinion, such counsel shall be
entitled to rely upon reasonable assumptions and conditions and to require and
rely upon reasonable representations relating thereto made by NewLogic and the
Securityholders.
10.9 3(a)(10) Fairness Hearing. The Fairness Hearing shall have been
held and a permit for the issuance of the Stock Consideration by the
Commissioner of Corporations of the State of California shall have been issued.
10.10 Accountants' Opinion. Paradigm shall have received an opinion of
its independent accountants, in form reasonably acceptable to Paradigm,
confirming certain accounting treatment and Purchase Price allocation matters
material to the transactions contemplated under this Agreement.
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ARTICLE XI
CLOSING
11.1 Time and Place. The purchase, sale and surrender of the Securities
hereunder (the "Closing") shall occur at the Menlo Park, California offices of
Pillsbury Madison & Sutro LLP at such time and date to which the parties may
agree in writing (the "Closing Date" or the "Closing").
11.2 Deliveries of NewLogic or the Securityholders. At the Closing,
NewLogic or the Securityholders will execute and deliver or cause to be executed
and delivered to Paradigm:
(a) Certificates and Instruments. Certificates representing the
Securities endorsed over to Paradigm or accompanied by duly executed stock
powers or similar instruments of transfer or, in the case of Securities to be
surrendered, instruments effecting such surrender;
(b) Corporate Documents. The Certificate of Incorporation of NewLogic,
certified by the Secretary of State of Delaware as of a recent date and the
Bylaws of NewLogic, certified by the Secretary of NewLogic, as in effect at the
Closing;
(c) Certificates of Good Standing and Qualification. Certificate of
Good Standing, dated as of a recent date, with respect to NewLogic issued by the
Secretary of State of Delaware, and Certificate of Qualification as a Foreign
Corporation, dated as of a recent date, with respect to NewLogic issued by the
Secretary of State of Washington;
(d) Resolutions. A copy of the resolutions of the Board of Directors of
NewLogic, certified by the Secretary of NewLogic as having been duly and validly
adopted and being in full force and effect, authorizing execution and delivery
of this Agreement and performance of the transactions contemplated hereby by
NewLogic;
(e) Books and Records. All of the minute books, stock ledgers and
similar corporate records of NewLogic;
(f) Consents. Evidence that all consents, filings, legend removal
permits, registrations, approvals, or authorizations of or notifications to any
third parties (including governmental agencies), if any, required to issue and
exchange the securities for the consideration set forth herein and to consummate
the transactions contemplated hereby have been obtained or made, as applicable,
by NewLogic;
(g) Opinion of Counsel. The BP&H Opinion;
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(h) NewLogic Certificate. A certificate from NewLogic, dated the
Closing Date, containing the information required pursuant to Section 9.4;
(i) FIRPTA. A Foreign Investment and Real Property Tax Act of 1980
Notification Letter executed by NewLogic; and
(j) Other Documents. The Escrow Agreement, the Agreement of Merger, the
Employment Letter Agreements, the Non-Competition Agreements, the Proprietary
Information Agreements and such other documents and instruments as Paradigm or
its counsel reasonably shall deem necessary to consummate the transactions
contemplated hereby.
(k) Option Exercise Price. Payment in full to NewLogic (or Paradigm on
behalf of NewLogic) of the aggregate option exercise price set forth next to
each Securityholder optionee identified on Schedule 11.2(k) attached hereto.
All documents delivered to Paradigm shall be in form and substance
satisfactory to Paradigm.
11.3 Deliveries of Paradigm. At the Closing, Paradigm will execute and
deliver or cause to be executed and delivered to NewLogic, the Securityholders
and/or the Escrow Agent, as appropriate, simultaneously with delivery of the
items referred to in Section 11.2 above:
(a) Payment of the Consideration. The Cash Consideration and
certificates representing the Stock Consideration set forth in Article and
Schedule 1.3(a);
(b) Resolutions. A copy of the resolutions of the Board of Directors of
Paradigm, certified by the Secretary thereof as having been duly and validly
adopted and being in full force and effect, authorizing execution and delivery
of this Agreement and performance of the transactions contemplated hereby by
Paradigm;
(c) Consents. Evidence that all consents, filings, registrations,
approvals, or authorizations of or notifications to any third parties (including
governmental agencies), if any, required to purchase the Securities and to
consummate the transactions contemplated hereby have been obtained or made, as
applicable, by Paradigm;
(d) Opinion of Counsel. The PM&S Opinion and the Tax Opinion;
(e) Paradigm Certificate. A certificate from Paradigm dated the Closing
Date, containing the information required pursuant to Section 10.6; and
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(f) 3(a)(10) Permit. The permit issued pursuant to section 25121 of the
California Corporations Code qualifying the issuance of the Stock Consideration.
(g) Other Documents. The Escrow Agreement, the Agreement of Merger, the
Employment Letter Agreements, and such other documents and instruments as
NewLogic, the Securityholders or its or their counsel reasonably shall deem
necessary to consummate the transactions contemplated hereby.
All documents delivered to NewLogic and/or to the Securityholders shall
be in form and substance satisfactory to NewLogic and/or to the Securityholders,
as appropriate.
ARTICLE XII
COVENANT OF SETTLEMENT AND GENERAL RELEASE
12.1 Settlement and General Release of the Paradigm Released Parties.
(a) From and after the Closing, for the consideration set forth herein
and for other due and valid consideration, the receipt and sufficiency of which
is hereby acknowledged and received, each of the Securityholders, for and on
behalf of themselves and on behalf of their respective affiliates, successors,
assigns, agents and representatives waive and finally release and forever
discharge Paradigm and NewLogic and each of Paradigm's and NewLogic's respective
officers, directors, stockholders, affiliates, agents, subsidiaries, including
officers and directors of subsidiaries, representatives, employees, successors
and assigns (collectively, the "Paradigm Released Parties") from any and all
claims, causes of action, suits, debts, demands, costs, expenses, attorneys'
fees, contracts, agreements, payments, compensation, liabilities or obligations,
contingent or fixed, liquidated or unliquidated, matured or unmatured, of every
name and nature, known or unknown, arising or which may have existed from the
beginning of the world against any such person, excluding therefrom only the
obligations specifically set forth in subparagraph 12.2(c) hereof (hereinafter
collectively referred to as the "NewLogic/Securityholders' Released Claims").
(b) Without limiting the generality of the foregoing, it is
specifically agreed that the NewLogic/Securityholders' Released Claims include
all claims arising out of, or related to, the approval of this Agreement by the
Securityholders, all of the transactions contemplated herein or in any other
document or agreement referred to herein and acceptance of the consideration for
the purchase or surrender of the Securities set forth herein. The
Securityholders hereby acknowledge and agree that from and after the Closing,
they shall cease to have any further right, title or interest in and to any of
the Securities purchased or surrendered pursuant to this Agreement and they
shall
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accordingly cease to have any equity interest in NewLogic as a result of the
transactions set forth in this Agreement.
(c) The NewLogic/Securityholders' Released Claims shall not include the
following: (i) the Stock Consideration; (ii) the potential payments set forth
under Article of this Agreement, if actually earned, and Paradigm's obligations
to act in good faith set forth in Section 2.2(d) above; (iii) the obligations of
Paradigm under the Employment Letter Agreements to the extent expressly set
forth therein; (iv) the right of any Securityholder of NewLogic to
indemnification or contribution from NewLogic pursuant to (A) NewLogic's
Certificate of Incorporation or Bylaws in effect on the Closing Date,(B) for
acts occurring prior to Closing, any written indemnification agreement between
NewLogic and the Securityholder in effect at the Closing, or (C) any
indemnification statute, at common law or in equity; (v) the rights of the
Securityholders to indemnification under the terms of Article of this Agreement
and to specifically enforce Paradigm's material obligations under this
Agreement; and (vi) the rights of the Securityholders against Pillsbury Madison
& Sutro LLP with respect to the Tax Opinion.
(d) Each of the Securityholders for and on behalf of themselves and on
behalf of their respective affiliates, successors, assigns, agents and
representatives covenants not to xxx or otherwise institute or cause to be
instituted or in any way participate in any legal, administrative or other
proceeding or action against any of the Paradigm Released Parties with respect
to any matter of any kind arising out of the NewLogic/Securityholders' Released
Claims except as required by court order or statute.
(e) The Securityholders acknowledge that this waiver and release
extends to all claims of every nature and kind, known or unknown, suspected or
unsuspected, past, present or future, arising from the NewLogic/Securityholders'
Released Claims, and any and all rights granted to such Securityholders under
section 1542 of the California Civil Code or any analogous state law or federal
law or regulation are hereby expressly waived. Said section 1542 of the Civil
Code of the State of California reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
(f) This Section 12.1 shall constitute a complete defense to any claim
released herein and shall survive indefinitely, without restriction,
qualification or limitation, notwithstanding anything in this Agreement to the
contrary.
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12.2 Settlement and General Release of the Securityholders Released
Parties.
(a) From and after the Closing, for the consideration set forth herein
and for other due and valid consideration, the receipt and sufficiency of which
is hereby acknowledged and received, Paradigm and NewLogic, each severally for
and on behalf of itself and on behalf of its respective affiliates,
subsidiaries, successors, assigns, officers, directors, shareholders, agents and
representatives waives and finally releases and forever discharges each of the
Securityholders and their successors and permitted assigns (collectively, the
"Securityholders Released Parties") from any and all claims, causes of action,
suits, debts, demands, costs, expenses, attorneys' fees, contracts, agreements,
payments, compensation, liabilities or obligations, contingent or fixed,
liquidated or unliquidated, matured or unmatured, of every name and nature,
known or unknown, arising or which may have existed from the beginning of the
world against any such person, excluding therefrom only the obligations
specifically set forth in subparagraph 12.2(c) hereof (hereinafter collectively
referred to as the "Paradigm/NewLogic Released Claims").
(b) Without limiting the generality of the foregoing, it is
specifically agreed that the Paradigm/NewLogic Released Claims include all
claims arising out of, or related to, this Agreement, all of the transactions
contemplated herein or in any other document or agreement referred to herein,
and any Securityholder's prior employment with, service to, or service as an
officer or director of NewLogic (except as excluded in subparagraph 12.2(c)
below).
(c) The Paradigm/NewLogic Released Claims shall not include (i) the
rights of Paradigm to indemnification under the terms of Article of this
Agreement and to specifically enforce NewLogic's and each Securityholder's
material obligations under this Agreement; (ii) each Securityholders'
obligations under his or her confidentiality and assignment of inventions and
similar agreements and any indemnification agreements entered into with or
inuring to the benefit of NewLogic or Paradigm; (iii) the obligations of each
Securityholder under his or her Employment Agreement or Offer Letter and
Noncompete Agreement to the extent expressly set forth in, and in accordance
with, such agreements and (iv) the rights of Paradigm against Xxxxxxx, Phleger &
Xxxxxxxx LLP with respect to the BP&H Opinion.
(d) Paradigm and NewLogic each severally for and on behalf of itself
and on behalf of its respective officers, directors, shareholders and each of
their respective affiliates, agents, representatives, successors and assigns
covenants not to xxx or otherwise institute or cause to be instituted or in any
way participate in any legal, administrative or other proceeding or action
against any of the Securityholder Released Parties with
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respect to any matter of any kind arising out of the Paradigm/NewLogic Released
Claims.
(e) Paradigm and NewLogic acknowledge that this waiver and release
extends to all claims of every nature and kind, known or unknown, suspected or
unsuspected, past, present or future, arising from the Paradigm/NewLogic
Released Claims, and any and all rights granted to Paradigm and NewLogic under
section 1542 of the California Civil Code or any analogous state law or federal
law or regulation are hereby expressly waived. Said section 1542 of the Civil
Code of the State of California reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
(f) This Section 12.2 shall constitute a complete defense to any claim
released herein and shall survive indefinitely, without restriction,
qualification or limitation, notwithstanding anything in this Agreement to the
contrary.
ARTICLE XIII
INDEMNIFICATION
13.1 Survival of Representations, Warranties, Covenants and Agreements.
(a) All representations, warranties, covenants and agreements of
Paradigm, NewLogic and the Securityholders in this Agreement shall survive the
execution, delivery, and performance of this Agreement in accordance with this
paragraph. All representations and warranties of each party set forth in this
Agreement shall be deemed to have been made again by such party at and as of the
Closing Date. The representations, warranties, covenants and agreements of
NewLogic, the Securityholders and Paradigm set forth in this Agreement (other
than Article XII, Section 5.15 and each Securityholders' continuing obligation
under his or her confidentiality, employment, non-competition, and assignment of
inventions-agreements entered into with NewLogic and/or Paradigm, which shall
survive indefinitely) shall terminate on the second anniversary of the Closing
Date.
(b) As used in this Article, any reference to a representation,
warranty, agreement or covenant contained in any Article of this Agreement shall
include the exhibit and the portion of the NewLogic or Paradigm Schedule
relating to such Article.
-46-
13.2 Indemnification.
(a) Subject to the terms and limitations of this Article XIII, each of
the Securityholders hereby agrees, severally and not jointly, to indemnify,
defend and hold harmless each of the Paradigm Released Parties (other than any
Paradigm Released Party which is a Securityholder) from and against any and all
losses, liabilities, damages, demands, claims, suits, actions, judgments or
causes of action, assessments, costs and expenses, including, without
limitation, interest, penalties, attorneys' fees, any and all expenses incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation or otherwise (collectively, "Damages") asserted
against, resulting from, imposed upon or incurred or suffered by any Paradigm
Released Party (other than any Paradigm Released Party which is a
Securityholder), directly or indirectly, as a result of or arising from any
inaccuracy in or breach or nonfulfillment of or noncompliance with (hereafter, a
"Breach") any of the representations, warranties, covenants or agreements made
by NewLogic or by such Securityholder in this Agreement or any facts or
circumstances constituting such a Breach (all of which shall be referred to as
the "13.2(a) Identifiable Claims"). The Securityholders' indemnification
obligations hereunder with respect to the representations, warranties, covenants
and agreements made by NewLogic shall survive the Closing in accordance with the
terms of this Section 13.2 notwithstanding the Merger of NewLogic with and into
Paradigm.
(b) Subject to the terms and limitations of this Article XIII, Paradigm
hereby agrees to indemnify, defend and hold harmless each of the Securityholder
Released Parties from and against any and all Damages asserted against,
resulting from, imposed upon or incurred or suffered by any Securityholder
Released Party, directly or indirectly, as a result of or arising from any
Breach of any of the representations, warranties, covenants or agreements made
by Paradigm in this Agreement or any facts or circumstances constituting such a
Breach (all of which shall be referred to as "13.2(b) Identifiable Claims" and
together with 13.2(a) Identifiable Claims, collectively, the "Identifiable
Claims").
(c) With respect to the payment of Damages by the Securityholders under
this Agreement, the sole remedy of the Paradigm Released Parties, other than
with respect to fraud or willful misrepresentation (for which the sole remedy is
set forth in Section 13.2(e)), shall be the right to offset as payment for such
Damages a portion of the Escrowed Shares then held in the Escrow Account, in
each case in accordance with the terms and provisions of, and subject to the
limitations provided in, the Escrow Agreement. For purposes of any such Offsets,
the dollar value of the Escrowed Shares shall be $8.65 per share (subject in
each case to adjustment relating to stock splits, consolida-
-47-
tions or recapitalizations). Any allocation of Damages (or Offsets relating to
such Damages) among the Securityholders, and the allocation among the
Securityholders of the Escrowed Shares, net of any such Offsets, following their
release from escrow, shall be the responsibility of the Securityholders Trustee
and the Securityholders. Indemnifiable Claims that may result in Damages and
Offsets shall be determined by the parties in accordance with Sections 13.3 and
13.4 below; provided, however, that the parties hereby agree and stipulate that
any Breach of the covenants contained in Section 6.9 shall result solely in a
payment to the Paradigm Indemnified Parties equal to the designated number of
Escrowed Shares set forth on Schedule I attached to the Escrow Agreement; and
provided, further, that no Damages shall be paid to the Paradigm Released
Parties in connection with the Breach of any representations, warranties,
covenants and agreements (excluding those set forth in Section 6.9) contained
herein unless, until and except to the extent the aggregate amount of
Indemnifiable Claims resulting in Damages exceeds $75,000.
(d) Paradigm's maximum liability to each such Securityholder for
Damages caused by a breach of its representations, warranties, covenants and
agreements set forth herein (absent fraud or willful misrepresentation, for
which the limitation on Damages is set forth in Section 13.2(e) below) shall be
limited to the maximum amount of Damages for which such Securityholder could be
liable to Paradigm (in the event such Securityholder were to owe Damages to
Paradigm) at the time such Damages are payable by Paradigm.
(e) The sole remedies that may be available to a party in the event of
fraud or willful misrepresentation relating to any of the representations,
warranties, agreements or covenants made by any other party(ies) in this
Agreement shall be as set forth in this Section 13.2(e). With respect to any
fraud or willful misrepresentation claim brought by any party seeking
indemnification against any other party, the party seeking indemnification will
bear the burden of proof of demonstrating that the other party had actual
knowledge of the alleged falsehood and intentionally misled such party with
respect to same. Knowledge of a fact or omission on which a fraud or willful
misrepresentation claim is based may not be imputed or attributed to a party
seeking indemnification on the basis of his or her position as an officer or
director of Paradigm or NewLogic, as applicable, on access to information
arising from such position (unless it can be demonstrated that in fact such
access was used by such party seeking indemnification to obtain such
information) or on any lack of investigation by such party seeking
indemnification. Each Securityholder's maximum obligation for any Damages
relating to any fraud or willful misrepresentation claim arising under this
paragraph shall be limited to the aggregate Stock Consideration and other
proceeds received or to be received by such Securityholder pursuant to Article
of this Agreement, but including only any consideration actually earned pursuant
to
-48-
Article at the time of the calculation of Damages. Paradigm's maximum liability
for any Damages relating to any fraud or willful misrepresentation claim arising
under this paragraph shall be limited to the total consideration paid, or to be
paid, pursuant to Article of this Agreement, but including only any
consideration actually paid pursuant to Article at the time of the calculation
of Damages.
(f) Notwithstanding the expiration date of the representations,
warranties, covenants and agreements set forth herein, if a party shall notify
the other with respect to the submission of a claim during the time period of
survivability of the representations, warranties, covenants and agreements, such
party's liability for Damages shall continue in full force and effect until
settled to the other party's satisfaction with respect to those claims timely
made.
13.3 Procedure for Indemnification with Respect to Third-Party Claims.
(a) If any Paradigm or Securityholder Released Party determines to seek
indemnification under this Article with respect to Identifiable Claims (the
party seeking such indemnification hereinafter referred to as the "Indemnified
Party" and the party against whom such indemnification is sought is hereinafter
referred to as the "Indemnifying Party") resulting from the assertion of
liability by third parties, the Indemnified Party shall give written notice to
the Indemnifying Party within thirty (30) days of the Indemnified Party becoming
aware of any such Identifiable Claim or of facts upon which any such
Identifiable Claim will be based; the notice shall set forth such material
information with respect thereto as is then reasonably available to the
Indemnified Party; provided, however, that such written notice shall be
effective only if delivered to the Indemnifying Party before the termination,
pursuant to Sections 13.1 and 13.2 hereof, of the representations, warranties,
covenants and agreements upon which such Identifiable Claim(s) are based. All
Indemnifiable Claims made by Paradigm shall also be communicated to the Escrow
Agent as provided in the Escrow Agreement. In case any such liability is
asserted against the Indemnified Party, and the Indemnified Party notifies the
Indemnifying Party thereof, the Indemnifying Party will be entitled, if it so
elects by written notice delivered to the Indemnified Party within twenty (20)
days after receiving the Indemnified Party's notice, to assume the defense
thereof with counsel satisfactory to the Indemnified Party. Notwithstanding the
foregoing, (i) the Indemnified Party shall also have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party unless the Indemnified Party shall
reasonably determine that there is a conflict of interest between the
Indemnified Party and the Indemnifying Party with respect to such Identifiable
Claim, in which case the fees and expenses of such counsel will be borne by the
Indemnifying Party, (ii) the
-49-
Indemnified Party shall not have any obligation to give any notice of any
assertion of liability by a third party unless such assertion is in writing and
(iii) the rights of the Indemnified Party to be indemnified hereunder in respect
of Identifiable Claims resulting from the assertion of liability by third
parties shall not be adversely affected by its failure to give notice pursuant
to the foregoing unless, and, if so, only to the extent that, the Indemnifying
Party is materially prejudiced thereby. With respect to any assertion of
liability by a third party that results in an Identifiable Claim, the parties
hereto shall make available to each other all relevant information in their
possession material to any such assertion.
(b) In the event that the Indemnifying Party, within twenty (20) days
after receipt of the aforesaid notice of an Identifiable Claim, fails to assume
the defense of the Indemnified Party against such Identifiable Claim, the
Indemnified Party shall have the right to undertake the defense, compromise, or
settlement of such action on behalf of and for the account and risk of the
Indemnifying Party.
(c) Notwithstanding anything in this Section to the contrary, if there
is a reasonable probability that an Identifiable Claim may materially and
adversely affect the Indemnified Party, the Indemnified Party shall have the
right to participate, at its own cost and expense, in such defense, compromise,
or settlement and the Indemnifying Party shall not, without the Indemnified
Party's written consent (which consent shall not be unreasonably withheld),
settle or compromise any Identifiable Claim or consent to entry of any judgment
in respect thereof unless such settlement, compromise, or consent includes as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such Identifiable
Claim.
13.4 Procedure For Indemnification with Respect to Non-Third Party
Claims. In the event that the Indemnified Party asserts the existence of a claim
giving rise to Damages (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to the Indemnifying
Party. Such written notice shall state that it is being given pursuant to this
Section 13.4, specify with particularity the nature and amount of the claim
asserted, accompanied by any written materials supporting such claim, and
indicate the date on which such assertion shall be deemed accepted and the
amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence); provided, however, that such written notice
shall be effective only if delivered to the Indemnifying Party before the
termination, pursuant to Sections 13.1 and 13.2 hereof, of the representations,
warranties, covenants and agreements upon which such Identifiable Claim(s) are
based. If the Indemnifying Party, within thirty (30) days after the mailing of
notice by the Indemnified Party, shall not give written notice to the
Indemnified Party announcing its
-50-
intent to contest such assertion of the Indemnified Party, such assertion shall
be deemed accepted and the amount of claim shall be deemed a valid claim. In the
event, however, that the Indemnifying Party contests the assertion of a claim by
giving such written notice to the Indemnified Party within said period, then the
parties shall act in good faith to reach agreement regarding such claim. If the
parties to this Agreement, acting in good faith, cannot reach agreement with
respect to such claim within fifteen (15) days after such notice, then the
parties may pursue other legal or equitable remedies in accordance with Section
hereof.
ARTICLE XIV
TERMINATION
14.1 Termination.
(a) This Agreement may be terminated at any time prior to the Closing:
(i) by mutual agreement of the Boards of Directors of Paradigm and
NewLogic;
(ii) by Paradigm, if there has been a breach by NewLogic or by
any of the Securityholders of any representation, warranty, covenant or
agreement set forth in this Agreement resulting in a material and
adverse change in the Business Condition of NewLogic and which NewLogic
fails to cure within five (5) business days after notice thereof is
given by Paradigm (except that no cure period shall be provided for a
breach by NewLogic or the Securityholders which by its nature cannot be
cured);
(iii) by NewLogic, if there has been a breach by Paradigm of
any representation, warranty, covenant or agreement set forth in this
Agreement on the part of Paradigm resulting in a material and adverse
change in the Business Condition of Paradigm and which Paradigm fails
to cure within five (5) business days after notice thereof is given by
NewLogic (except that no cure period shall be provided for a breach by
Paradigm which by its nature cannot be cured);
(iv) by Paradigm, if the Closing condition contained in
Section 9.14 has not been met within three (3) business days following
the issuance by the California Department of Corporations of a fairness
determination and permit under section 25121 of the California
Corporations Code with respect to the Stock Consideration;
-51-
(v) by Paradigm or NewLogic, if the Closing shall not have
been consummated on or before June 30, 1996;
(vi) by Paradigm or NewLogic, if any permanent injunction or
other order of a court or other competent authority preventing the
Closing shall have become final and nonappealable or, in either party's
reasonable good faith judgment, shall render unlikely within a
reasonable period of time the consummation of the transactions set
forth herein on the terms contemplated hereby; or
(vii) by Paradigm or NewLogic, if any Governmental Entity
shall have issued a temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of
the transactions set forth herein or any litigation shall be pending,
the ultimate resolution of which is likely to (A) result in the
issuance of such an order or injunction, or the imposition against
NewLogic or Paradigm of substantial damages if the transactions set
forth herein are consummated, (B) prohibit Paradigm's or NewLogic's
ownership or operation of all or a material portion of the business
rights of NewLogic or Paradigm and its subsidiaries taken as a whole,
or to compel Paradigm or NewLogic to dispose of or hold separate all or
a material portion of the business or assets of NewLogic or Paradigm
and its subsidiaries taken as a whole, as a result of the consummation
of the transactions set forth herein, (C) materially limit or restrict
Paradigm's proposed conduct or operation of the business of NewLogic,
or (D) render Paradigm or NewLogic unable to consummate the
transactions set forth herein. In the event any such order or
injunction shall have been issued, each party agrees to use its best
efforts to have any such order or injunction lifted.
(viii) By Paradigm, if Paradigm determines in its reasonably
judgment that it will be unable to obtain the accountants opinion
described in Section 9.11 and 10.10 above.
(b) Where action is taken to terminate this Agreement pursuant to this
Section 5.2, it shall be sufficient authorization for such action to be
authorized by the Board of Directors of the party taking such action.
(c) In the event of termination of this Agreement as provided in this
Section 5.2, this Agreement shall forthwith become null and void.
-52-
(d) In the event of termination of this Agreement pursuant to any of
the events or conditions set forth in Section 14.1(a), no party shall be liable
for any costs, charges, expenses or fees of any other party. In addition, in no
event will any party to this Agreement be liable for special, consequential or
indirect damages relating to or arising out of this Agreement, except for such
damages arising out of actual fraud or intentional misrepresentation.
14.2 Breakup Fee. If Paradigm terminates this Agreement pursuant to
Section 14.1(a)(iv) and, in the circumstances of such termination, all of the
Closing conditions contained in Article would have otherwise been met, NewLogic
shall pay to Paradigm within fifteen (15) business days after such termination
in cash the sum of $250,000, plus Paradigm's documented reasonable out-of-pocket
expenses incurred through the date of termination in connection with this
Agreement and the transactions contemplated thereby (as evidenced by written
notice accompanied by such documentation and delivered to NewLogic by Paradigm
within ten (10) business days of such termination).
14.3 Bridge Loan. If Paradigm terminates this Agreement pursuant to
Section 14.1(a)(viii) and, in the circumstances of such termination, all of the
other Closing conditions contained in Article would have otherwise been met,
Paradigm shall agree to provide NewLogic with bridge loan financing, for a term
of up to four (4) months, of up to $400,000 in original principal amount, with
interest at the rate of prime plus one percent (1%) per annum, and pursuant to
such other commercially reasonable terms and conditions as shall be mutually
agreed upon in good faith between Paradigm and NewLogic.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Notice. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be delivered to the parties
at the address set forth below their respective signature blocks, or at such
other address that they designate by notice to all other parties in accordance
with this Section 15.1. Any party delivering notice to Paradigm shall also
deliver a copy to: Pillsbury Madison & Sutro LLP, 0000 Xxxx Xxxx Xxxx, Xxxxx
Xxxx, Xxxxxxxxxx 00000, Attn: Xxxxx X. del Xxxxx, Esq. Any party delivering
notice to NewLogic or the Securityholders shall also deliver a copy to: Xxxxxxx,
Phleger & Xxxxxxxx LLP, Two Embarcadero Place, 0000 Xxxx Xxxx, Xxxx Xxxx, XX
00000, Attn: Xxxxxx X. Xxxxxxx, Esq. All notices and communications shall be
deemed to have been received: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of telex or facsimile transmission, on the
date on which the sender receives confirmation by telex or facsimile
transmission that such notice was received by the addressee, provided that a
copy of such
-53-
transmission is additionally sent by mail as set forth in (d) below; (c) in the
case of overnight air courier, on the second business day following the day
sent, with receipt confirmed by the courier; and (d) in the case of mailing by
first class certified or registered mail, postage prepaid, return receipt
requested, on the fifth business day following such mailing.
15.2 Entire Agreement. This Agreement, the exhibits and schedules
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to said subject matter.
15.3 Binding Effect; Assignment. This Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon NewLogic and the Securityholders and their respective successors and
permitted assigns and upon Paradigm and its successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be transferred or assigned (by operation of law or otherwise) by any of
the parties hereto without the prior written consent of the other party;
provided, however, that Paradigm may, without such written consent, assign its
rights in connection with a merger of Paradigm with or into another entity, a
sale of all or substantially all of Paradigm's assets or a reorganization
involving Paradigm or a merger or sale of assets of NewLogic to Paradigm or to
one of Paradigm's affiliates.
15.4 Expenses of Transaction. NewLogic and the Securityholders shall
pay in full all fees and expenses incurred by NewLogic and the Securityholders,
respectively, in connection with this Agreement and the transactions
contemplated hereby; provided, however, that all legal fees and expenses
incurred by NewLogic in excess of twenty five thousand dollars ($25,000) shall
be paid by the Securityholders. Paradigm shall pay all fees and expenses
incurred by Paradigm in connection with this Agreement and the transactions
contemplated hereby. NewLogic and the Securityholders shall pay all applicable
sales, use, excise, transfer, documentary and any other similar taxes arising
out of the purchase and sale of the Securities.
15.5 Waiver; Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto; and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations
-54-
hereunder or thereunder shall be deemed to be a waiver of any other condition or
subsequent or prior breach of the same or any other obligation or representation
by the other party, nor shall any forbearance by the first party to seek a
remedy for any noncompliance or breach by the other party be deemed to be a
waiver by the first party of its rights and remedies with respect to such
noncompliance or breach.
15.6 Third-Party Beneficiaries. Except as otherwise expressly provided
for in this Agreement, nothing herein, expressed or implied, is intended or
shall be construed to confer upon or give to any person, firm, corporation or
legal entity, other than the parties hereto, any rights, remedies or other
benefits under or by reason of this Agreement.
15.7 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
15.8 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
15.9 Governing Law. This Agreement shall in all respects be construed
in accordance with and governed by the laws of the State of California, as
applied to contracts entered into and to be performed solely within California
solely between residents of California.
15.10 Other Remedies. Any and all rights and remedies herein expressly
conferred upon a party pursuant to this Agreement or in any agreement referred
to herein will be deemed cumulative with and not exclusive of any other right or
remedy conferred hereby or thereby; and the exercise of any one right or remedy
will not preclude the exercise of any other right or remedy under any such
Agreement.
15.11 Mutual Drafting. This Agreement is the joint product of Paradigm,
NewLogic and the Securityholders, and shall not be construed for or against any
party hereto.
15.12 Tax Matters. Each of the parties to this Agreement acknowledges
and agrees that any amounts payable under
-55-
Article II of this Agreement shall be subject to all applicable
withholding requirements.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
executed as of the day and year first above written.
PARADIGM TECHNOLOGY, INC.
By_______________________________________
Title____________________________________
Address 00 Xxxxx Xxxxxxx
Xxx Xxxx, XX 00000
NEWLOGIC CORP.
By_______________________________________
Title____________________________________
Address 00000 X.X. 00xx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
-56-
SIGNATURE PAGE
TO
SECURITIES PURCHASE AGREEMENT BY AND AMONG
PARADIGM TECHNOLOGY, INC.,
NEWLOGIC CORP.
AND THE SECURITYHOLDERS OF NEWLOGIC CORP.
The undersigned hereby executes and delivers the Securities Purchase
Agreement (the "Agreement") to which this Signature Page is attached effective
as of the date of the Agreement, which Agreement and Signature Page, together
with all counterparts of said Agreement and Signature Pages of the other parties
named in said Agreement, shall constitute one and the same document in
accordance with the terms of said Agreement.
-------------------------------------------
Name of Securityholder
-------------------------------------------
Signature
Address
------------------------------------
------------------------------------
------------------------------------
SCHEDULE A
----------
NEWLOGIC SECURITYHOLDERS
------------------------
Common Common
Issuable Issuable
Upon Upon
Exercise Exercise
of of
Outstanding Vested Unvested Series B-1
Common Options Options Preferred Total
----------- ------- -------- ---------- ---------
Xxxx Xxxxx 1,070,000 259,380 0 0 1,329,380
Xxxxx Xxxxxxxx 474,880 0 0 950,000 1,424,880
Xxxxxx Xxxxxxxx 0 0 0 50,000 50,000
Xxxxx Xxxxxxxx, 504,500 0 0 0 504,500
T'ee
Xxxx Xxxxxxx 282,000 28,000 30,000 0 340,000
Xxxxxx Xxxxxxx 8,000 15,000 45,000 0 68,000
Xxxxx XxXxxxxxx 8,000 30,000 30,000 0 68,000
Xxxxxxx Xxxxxxx 8,000 30,000 30,000 0 68,000
Xxxx Xxxx 0 0 36,000 0 36,000
Xxxx Xxxxxxx 0 0 48,000 0 48,000
Xxxxxx Xxx 0 0 132,000 0 132,000
---------
4,068,760
In the event any securityholder of NewLogic set forth above fails to
enter into this Agreement and complete its obligations provided in Section 8.2
of the Agreement, (i) such securityholder's unvested options and other rights to
purchase Common Stock of NewLogic shall not accelerate, (ii) all such rights of
such securityholder to acquire such shares shall terminate at the Closing, (iii)
the Securities to be sold to Paradigm hereunder shall be decreased by the number
of shares set forth next to such securityholder's name in the column captioned
"Common Issuable Upon Exercise of Unvested Options," and (iv) the Stock
Consideration (and Cash Consideration, if any) payable by Paradigm for such
Securities shall be commensurately reduced.
SCHEDULE 1.3(a)
---------------
PAYMENTS TO SECURITYHOLDERS
---------------------------
Paradigm
Shares Issued Paradigm
NewLogic and Shares Issued
Certificate Shares Transferred and Held in Cash at
Name Numbers Represented at Close Escrow Close
------------------------------------ ----------- ------------ ----------- ----------- ------------
Xxxxx and Xxxxxx Xxxxxxxx B1-2, B1-3 1,000,000 B-1 76,411 14,498 $ 0.79
Xxxxx Xxxxxxxx 21 128,000 9,624 0 $ 0.52
27 346,880 0 26,080 $ 1.76
Xxxxx X. Xxxxxxxx TTEE 17 192,000 14,436 0 $ 5.97
23 312,500 4,530 18,966 $ 2.08
Xxxx Xxxxx 22 320,000 16,822 0 $ 62,601.35
28 750,000 25,916 30,474 $ 8.45
TBD 259,380 0 19,502 $ 2.21
Xxxxxxx Xxxxxxx 20 4,000 300 0 $ 6.50
28 278,000 12,481 8,421 $ 2.21
TBD 58,000 0 4,360 $ 7.80
Xxxxxxxx Xxxx 29 16,000 0 0 $ 10,406.02
TBD 113,400 0 0 $ 73,752.63
Xxxxxx Xxxxxxx 30 8,000 601 0 $ 4.36
TBD 60,000 1,955 2,556 $ 2.41
Xxxxx XxXxxxxxx 19 4,000 300 0 $ 8.45
25 4,000 300 0 $ 8.45
TBD 60,000 1,955 2,556 $ 2.41
Xxxxxxx Xxxxxxx 20 4,000 300 0 $ 8.45
24 4,000 300 0 $ 8.45
TBD 60,000 1,955 2,556 $ 2.41
Xxxx Xxxx TBD 36,000 1,353 1,353 $ 6.63
Xxxx Xxxxxxx TBD 48,000 1,805 1,804 $ 0.20
Xxxxxx Xxx TBD 132,000 4,962 4,962 $ 7.02
Xxxxx XxxXxxxxxx TBD 24,000 0 0 $ 15,609.02
Xxxxx Xxxxxxx 2,000 0 0 $ 1,300.75
Xxxxxxx Xxxxxxxx 2,000 0 0 $ 1,300.75
--------- ------- ------- ------------
TOTAL 4,226,160 176,306 138,088 $165,068.05
SCHEDULE 1.4
------------
OTHER NEWLOGIC SECURITYHOLDERS
------------------------------
Name Shares Held
---- -----------
Nichimen Corporation 825,000 Series B-1
Xxxxx Xxxxxxx 2,000 Common
Xxxxxxx Xxxxxxxx 2,000 Common
Xxxxx XxxXxxxxxx 24,000 Common
Xxxxxxxx Xxxx 129,400 Common
SCHEDULE 2.1
------------
POST CLOSING CONSIDERATION TABLE
--------------------------------
Name Initial Percentage Interest
---- ---------------------------
Xxxx Xxxxx 18.5%
Xxxxx Xxxxxxxx 18.5%
Xxxxxxx Xxxxxxx 12%
Xxxxxx Xxxxxxx 12%
Xxxxx XxXxxxxxx 8%
Xxxx Xxxxxxx 8%
Xxxx Xxxx 4%
Xxxx Xxxxxxx 4%
Xxxxxx Xxx 4%
Xxxx Xxxx 4%
Reserved 7%
----
TOTAL 100%
SCHEDULE 2.2
------------
THE NEWLOGIC PRODUCTS
---------------------
ISC-5 Integrated Pentium "North Bridge" System Controller
with Integrated L2 Cache (NewLogic 5610) and
derivatives thereof
ISC-6 Integrated Pentium Pro "North Bridge"
ICR-5 High Integration Cache Solution for Pentium PC's
ICR-6 High Integration Cache Solution for Pentium Pro PC's
Other Any other product substantially developed by NewLogic
Securityholders other than Paradigm's normal SRAM products and
proposed SRAM products
SCHEDULE 11.2(k)
----------------
OPTION EXERCISE PRICE
---------------------
Per Share Aggregate
Exercise Total Exercise
Name Price Shares Price
---- -------- ---------- ----------
Xxxx Xxxxx $0.088 x 259,380 = $22,825.44
Xxxxxxx Xxxxxxx 0.08 x 58,000 = 4,640.00
Xxxxxxxx Xxxx 0.08 x 113,400 = 9,072.00
Xxxxxx Xxxxxxx 0.08 x 60,000 = 4,800.00
Xxxxx XxXxxxxxx 0.08 x 60,000 = 4,800.00
Xxxxxxx Xxxxxxx 0.08 x 60,000 = 4,800.00
Xxxx Xxxx 0.08 x 36,000 = 2,880.00
Xxxx Xxxxxxx 0.08 x 48,000 = 3,840.00
Xxxxxx Xxx 0.08 x 132,000 = 10,560.00
Xxxxx XxxXxxxxxx 0.08 x 24,000 = 1,920.00
----------
TOTAL $70,137.44
