STOCK PURCHASE AGREEMENT
dated as of
April 21, 1999
by and between
LATTICE SEMICONDUCTOR CORPORATION
and
ADVANCED MICRO DEVICES, INC.
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE/COMPANY OPTIONS/CLOSING
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1.1 Transfer of the Stock by Seller................................ 1
1.2 Company Options................................................ 2
1.3 The Closing.................................................... 4
1.4 Determination of Estimated Closing Equity Adjustment Amount.... 4
1.5 Determination of Closing Equity Adjustment Amount.............. 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Related Matters............................... 8
2.2 Stock.......................................................... 9
2.3 Financial Statements; No Other Liabilities.................... 10
2.4 Taxes......................................................... 11
2.5 Material Contracts............................................ 12
2.6 Changes....................................................... 12
2.7 Properties.................................................... 14
2.8 Intellectual Property......................................... 15
2.9 Authorization;No Conflicts.................................... 17
2.10 Legal Proceedings and Certain Labor Matters................... 18
2.11 Insurance..................................................... 19
2.12 Permits....................................................... 19
2.13 Compliance with Law........................................... 20
2.14 Environmental Compliance...................................... 20
2.15 Dividends and Other Distributions............................. 20
2.16 Employee Benefits............................................. 20
2.17 Bank Accounts, Powers, etc.................................... 21
2.18 No Brokers or Finders......................................... 21
2.19 Certain Interests............................................. 22
2.20 Receivables................................................... 22
2.21 Customers and Suppliers....................................... 22
2.22 Amended Schedules............................................. 22
2.23 Disclaimer of Representations and Warranties.................. 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Organization and Related Matters.............................. 23
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3.2 Authorization; No Conflicts.................................. 23
3.3 No Brokers or Finders........................................ 24
3.4 Legal Proceedings............................................ 24
3.5 WARN Act..................................................... 25
3.6 Investment Representation.................................... 25
3.7 Disclaimer of Representations and Warranties................. 25
3.8 Financing Commitment......................................... 25
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF COMPANY
AND THE SUBSIDIARIES PRIOR TO CLOSING
4.1 Access....................................................... 25
4.2 Conduct of Business.......................................... 26
4.3 Permits and Approvals........................................ 29
4.4 Government Filings........................................... 30
4.5 Preservation of Business Prior to Closing Date............... 30
4.6 Exclusivity.................................................. 31
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 Seller's Post-Closing Access................................. 32
5.2 No Rights to Seller Intellectual Property.................... 33
5.3 Insurance; Indemnity Obligations............................. 34
5.4 WARN Act..................................................... 35
5.5 Intercompany Agreements...................................... 35
5.6 Expenses of Sale............................................. 35
5.7 Intercompany Balances........................................ 36
5.8 Facilities................................................... 36
5.9 Nondisclosure of Proprietary Data............................ 36
5.10 Nonsolicitation.............................................. 36
5.11 Noncompetition............................................... 37
5.12 Dividends.................................................... 40
5.13 Access for Environmental Review.............................. 40
5.14 Contract Rights.............................................. 40
5.15 Patents...................................................... 40
5.16 Transfer of Certain Business-Related Assets.................. 41
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GENERAL CONDITIONS OF PURCHASE
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6.1 No Orders; Legal Proceedings................................... 42
6.2 Approvals...................................................... 42
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
7.1 Representations and Warranties and Covenants of Seller......... 43
7.2 Resignation of Directors....................................... 43
7.3 Continuing Intercompany Agreements............................. 44
7.4 Amended Schedules.............................................. 44
7.5 Financing...................................................... 44
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
8.1 Representations and Warranties and Covenants of Buyer.......... 45
ARTICLE IX
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 Termination of Agreement....................................... 45
9.2 Effect of Termination.......................................... 46
9.3 Survival of Representations and Warranties..................... 46
9.4 Notice of Known Unsatisfied Conditions or Breached
Representations, Warranties or Covenants....................... 47
ARTICLE X
INDEMNIFICATION
10.1 Obligations of Seller.......................................... 47
10.2 Obligations of Buyer........................................... 48
10.3 Procedure...................................................... 49
10.4 Limitations on Indemnification................................. 52
10.5 Remedies Exclusive............................................. 53
ARTICLE XI
TAX MATTERS
11.1 Allocation of Tax Liabilities; Indemnification................. 54
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11.2 Tax Covenants.................................................. 56
11.3 Refunds........................................................ 56
11.4 Tax Benefits................................................... 57
11.5 Returns and Reports............................................ 58
11.6 Disputes....................................................... 60
11.7 Section 338 Election........................................... 60
11.8 Termination of Tax Sharing Agreements.......................... 61
11.9 Price Adjustment............................................... 62
11.10 Survival....................................................... 62
ARTICLE XII
PUBLICITY/CONFIDENTIALITY
12.1 Publicity and Reports.......................................... 62
12.2 Confidentiality................................................ 62
ARTICLE XIII
DEFINITIONS
13.1 General Provisions............................................. 64
13.2 Specific Provisions............................................ 64
ARTICLE XIV
GENERAL
14.1 Amendments; Waivers............................................ 77
14.2 Exhibits and Schedules; Integration............................ 77
14.3 Reasonable Efforts............................................. 78
14.4 Further Assurances............................................. 78
14.5 Governing Law.................................................. 78
14.6 No Assignment.................................................. 79
14.7 Headings....................................................... 79
14.8 Counterparts................................................... 79
14.9 Parties in Interest............................................ 79
14.10 Performance by Subsidiaries.................................... 80
14.11 Notices........................................................ 80
14.12 Expenses....................................................... 81
14.13 Attorneys' Fees................................................ 81
14.14 Representation By Counsel; Interpretation...................... 82
14.15 Severability................................................... 82
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14.16 Dispute Resolution; Agreement to Arbitrate..................... 82
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TABLE OF CONTENTS
SCHEDULES
Disclosure Schedule
1.2 Outstanding Stock Options
2.1(a) Subsidiaries; Capitalization; Ownership
2.1(b) Directors and Executive Officers
2.2 Contracts to Acquire Equity Securities
2.3(b) Material Changes
2.3(c)(vi) Material Liabilities
2.5 Material Contracts
2.6(e) Material Contract Changes
2.6(h) Compensation Arrangements
2.7(a) Assets, Properties and Rights
2.7(b) Real Property
2.8(b)(i) Intellectual Property
2.8(b)(ii) and
(iii) Intellectual Property Licenses and Agreements
2.8(c) Intellectual Property Claims
2.8(d) Infringement Claims
2.9 Seller Approvals and Permits
2.10 Legal Proceedings
2.11 Insurance
2.16 Company Plans
2.17 Bank Accounts
2.21 Customers
3.2 Buyer Approvals and Permits
5.5 Intercompany Agreements
5.6 Other Sale Expenses
5.8 Real Property Leases
8.2 Real Property Leases to be Assigned
13.2 Knowledge
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated as of April 21, 1999 by and
between Lattice Semiconductor Corporation, a Delaware corporation ("Buyer"), and
Advanced Micro Devices, Inc., a Delaware corporation ("Seller"). Certain
capitalized terms used in this Agreement are defined in Section 13.2 hereof.
W I T N E S S E T H
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WHEREAS, Seller owns and will own as of the Closing Date all of the
issued and outstanding capital stock (the "Stock") of Vantis Corporation, a
Delaware corporation ("Company"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Stock on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound, Buyer and Seller do hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE/COMPANY OPTIONS/CLOSING
1.1 Transfer of the Stock by Seller. (a) Subject to the terms and
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conditions of this Agreement, Seller agrees to sell, assign and transfer good
and valid title and interest in and to the Stock free and clear of all
Encumbrances and deliver the certificate(s) representing the Stock, to Buyer at
the Closing. The certificate(s) shall be properly endorsed for transfer to, or
accompanied by a duly executed stock power in favor of, Buyer.
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(b) Purchase of the Stock by Buyer; Purchase Price; Amount
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Payable at Closing. Subject to the terms and conditions of this Agreement, Buyer
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agrees to purchase all of the right, title and interest in and to the Stock from
Seller and to pay to Seller the Purchase Price. The "Purchase Price" shall be
$500,000,000 (Five Hundred Million Dollars) (the "Base Price") adjusted by the
Closing Equity Adjustment Amount (which may be a negative number). At the
Closing, Buyer shall pay the Estimated Purchase Price (determined in accordance
with Section 1.4) to Seller by wire transfer of funds immediately available in
the City of San Francisco.
1.2 Company Options. On the Closing Date, the Company Stock Option
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Plans and each outstanding option to purchase shares of Company common stock
under the Company Stock Option Plans (the "Company Options") as of the Closing
Date will be assumed by Buyer and each Company Option shall become an option to
purchase shares of Buyer common stock, as determined below. In addition, Buyer
will honor the provisions of the Company Options respecting vesting and
exercisability and shall treat the consummation of the transactions contemplated
hereby as a "Change in Control" for purposes thereof, all upon the same terms
and conditions as set forth therein. All of the terms and conditions of each
Company Option in effect immediately prior to the assumption shall continue in
full force and effect under the assumed option, except that, (i) as appropriate,
references to Company under such option shall be deemed to be references to
Buyer, (ii) each Company Option shall be exercisable (or shall become
exercisable in accordance with its terms) for that number of whole shares of
Buyer common stock equal to the product of (a) the number of shares of Company
common stock that were issuable upon exercise of the Company Option immediately
prior to the Closing Date and (b) the Exchange Ratio (as defined below), rounded
up to the nearest whole number of shares of
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Buyer common stock, and (c) the per share exercise price for the shares of Buyer
common stock issuable upon exercise of such assumed Company Option shall be
equal to the quotient determined by dividing (A) the exercise price per share of
the Company Option immediately prior to the Closing Date by (B) the Exchange
Ratio, rounded up to the nearest whole cent. The Exchange Ratio shall mean the
quotient determined by dividing the Company Per Share Value by the Buyer Per
Share Value. The Company Per Share Value shall equal the quotient determined by
dividing the Purchase Price by the fully diluted number of shares of Company
common stock outstanding immediately prior to the close of this transaction
(reflecting all shares subject to the Company Options, without applying the
treasury method). The Buyer Per Share Value shall equal the average of the
closing sales prices as reported on the Nasdaq National Market for a share of
Buyer common stock for the five most recent trading days that the Buyer common
stock is traded ending three days prior to the date on which the execution of
this Agreement is publicly announced. Company and Seller shall take all actions
necessary to provide that upon the Closing Date, all outstanding Company Options
can be automatically assumed by Buyer. Schedule 1.2 sets forth a list as of the
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date hereof of all holders of Company Options, including, with respect to each
Company Option, the number of shares of Company common stock subject to each
such Company Option, the exercise price per share, the termination date, and the
vesting schedule. As soon as reasonably practicable, but in no event more than
the later of 90 days after the Closing Date and 14 days after final
determination of the Closing Equity Adjustment Amount pursuant to Section 1.5,
Buyer will issue to each person who immediately prior to the Closing Date was a
holder of Company Options a document evidencing the foregoing assumption of such
option by Buyer.
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1.3 The Closing. The Closing shall take place at the offices of
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O'Melveny & Myers LLP, Embarcadero Center West, 275 Battery Street, San
Francisco, California 94111-3305, as soon as practicable after all conditions
specified in Articles VI, VII and VIII have been satisfied or waived in
accordance with this Agreement, but not later than the fifth business day
following the date that all conditions specified in Articles VI, VII and VIII
have been satisfied or waived in accordance with this Agreement, or at such
other place or on such other date as Seller and Buyer may mutually agree.
1.4 Determination of Estimated Closing Equity Adjustment Amount.
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The "Estimated Purchase Price" shall be the Base Price as adjusted by the
Estimated Closing Equity Adjustment Amount (as defined below) (which shall not
exceed a positive $5,000,000 and which may be a negative number). Not later than
five business days prior to the Closing Date, Seller shall deliver to Buyer a
written notice setting forth Seller's good faith estimate (applying the Agreed
Accounting Principles) as of the Closing Date of the Closing Equity Adjustment
Amount (the "Estimated Closing Equity Adjustment Amount") and, based thereon,
Seller's calculation of the Estimated Purchase Price, which shall be binding on
Buyer and Seller as the Estimated Purchase Price hereunder absent manifest
error. Such notice shall be accompanied by the estimated balance sheet used to
prepare the Estimated Closing Equity Adjustment Amount, including (in reasonable
detail) an explanation of the methods used (including estimates of cash flows
and income) to "roll forward" the estimated line items set forth therein from
the immediately preceding month's end balance sheet and related statements of
results of operations and cash flows, copies of which shall also accompany the
notice. Seller shall make, upon Buyer's request, its appropriate personnel and
records available to Buyer's internal and external
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accountants for purposes of explaining the assumptions and estimates used in the
preparation of the Estimated Closing Equity Adjustment Amount.
1.5 Determination of Closing Equity Adjustment Amount.
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(a) Following the Closing, the parties shall observe the
procedures set forth in this Section 1.5 to determine the Closing Equity
Adjustment Amount. Promptly, but in any event not later than five business days
after the final determination thereof in accordance herewith, (i) in the event
that the difference between the Closing Equity Adjustment Amount and the
Estimated Closing Equity Adjustment Amount (i.e., the Closing Equity Adjustment
Amount minus the Estimated Closing Equity Adjustment Amount) is positive, Buyer
shall pay to Seller by wire transfer of immediately available funds to an
account specified by Seller an amount equal to such difference plus interest
thereon from the Closing Date to the date of payment thereof at the Agreed Rate,
or (ii) in the event that the difference between the Closing Equity Adjustment
Amount and the Estimated Closing Equity Adjustment Amount (i.e., the Closing
Equity Adjustment Amount minus the Estimated Closing Equity Adjustment Amount)
is negative, Seller shall pay to Buyer by wire transfer of immediately available
funds to an account specified by Buyer an amount equal to such difference plus
interest thereon from the Closing Date to the date of payment thereof at the
Agreed Rate.
(b) Within sixty days after the Closing Date, Buyer shall
prepare and deliver to Seller a notice setting forth its determination of the
Closing Equity Adjustment Amount (the "Initial Closing Equity Statement") and
setting forth in reasonable detail the basis for such determination. Such notice
shall be accompanied by the consolidated balance sheet of the Company used to
prepare the Initial Closing Equity Statement (the "Initial Balance Sheet"),
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together with the related estimated statement of results of operation and cash
flows for the period from December 28, 1998 to the Closing Date used to prepare
the Initial Balance Sheet. During the sixty days next following Seller's receipt
of the Initial Closing Equity Statement, Seller and its representatives will be
permitted to review Buyer's working papers relating to the Initial Closing
Equity Statement as well as all of the books and records relating to the
operations and finances of the Business with respect to the period up to and
including the Closing Date, and Buyer shall make reasonably available in Buyer's
offices the individuals responsible for the preparation of the Initial Closing
Equity Statement in order to respond to the reasonable inquiries of Seller
relating thereto.
(c) If Seller disagrees with Buyer's calculation of the
Closing Equity Adjustment Amount, then not later than sixty days following
Seller's receipt of the Initial Closing Equity Statement, Seller shall so notify
Buyer in writing (the "Notice of Disagreement"), setting forth in reasonable
detail the basis for such disagreement, the dollar amounts involved and Seller's
good faith calculation of the Closing Equity Adjustment Amount. Such notice
shall be accompanied by the consolidated balance sheet of the Company used to
prepare the Notice of Disagreement (the "Protest Balance Sheet"), together with
the related statement of results of operations and cash flows used to prepare
the Protest Balance Sheet. If no Notice of Disagreement is received by Buyer
within such sixty day period, then the Initial Closing Equity Statement, and its
related balance sheet, shall be deemed to have been accepted by Seller, shall
become final and binding upon the parties, the Closing Equity Adjustment Amount
as indicated therein shall be the final Closing Equity Adjustment Amount
hereunder and its related balance sheet shall be the final Closing Balance
Sheet.
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(d) During the twenty business days immediately following the
delivery of a Notice of Disagreement (if any), Seller and Buyer shall seek in
good faith to resolve any differences which they may have with respect to any
matter specified in the Notice of Disagreement. If at the end of such twenty
business day period Seller and Buyer have been unable to agree upon the Closing
Equity Adjustment Amount and a supporting balance sheet therefor, Seller and
Buyer shall submit to the Independent Accounting Firm for review and resolution
any and all matters which remain in dispute with respect to the Notice of
Disagreement. If required to do so by such Independent Accounting Firm, in
connection with its engagement, Buyer and Seller shall (i) negotiate in good
faith to agree to a specific materiality level for the conduct of the engagement
(which shall not exceed $30,000 nor be less than $10,000 per individual item)
and (ii) submit the Initial Balance Sheet (with such changes as may then have
been agreed by Seller and Buyer) to such Independent Accounting Firm for audit.
Buyer and Seller shall use commercially practicable efforts to cause the
Independent Accounting Firm to make a final determination as promptly as
practicable, but in no event later than sixty days from submission of the
Initial Balance Sheet to the Independent Accounting Firm, binding on the parties
hereto, of the Closing Equity Adjustment Amount and a supporting balance sheet
therefor, and such final determination shall be the final Closing Equity
Adjustment Amount. The supporting balance sheet as agreed by the parties or as
determined by the Independent Accounting Firm pursuant to this Section 1.5(d)
shall then be the final Closing Balance Sheet. The cost of the Independent
Accounting Firm's review and determination shall be paid by the party which has
determined an amount of the Closing Equity Adjustment Amount that is the
greatest amount different from the amount of the same determined by the
Independent Accounting Firm. During the review by the Independent Accounting
Firm, Buyer and Seller will
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each make available to the Independent Accounting Firm interviews with such
individuals and such information, books and records as may be reasonably
required by the Independent Accounting Firm to make its final determination.
(e) Seller and Buyer agree that, in the case of Seller,
prior to the Closing and, in the cause of Buyer, following the Closing through
the date that payment, if any, is made pursuant to Section 1.5(a), it will not
take any actions with respect to any accounting books, records, policy or
procedure that would affect the determination of the Closing Equity Adjustment
Amount that are inconsistent with past practices of Company or that would make
it impossible or impracticable to calculate the Closing Equity Adjustment Amount
in the manner and utilizing the methods required hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.1 Organization and Related Matters. Seller and Company are
--------------------------------
each corporations duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation. Seller has all
necessary corporate power and authority to execute, deliver and perform its
obligations under this Agreement. Schedule 2.1(a) sets forth, as of the date
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hereof, the equity capitalization of each Subsidiary and Company's direct or
indirect ownership interest therein and the jurisdiction in which each
Subsidiary was organized. Except as set forth on Schedule 2.1(a), neither
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Company nor any Subsidiary holds any Equity Securities of any person. Schedule
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2.1(b) sets forth the current directors and executive officers of Company and of
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each Subsidiary. Each of the Subsidiaries is a corporation duly organized,
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validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Company and the Subsidiaries have all necessary corporate power
and authority to own or lease their respective properties and assets, as
applicable, and to carry on their respective businesses as now conducted and are
duly qualified or licensed to do business as foreign corporations in good
standing in all jurisdictions, except where the failure to be so qualified or
licensed is not material to the Business. Neither Company nor any of the
Subsidiaries is a registered or reporting company under the Exchange Act. True,
correct and complete copies of the respective charter documents, including all
amendments, of Company and the Subsidiaries have been delivered to Buyer.
2.2 Stock. Seller beneficially and of record owns all of the
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shares of capital stock of Company outstanding. Company beneficially and of
record owns all of the outstanding Equity Securities of each of the
Subsidiaries, directly or indirectly through a wholly owned Subsidiary. All of
such Equity Securities of Company and the Subsidiaries are owned free and clear
of any Encumbrances. At the Closing, Buyer will acquire good and marketable
title to and complete ownership of all of the capital stock of Company
outstanding on the Closing Date, free and clear of any Encumbrances. The
authorized capital stock of Company consists of 150,000,000 shares of common
stock, $0.01 par value, of which 100,000,000 shares are issued and outstanding
on the date hereof. Except for the Company Options listed in Schedule 1.2, there
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are no outstanding Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue or grant any rights to acquire, any
Equity Securities of Company or any Subsidiary, or to restructure or
recapitalize Company or any Subsidiary. Except as set forth on Schedule 2.2,
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there are no outstanding Contracts of Seller, Company or any Subsidiary to
repurchase, redeem or otherwise acquire any Equity Securities of Company or any
Subsidiary.
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All outstanding Equity Securities of Company and the Subsidiaries are duly
authorized, validly issued and outstanding and are fully paid and nonassessable,
and were issued in conformity with applicable Laws. There are no preemptive
rights in respect of any Equity Securities of Company or any Subsidiary.
2.3 Financial Statements; No Other Liabilities.
------------------------------------------
(a) Seller has delivered to Buyer true, correct and complete
copies of Company's audited consolidated balance sheets at fiscal year-end 1996,
1997 and 1998 and the related audited consolidated statement of operations and
statement of cash flows for the periods ending December 1996, 1997 and 1998 (the
"Financial Statements"). Such Financial Statements have been prepared in
conformity with GAAP except as disclosed therein or in the footnotes thereto.
Such Financial Statements reflect the conduct of Company as a division of
Seller, until September 1997. The statements of operations and cash flow present
fairly, in accordance with GAAP, the results of operations and cash flows of
Company and the Subsidiaries for the respective periods covered, and the balance
sheets present fairly, in accordance with GAAP, the financial condition of
Company and the Subsidiaries as of their respective dates. Since December 27,
1998, there has been no change in any of the significant accounting policies,
methods, practices or procedures of Company and the Subsidiaries. Under cover of
a letter dated of even date herewith, Seller has delivered to Buyer a true,
correct and complete copy of Company's unaudited consolidated balance sheet at
March 28, 1999 and the related unaudited consolidated statement of operations
and statement of cash flows for the three months then ended. Such financial
statements have been prepared in conformity with GAAP (except for the absence of
notes, normal year-end audit adjustments and accruals for profit-sharing). Such
statement of operations and statement of cash flows present fairly in accordance
with GAAP, the
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results of operations and cash flows of Company for the period covered and such
balance sheet presents fairly, in accordance with GAAP, the financial condition
of Company as of its date.
(b) Except as set forth on Schedule 2.3(b), since December
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27, 1998, whether or not in the ordinary course of business, there has not been,
occurred or arisen any change in or event affecting Company or any of the
Subsidiaries that has or would have a material adverse effect on the Business
(other than matters of general applicability to Company's industry and matters
arising in connection with this Agreement).
(c) Neither Company nor any Subsidiary has any liabilities
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, probable of assertion or not, except liabilities that (i)
are reflected or disclosed in the March 28, 1999 balance sheet described in
clause (a) above, (ii) are reflected in the notes to the balance sheet included
in the most recent of the Financial Statements, (iii) are obligations set forth
in any Contracts listed in the Schedules to this Agreement or in Contracts not
required to be listed in such Schedules, (iv) are disclosed in any of the
Schedules to this Agreement, (v) were incurred in the ordinary course of
business, or (vi) except as set forth in Schedule 2.3(c)(vi), do not exceed
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$200,000 individually or $2,000,000 in the aggregate.
2.4 Taxes. All federal Tax Returns and all material state,
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local and foreign Tax Returns that are required to be filed by or with respect
to Company and each Subsidiary on or before the Closing Date have been or prior
to the Closing will be duly filed, and all Taxes shown as due on such Tax
Returns have been paid or will be paid in full. No issues relating to Company or
any Subsidiary, that have been raised by the IRS or any other taxing authority
in connection with the examination of any of such Tax Returns, are currently
pending.
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2.5 Material Contracts. Schedule 2.5 lists each Contract which is
------------------ ------------
a Material Contract. Each Material Contract is valid and subsisting, Company or
the applicable Subsidiary has duly performed all its obligations under each
Material Contract to which Company or any Subsidiary is a party to the extent
that such obligations to perform have accrued, and no breach or default (or, to
Seller's knowledge, alleged breach or default) or event which would (with the
passage of time, notice or both) constitute a breach or default or loss of
rights or benefits by Company or the Subsidiary thereunder, as the case may be,
or, to Seller's knowledge, any other party or obligor with respect thereto, has
occurred or, assuming that the requisite Approvals and Permits set forth on
Schedule 2.9 are sought and obtained, as a result of the execution, delivery and
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performance of this Agreement will occur, except for such, as individually or in
the aggregate, as would not have a material adverse effect on the Business.
True, correct and complete copies of the agreements identified in Schedule 2.5,
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including all amendments and supplements, have been delivered to Buyer (subject
to compliance with applicable confidentiality restrictions for the contracts
that are so indicated on Schedule 2.5).
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2.6 Changes. Since December 27, 1998, there has not been:
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(a) excluding any changes which may occur after the date of
this Agreement as a result of the transactions contemplated by this Agreement,
any change (other than changes affecting Company's industry generally) that has
or would have a material adverse effect on the Business, except (i) changes
reflected in the unaudited balance sheet of Company at March 28, 1999, (ii)
changes in the ordinary course of business, which have not been, individually or
in the aggregate, materially adverse to the Business, and (iii) repayment by
Seller to Company of an intercompany loan in an approximate amount of
$12,000,000 on March 29, 1999.
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(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, cash flows or operating results of Company and Subsidiaries, taken as
a whole;
(c) any waiver by Company or any Subsidiary of a valuable right or
of a debt owed to it, except for such as have not been, individually or in the
aggregate materially adverse to the Business;
(d) any satisfaction or discharge of any lien, claim of encumbrance
or payment of any obligation by Company or any Subsidiary, except in the
ordinary course of business and that is not material to the assets, properties,
financial condition, operating results or Business (as such Business is
presently conducted);
(e) except as set forth on Schedule 2.6(e), any change or amendment
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to a Material Contract;
(f) except for the Company Options and issuances thereunder, any
change in the outstanding capital stock of Company;
(g) except for intercompany loans to Seller which have been paid in
full, any loan, guaranty or other extension of credit to any Person;
(h) except as described on Schedule 2.6(h), any material change
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in any compensation arrangement or agreement with any key employee; or
(i) other than dispositions of surplus equipment, furniture and
fixtures and dispositions of inventory in the ordinary course of business, any
sale, disposition, transfer or
13
<PAGE>
encumbrance of any material property owned by Company or any Subsidiary, or any
termination, modification or amendment of any material lease of property to
which Company or any Subsidiary was a party on December 27, 1998.
2.7 Properties.
----------
(a) Except for dispositions of surplus equipment, furniture,
fixtures, dispositions in the ordinary course of business and dispositions
reflected on the March 28, 1999 unaudited consolidated balance sheet described
in Section 2.3(a), Company and the Subsidiaries have good title to or, in the
case of leased assets and properties, valid leasehold interests in, all tangible
real and personal assets and properties that they respectively own or lease and
that are used in and material to conduct of the Business, including, but not
limited to, all such assets that they respectively own or lease as reflected in
the December 1998 balance sheet referred to in Section 2.3(a). Such assets are
sufficient for the conduct of the Business as currently conducted. None of such
assets or properties is subject to any Encumbrances other than Permitted
Encumbrances. Except as set forth on Schedule 2.7(a), the assets, properties and
---------------
rights of Company and the Subsidiaries (including contract rights and intangible
assets, properties and rights) include all of the assets, properties and rights
of Seller, its subsidiaries and any of their controlled Affiliates primarily
used in the Business.
(b) Company and the Subsidiaries do not own any real
property. Schedule 2.7(b) sets forth a list of all real property currently
leased or subleased by Company (other than foreign office space provided by
Seller and its Affiliates) or any Subsidiary (each a "Lease"). With respect to
each property listed on Schedule 2.7(b):
---------------
14
<PAGE>
(i) the Lease is valid and subsisting, and there is
not, under such Lease, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a
default) by Company or any Subsidiary or, if Seller or any subsidiary
is a party to such Lease, by Seller or such subsidiary of Seller, or
to Seller's knowledge, any other party thereto; and
(ii) to Seller's knowledge, no third party to a
material Lease has repudiated any provisions thereof.
(c) All material items of equipment owned or leased by
Company or any Subsidiary used in the Business are in adequate operating
condition, regularly and properly maintained, subject to normal wear and tear,
except, in each case, for such failures in condition and maintenance as do not
have a material adverse effect on the Business.
2.8 Intellectual Property.
---------------------
(a) Company and Subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use, all Intellectual Property
and trade secrets that are used in the Business as currently conducted, except
to the extent that the failure to have such rights is not material to the
Business.
(b) Schedules 2.8(b)(i) and 2.8(b)(ii) and (iii) list (i)
--------------------------------------------
(A) all United States patents, including applications therefor, (B) all United
States and international registered trademarks, applications to register
trademarks, including intent-to-use applications, and (C) United States mask
work registrations and applications to register mask works, which are owned by
Company or licensed by Company and which are material to its Business (clauses
(A)
15
<PAGE>
through (C) constituting "Registered Property"), including the jurisdictions in
which each such Intellectual Property right has been issued or registered or in
which any application for such issuance and registration has been filed, (ii)
all licenses, sublicenses and other agreements which are material to the
Business and as to which Seller, Seller's controlled Affiliate, Company or a
Subsidiary is a party, and pursuant to which any other third party is authorized
or licensed to use any such Intellectual Property or trade secret, and (iii) all
licenses, sublicenses and other agreements which are material to the Business
and as to which Seller, Seller's controlled Affiliate, Company or a Subsidiary
is a party, and pursuant to which Seller, Seller's controlled Affiliate, Company
or a Subsidiary is authorized to use any third party patents, trademarks, trade
secrets, copyrights, maskworks or software which are incorporated in, are or
form a part of, any product that is sold by the Business.
(c) To Company's knowledge, except as to claims listed in
Schedule 2.8(c), there is no unauthorized use, disclosure, infringement or
---------------
misappropriation of any Intellectual Property rights of Company or any
Subsidiary, any trade secret material to Company or any Subsidiary, or any
Intellectual Property right of any third party to the extent licensed by or
through Company or any Subsidiary, by any third party, including any employee or
former employee of Company or any Subsidiary. Neither Company nor any Subsidiary
has entered into any agreement to indemnify any other person against any charge
of infringement of any Intellectual Property or misappropriation of any trade
secrets, other than indemnification provisions contained in license agreements
for such Intellectual Property or such trade secrets licensed by Company or in
purchase orders or customer agreements arising in the ordinary course of
business.
16
<PAGE>
After the Closing, all Registered Property owned by Company will be
fully transferable, alienable or licensable by Company without payment of any
kind to any third party.
Buyer's entering into this Agreement, either alone or in conjunction
with the Continuing Intercompany Agreements, will not, by virtue of any
agreement to which Company is a party, (i) to Seller's knowledge, cause Buyer to
be obligated to grant to any third party any new material right to use any
Intellectual Property owned by, or licensed to, Buyer; (ii) cause Company to be
bound by or subject to any new non-competition obligation, or (iii) cause
Company to be obligated to pay any royalty rate or other amount to any given
third party in excess of the royalty rate or amount payable by Company to such
given third party prior to Closing.
(d) Except as set forth on Schedule 2.8(d), Company (i) is not a
---------------
party to any suit, action or proceeding which involves a claim of infringement
of any patents, trademarks, copyrights or violation of any trade secret or other
Intellectual Property right of any third party and (ii) has not brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. To Company's knowledge, the manufacture, marketing, licensing or sale of
Company's products has not and does not infringe any Intellectual Property right
or misappropriate any trade secret of any third party, except where such
infringement or misappropriation is not material to the Business.
2.9 Authorization; No Conflicts. The execution, delivery and
---------------------------
performance of this Agreement by Seller has been duly and validly authorized by
the board of directors of Seller and by all other necessary corporate action on
the part of Seller. This Agreement constitutes the legally valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization,
17
<PAGE>
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally. The execution, delivery and performance of
this Agreement by Seller will not directly or indirectly (a) contravene,
conflict with, violate, or constitute a breach or default (whether upon lapse of
time and/or the occurrence of any act or event or otherwise) under any provision
of the charter documents or by-laws of Seller, Company or any Subsidiary or any
resolution adopted by the board of directors or stockholders of Seller, Company
or any Subsidiary, (b) result in the imposition of any Encumbrance against any
material asset or property owned, licensed or leased by Company or any
Subsidiary, or (c) contravene, conflict with or result in a violation of any Law
or Order to which Company, any Subsidiary or any of the assets owned licensed or
leased by any of them are subject, except, in each of clauses (b) through (c),
for such contraventions, conflicts, impositions and violations, which,
individually or in the aggregate, do not have a material adverse effect on the
Business. Schedule 2.9 lists, as of the date hereof, all Approvals and Permits
------------
required to be obtained by Seller, Company or any Subsidiary to consummate the
transactions contemplated by this Agreement and to permit Company as a wholly-
owned subsidiary of Buyer to operate the Business without loss of material
rights, other than those which have been previously obtained. Except for the
Approvals and Permits identified on Schedule 2.9 as requiring that certain
------------
actions be taken by or with respect to a third party or Governmental Entity, the
execution, delivery and performance of this Agreement by Seller will not require
any material filing or registration with, or the issuance of any material
Approval or Permit by, any third party or Governmental Entity.
2.10 Legal Proceedings and Certain Labor Matters. Except as set
----------------------------------------------------------
forth in Schedule 2.10, there is no Order or Action pending, or, to Seller's
----------------------
knowledge, threatened, against Company or any Subsidiary or any of their
respective properties or assets that individually or
18
<PAGE>
when aggregated with one or more other such Orders or Actions has, or, if
determined adversely to the interests of Seller, Company or Buyer can be
reasonably expected to have, a material adverse effect on the Business or
Seller's ability to perform its obligations under this Agreement. There is no
organized labor strike, dispute, slowdown or stoppage, or collective bargaining
or unfair labor practice claim pending or, to Seller's knowledge, threatened,
against or affecting Company or any Subsidiary. Schedule 2.10 lists, each
-------------
pending Order and each Action that involves a claim or potential claim of
aggregate liability in excess of $250,000 against, or that enjoins or seeks to
enjoin any activity of Company or any Subsidiary.
2.11 Insurance. Schedule 2.11 lists, as of the date hereof, all
--------- -------------
insurance policies owned by Seller under which Company and the Subsidiaries are
insured. Under the terms thereof, Company and the Subsidiaries are, and at all
times during the past year have been, insured with reputable insurers against
the types of risks normally insured against by companies in similar lines of
business. All of such insurance policies to the extent Company and the
Subsidiaries are insured thereby or participate therein, are in full force and
effect and neither Seller nor Company or any Subsidiary is in material default
thereunder. Company and Subsidiaries have timely filed claims with their
respective insurers with respect to all material losses for which they believe
they have coverage.
2.12 Permits. Company and the Subsidiaries hold all Permits that
-------
are required by any Governmental Entity to permit each of them to conduct their
respective businesses as now conducted, and all such Permits are valid and in
full force and effect, except, in each case, for those which would not have a
material adverse effect on the Business.
19
<PAGE>
2.13 Compliance with Law. Company and the Subsidiaries have
-------------------
conducted the Business in all material respects in accordance with applicable
Law (including the receipt of all Permits material to the conduct of the
Business). No suspension, cancellation or termination of any material Permits is
pending or, to Seller's knowledge, threatened.
2.14 Environmental Compliance. Company's and the Subsidiaries'
------------------------
properties are, in all material respects, in compliance with all applicable
Environmental Laws, and Company has no knowledge and has received no notice of
any material unresolved violation or alleged violation of any Environmental Laws
in its conduct of the Business.
2.15 Dividends and Other Distributions. There has been no dividend
---------------------------------
or other distribution of assets or securities by Company or any Subsidiary,
whether consisting of money, property or any other thing of value, declared,
issued or paid subsequent to the date of the latest financial statements
referred to in Section 2.3(a).
2.16 Employee Benefits. Schedule 2.16 sets forth, as of the date
-----------------
hereof, a complete list of all Employee Pension Benefit Plans (as defined in
Section 3(2) of ERISA), Employee Welfare Benefit Plans (as defined in Section
3(1) of ERISA) and any other significant employee benefit arrangements
maintained by Company and the Subsidiaries or to which Company and the
Subsidiaries contribute or to which Company or any Subsidiaries would have any
liability or obligation (collectively, the "Company Plans"). No Company Plan is
subject to Title IV of ERISA, nor is any such plan a multiemployer plan (within
the meaning of Section 3(37) of ERISA). With respect to each Company Plan:
20
<PAGE>
(a) such Company Plan has been administered in all material
respects in accordance with its terms and, to the extent it is subject to any
requirements under ERISA or the Code, complies in all material respects
therewith;
(b) all contributions payable by Seller, Company, or any of
their respective Affiliates which are due, if any, to such Company Plan have
been paid in full;
(c) Seller has delivered to Buyer complete copies of the
current plan documents with respect to the Company Plans, together with copies
of any and all amendments thereof adopted through the date hereof;
(d) there is no pending or threatened legal action,
proceeding or investigation against such Company Plan or the assets of any of
the trusts under such Company Plan that is reasonably likely to have a material
adverse effect on the Business; and
(e) there have been no non-exempt "prohibited transactions"
within the meaning of Section 406 of ERISA and Section 4975 of the Code or
breaches of fiduciary duty with respect to such Company Plan that are reasonably
likely to have a material adverse effect on the Business.
2.17 Bank Accounts, Powers, etc. Schedule 2.17 lists, each bank,
--------------------------- -------------
trust company, savings institution, brokerage firm, mutual fund or other
financial institution with which Company or any Subsidiary has an account or
safe deposit box and the names and identification of all Persons authorized to
draw thereon or to have access thereto.
2.18 No Brokers or Finders. No agent, broker, finder, or
---------------------
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of Seller, Company
21
<PAGE>
or any Subsidiary or any of their respective Affiliates in connection with the
negotiation, execution or performance of this Agreement or the transactions
contemplated by this Agreement, is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement or
such transactions, except for Morgan Stanley Dean Witter and Donaldson, Lufkin &
Jenrette (in each case for their services on behalf of Seller), as to which
Seller shall have full responsibility and none of Buyer, Company or any
Subsidiary shall have any liability.
2.19 Certain Interests. No controlled Affiliate of Seller,
-----------------
Company or any Subsidiary, nor any officer, director or Affiliate thereof, has
any material interest in any property used in or pertaining to the Business or,
to Seller's knowledge, any customer or supplier doing business with Company or
any of the Subsidiaries.
2.20 Receivables. All receivables of Company and the Subsidiaries,
-----------
whether reflected on the balance sheet or otherwise, represent sales actually
made in the ordinary course of business. Reserves shown on Company's audited
consolidated balance sheet at December 27, 1998 referred to in Section 2.3(a)
are adequate as of such date and were calculated on a basis consistent with GAAP
and past practices. Seller has delivered to Buyer a complete and accurate aging
list of all receivables of Company and the Subsidiaries as of March 28, 1999.
2.21 Customers and Suppliers. Schedule 2.21 lists the names of the
----------------------- -------------
five largest customers of the Business for the fiscal year ended December 27,
1998.
2.22 Amended Schedules. Seller may, within 3 days prior to the
-----------------
Closing Date, deliver to Buyer an amendment to Schedules 2.5, 2.8(c), 2.8(d)
--------------------- ----
and 2.10, which amendment shall reflect any additions to such Schedules for
events occurring from the date hereof to the Closing Date.
22
<PAGE>
2.23 Disclaimer of Representations and Warranties. Seller
--------------------------------------------
acknowledges and agrees that the purchase and sale of the Stock hereunder shall
be without representation or warranty by Buyer, express or implied, except as
specifically set forth in Article III.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Organization and Related Matters. Buyer is a corporation duly
--------------------------------
acknowledges and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Buyer has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to carry on its business as now being conducted.
3.2 Authorization; No Conflicts. The execution, delivery and
---------------------------
performance of this Agreement by Buyer has been duly and validly authorized by
the board of directors of Buyer and by all other necessary corporate action on
the part of Buyer and its Affiliates. This Agreement constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally. The execution,
delivery and performance of this Agreement by Buyer will not directly or
indirectly (a) contravene, conflict with, violate, or constitute a breach or
default (whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under, the charter documents or by-laws of Buyer, (b) result in the
imposition of any Encumbrance against any material asset or property owned,
licensed or leased by Buyer, or (c) contravene, conflict with or result in a
violation of Law or Order to which Buyer
23
<PAGE>
or any of the assets owned, licensed or leased by Buyer are subject, except, in
each of clauses (b) through (c), for such contraventions, conflicts, impositions
and violations which , individually or in the aggregate, do not have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement. Schedule 3.2 lists, as of the date hereof, all material Approvals and
------------
Permits required to be obtained by Buyer to consummate the transactions
contemplated by this Agreement, other than those which have already been
obtained. Except for the Approvals and Permits identified on Schedule 3.2 as
------------
requiring that certain actions be taken by or with respect to a third party or
Governmental Entity, the execution, delivery and performance of this Agreement
by Buyer will not require any material filing or registration with, or the
issuance of any material Approval or Permit by, any third party or Governmental
Entity.
3.3 No Brokers or Finders. No agent, broker, finder or or
---------------------
investment or commercial banker, or other Person or firms engaged by or acting
on behalf of Buyer or its Affiliates in connection with the negotiation,
execution or performance of this Agreement or the transactions contemplated by
this Agreement, is or will be entitled to any broker's or finder's or similar
fees or other commissions as a result of this Agreement or such transactions,
except for Morgan Stanley Dean Witter (for their services provided on behalf of
Buyer), as to which Buyer shall have full responsibility and Seller shall not
have any liability.
3.4 Legal Proceedings. There is no Order or Action pending, or
-----------------
to the knowledge of Buyer, threatened, against or affecting Buyer or any of its
properties or assets that individually or when aggregated with one or more other
Actions has or, if determined adversely to the interest of Buyer, might
reasonably be expected to have, a material adverse effect on Buyer's ability to
perform its obligations under this Agreement.
24
<PAGE>
3.5 WARN Act. Buyer is not planning or contemplating, and has
--------
not made or taken, any decisions or actions concerning Company or any Subsidiary
after the Closing that would require the service of notice under the Worker
Adjustment and Retraining Act of 1988 (the "WARN Act").
3.6 Investment Representation. Buyer is acquiring the Stock from
-------------------------
Seller for Buyer's own account, for investment purposes only and not with a view
to, or for sale in connection with, any distribution thereof.
3.7 Disclaimer of Representations and Warranties. Buyer
--------------------------------------------
acknowledges and agrees that the purchase and sale of the Stock hereunder shall
be without representation or warranty by Seller, express or implied, except as
specifically set forth in Article II.
3.8 Financing Commitment. Buyer has received a commitment letter,
--------------------
a copy of which has been delivered to Seller (the "Commitment Letter"), with
respect to financing for the transactions contemplated by this Agreement in the
form of senior unsecured debt (the "Financing"). Buyer has no basis to believe
that the financing contemplated thereby will not be available to Buyer in a time
sufficient to support a Closing by June 25, 1999, assuming satisfaction of all
other conditions to Closing by such date.
ARTICLE IV
COVENANTS WITH RESPECT TO CONDUCT OF COMPANY
AND THE SUBSIDIARIES PRIOR TO CLOSING
4.1 Access. Seller shall and shall cause Company and the
------
Subsidiaries to authorize and permit Buyer, its prospective lenders and their
respective representatives,
25
<PAGE>
including their respective independent accountants, financial advisers, agents
and counsel (such entities being, with respect to either Buyer or Seller,
collectively, "Representatives") to have reasonable access during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of their respective businesses, to all
of their respective properties, books, records, operating instructions and
procedures and all other information with respect to the Business as Buyer may
from time to time request, and to make copies of such books, records and other
documents and to discuss the Business with the respective directors and officers
and, after consultation with Seller, and accompanied by or in coordination with
Seller, employees, accountants, counsel, suppliers, customers and creditors of,
Company and Subsidiaries, in each case, as is reasonably necessary or
appropriate for the purposes of familiarizing themselves with the Business and
in connection with obtaining financing for and any necessary Approvals of or
Permits for the transactions contemplated by this Agreement; provided, however,
-------- -------
that under no circumstances shall Seller be required to provide to Buyer, its
prospective financing sources and their respective representatives access to (i)
Tax Returns filed by Seller or any of its Affiliates other than Tax Returns
filed by Company or any Subsidiary, (ii) any information or materials required
to be kept confidential pursuant to agreements with third parties or by Law, or
(iii) subject to entering into appropriate agreements that preserve the
privilege, any privileged attorney-client communications or attorney work-
product of Company.
4.2 Conduct of Business. During the period beginning on the date
-------------------
hereof and ending on the Closing Date, Seller shall not and shall cause Company
and each Subsidiary not to, without the prior written consent of Buyer (which
consent shall not be unreasonably withheld):
(a) conduct the Business in any manner except in the
ordinary course;
26
<PAGE>
(b) terminate, or fail to renew or preserve, any material
Permits;
(c) make any loan, guaranty or other extension of credit, or
enter into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee, stockholder or
any of their respective Affiliates, except pursuant to the Company Plans;
(d) amend any Company Plan or grant any general or uniform
increase in the rates of pay or benefits to officers, directors or employees (or
a class thereof), or any increase in salary or benefits of any officer, director
or employee or pay any bonus to any person, except for (i) any increase or bonus
mandated by any of the Company Plans, (ii) any normal increase or bonus in
connection with a promotion not to exceed 10% of each such Person's annual base
pay, and (iii) annual merit salary increases in the ordinary course of business
not to exceed 5.5% of the applicable base annual salaries on an aggregate basis;
(e) sell, transfer, mortgage, encumber or otherwise dispose
of any assets or properties except dispositions of inventory in the ordinary
course of business consistent with past practices and other dispositions of
assets not to exceed $100,000 in the aggregate in the ordinary course of
business consistent with past practices;
(f) except pursuant to Company Options, issue, grant, sell,
redeem or acquire for value, or agree to issue, sell, redeem or acquire for
value or, except as provided in Section 1.2, amend or modify, any Equity
Securities of Company or any of the Subsidiaries;
(g) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other thing of value, to its
27
<PAGE>
stockholders, or split, combine, dividend, distribute or reclassify any shares
of its Equity Securities, except in accordance with Section 5.12;
(h) change or amend its certificate of incorporation or
bylaws;
(i) amend the Intercompany Agreements;
(j) terminate, amend or fail to use its commercially
reasonable efforts to renew any existing insurance coverage;
(k) other than (i) in the ordinary course of business
consistent with past practice, (ii) capital expenditures permitted under
paragraph (q) of this Section 4.2 and (iii) sales returns by, or price
allowances to, distributors or stocking representatives, voluntarily incur or
agree to incur any obligation or liability (absolute or contingent) that
individually calls for payment by Company or any Subsidiary of more than $75,000
in any specific case or $350,000 in the aggregate;
(l) issue, sell, redeem or acquire for value, or agree to do
so, any debt obligations (other than advances to or from Seller) or Equity
Securities of Company or any Subsidiary;
(m) compromise or otherwise settle or waive any claims in
respect of Intellectual Property or for non-monetary consideration or for
payment of monetary consideration in excess of $50,000 individually or $250,000
in the aggregate;
(n) make any material investment, by purchase, contributions
to capital, property transfers, or otherwise, in any other Person;
28
<PAGE>
(o) other than as expressly provided herein, make any Tax
election or make any change in any method or period of accounting or in any
accounting policy, practice or procedure;
(p) dispose of or fail to preserve any material Intellectual
Property, trade secrets or any rights to the use thereof;
(q) make any capital expenditures or commitments with respect
thereto (i) in excess of $3,000,000 in the aggregate in accordance with the
aggregate annual budget for 1999 as of the date hereof (subject to variances of
up to 10% for any discrete budgeted item, without increasing the $3,000,000
aggregate limit); or (ii) in excess of $250,000 with respect to individual items
of equipment or individual systems; or
(r) agree to or make any commitment to take any actions
prohibited by this Section 4.2.
4.3 Permits and Approvals. Seller shall use its best efforts to
---------------------
obtain, and will promptly prepare all registrations, filings and applications,
requests and notices in order to obtain, all Approvals and Permits required on
its part to consummate the transaction contemplated by this Agreement and to
permit Buyer to operate the Business without loss of any material rights. Buyer
shall use its best efforts to obtain, and will promptly prepare all
registrations, filings and applications, requests and notices in order to
obtain, all Approvals and Permits required on its part to consummate the
transactions contemplated by this Agreement. Each party shall pay their
respective costs or expenses incurred in order to obtain such Approvals. Fees
paid or expenses incurred in connection with any and all filings or proceedings
29
<PAGE>
required under the Hart-Scott-Rodino Act and any other Law requiring filings
with any Governmental Entity shall be addressed under Section 4.4.
4.4 Government Filings. Buyer and Seller shall promptly make any
------------------
and all filings required under the Hart-Scott-Rodino Act and any other Law
requiring filings with any Governmental Entity with respect to the transactions
contemplated hereby. Buyer and Seller agree to use their best efforts to obtain
all approvals required under the Hart-Scott-Rodino Act to consummate the
transactions contemplated by this Agreement. Subject to such confidentiality
restrictions as may be reasonably requested, Seller and Buyer shall furnish each
other such necessary information and reasonable assistance as the other may
reasonably request in connection with its preparation of necessary filings or
submissions under the provisions of such Laws. Seller and Buyer will immediately
supply to each other copies of all correspondence, filings or communications, by
such party or its Affiliates with any Governmental Entity or members of its
staff, with respect to the transactions contemplated by this Agreement and any
related or contemplated or inconsistent transactions, except for documents filed
pursuant to Item 4(c) of the Hart-Scott Rodino Notification and Report Form or
communications regarding the same. Buyer and Seller shall each pay their
respective costs and expenses incurred under this Section 4.4, except for the
$45,000 initial filing fee under the Hart-Scott-Rodino Act with respect to the
transactions contemplated by this Agreement, which shall be borne entirely by
Buyer.
4.5 Preservation of Business Prior to Closing Date. During the
----------------------------------------------
period beginning on the date hereof and ending on the Closing Date, (a) Seller
will and will cause Company to use its commercially reasonable efforts to
preserve the Business and to preserve the goodwill of customers, suppliers and
others having business relations with Company or the Subsidiaries, and (b)
Seller and Buyer will consult with each other concerning, and Seller will
30
<PAGE>
use commercially reasonable efforts and will cooperate with Buyer in connection
with Buyer's efforts to keep, the services of the officers and employees of
Company and the Subsidiaries that Buyer may wish to have Company and the
Subsidiaries retain. Nothing in this Section 4.5 shall obligate Buyer, Company
or any Subsidiary after the Closing to retain or offer employment to any officer
or employee of Company or any Subsidiary.
4.6 Exclusivity. Prior to the Closing, Seller will not, and will
-----------
cause its controlled Affiliates and Company and any of the directors, officers,
employees, representatives or agents of Seller, Company or any of their
controlled Affiliates (collectively, the "Seller's Representatives") not to,
directly or indirectly, (a) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged, acquiring or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets or
capital stock or other equity interest in Company or any of the Subsidiaries
other than the transactions contemplated by this Agreement (an "Acquisition
Transaction"), (b) facilitate, encourage, solicit or initiate discussions,
negotiations or submissions of proposals or offers in respect of an Acquisition
Transaction, (c) furnish or cause to be furnished, to any Person, any
information concerning the business operations, properties or assets of Company
or any of the Subsidiaries in connection with an Acquisition Transaction, or (d)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. Seller will inform Buyer in writing immediately following the
receipt by Seller, Company or any of Seller's Representatives of any proposal or
inquiry in respect of any Acquisition Transaction.
31
<PAGE>
4.7 International Patents. Seller shall deliver to Buyer within
---------------------
three days prior to the Closing Date an amendment to Schedule 2.8(b)(i) listing
------------------
all international patents, including applications therefor, which are related
to the United States patents, including applications therefor, as set forth on
Schedule 2.8(b)(i) as of the date of this Agreement.
------------------
4.8 Company Stock Option Plans. Prior to the Closing, the
--------------------------
appropriate committee of the Board of Directors of the Company (the "Board"), in
accordance with Section 6.2.1 of the Company Stock Option Plans, shall (i) adopt
resolutions (A) approving the Exchange Ratio as described in Section 1.2 of this
Agreement, and (B) providing that all outstanding Company Options shall be
automatically assumed by Buyer at Closing in accordance with the terms in
Section 1.2 of this Agreement and (ii) take all other actions necessary to
implement the terms of Section 1.2 of this Agreement. In addition, Seller and
the Company shall not make any amendments or other changes to the Company Stock
Option Plans or to the Company Options except as required by Law or this Section
and Section 1.2 of this Agreement.
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 Seller's Post-Closing Access.
----------------------------
(a) Subject to Section 11.5(d) hereof (relating to the
preservation of Tax records), Seller and Buyer agree that each of them shall
preserve and keep the records held by it, their subsidiaries or their controlled
Affiliates relating to the business of Company and the Subsidiaries for a period
of three years from the Closing Date and shall make such records and personnel
available to the other as may be reasonably required by such party, including
without limitation in connection with, among other things, any insurance claims
by, legal proceedings
32
<PAGE>
against or governmental investigations of Seller or Buyer or any of their
Affiliates or in order to enable Seller or Buyer to comply with their respective
obligations under this Agreement and each other agreement, document or
instrument contemplated hereby subject to restrictions on disclosure of such
information under applicable Laws, agreements with third parties, and, subject
to entering into appropriate agreements that preserve attorney-client privilege,
attorney-client privilege. In the event Seller or Buyer wishes to destroy such
records after that time, such party shall first give ninety days' prior written
notice to the other party and such other party shall have the right at its
option and expense, upon prior written notice given to such party within that
ninety day period, to take possession of the records within one hundred and
eighty days after the date of such notice. Any information obtained pursuant to
this Section 5.1 or pursuant to any other section hereof (including Section
11.5(d)) providing for the sharing of information or the review of any Tax
Return or other schedule relating to Taxes shall be subject to Section 12.2.
5.2 No Rights to Seller Intellectual Property. Except as provided
-----------------------------------------
herein or in the Continuing Intercompany Agreements, Buyer acknowledges and
agrees that Company and the Subsidiaries shall not have, and Buyer shall not
acquire pursuant to this Agreement, any rights of ownership or use whatsoever
with respect to any Mark of any kind that is owned by Seller or any Affiliate of
Seller other than Company or any Subsidiary, including, but not limited to, the
names and Marks "Advanced Micro Devices, Inc.," "AMD," "an AMD Company," and any
derivatives thereof. Buyer agrees that, effective as of the Closing, it shall
cause Company and the Subsidiaries to promptly cease and desist from any use of
any such names or Marks in connection with any advertising, marketing, or
solicitation efforts, and not later than 120 days after the Closing Date, to
cease and desist from any other use of any such name or Mark.
33
<PAGE>
5.3 Insurance; Indemnity Obligations.
--------------------------------
(a) Seller shall maintain in effect, with respect to Company
and the Subsidiaries, until 12:00 a.m. on the date following the Closing Date
all casualty and liability insurance policies listed on Schedule 2.11 (or
-------------
comparable replacement policies). Effective at 12:01 a.m. on the date following
the Closing Date, all insurance coverage maintained by Seller under which
Company and the Subsidiaries are insured, including any and all bonds or other
indemnity obligations (excluding any of the same set forth on Schedule 5.5),
------------
shall be cancelled and terminated (except to the extent that they may not, by
their terms, be so cancelled or terminated). Company and the Subsidiaries shall
be responsible for any deductibles or retentions in connection with any such
insurance. All premium refunds paid to Seller relating to insurance covering
Company and the Subsidiaries shall be the property of Seller, regardless of
whether such refunds are paid on, before or after the Closing Date.
(b) Company and the Subsidiaries shall continue to be entitled
to such claims or rights to receive any insurance proceeds under pre-Closing
insurance covering Company and the Subsidiaries as Seller may have, whether such
coverage is or was maintained on an "occurrence" basis or a "claims-made" basis.
From and after the Closing Date, Seller and Buyer shall cooperate in connection
with the adjustment and administration of claims under all such insurance
coverage. Buyer, Company and the Subsidiaries shall be responsible for any
deductible, retention or other charge provided for by the terms of any such
coverage.
(c) Buyer and Seller shall use all reasonable efforts to ensure
that no certificates of insurance indicating coverage under Seller (or by reason
of being a subsidiary or Affiliate of Seller) shall be issued after the Closing
Date and that all such insurance certificates
34
<PAGE>
which are outstanding as of the Closing Date are promptly returned to Seller. In
the event that Seller is unable to notify the holder of a certificate of
insurance indicating such coverage of the termination of coverage as of the
Closing Date, or Seller is unable to cancel or terminate any such coverage as of
the Closing Date, and Seller or its insurer thereafter receives a claim or
purported claim under any such coverage, Buyer shall have no right to recover
any amounts in respect thereof from Seller or its insurers and be responsible
for all Losses incurred by Seller or its insurers in respect of the same.
5.4 WARN Act. Buyer agrees that it will not take any action which
--------
causes the notice provisions of the WARN Act to be applicable to Seller or,
prior to the Closing, Company or any Subsidiary in connection with the
transactions contemplated by this Agreement.
5.5 Intercompany Agreements. Buyer agrees to perform or cause
-----------------------
Company to perform the obligations of Company under the Continuing Intercompany
Agreements. Except with respect to the Continuing Intercompany Agreements, Buyer
and Seller acknowledge and agree that all Intercompany Agreements shall be
terminated as of the Closing Date.
5.6 Expenses of Sale. To the extent and only to the extent paid
----------------
prior to the Closing or accrued on the Closing Balance Sheet, Company shall be
responsible for the following extraordinary out-of-pocket expenses actually
incurred by Company and the Subsidiaries in connection with the sale of the
Stock hereunder: (a) pre-Closing fees, expenses and disbursements of legal
counsel, accountants, consultants and other advisors, (b) pre-Closing expenses
relating to arrangements for due diligence investigations of Company, the
Subsidiaries and the Business by prospective buyers, including, but not limited
to, expenses to secure premises, equipment, personnel and other services, and
(c) the other sale expenses set forth on
35
<PAGE>
Schedule 5.6. Upon request, Seller shall reimburse Buyer for any such expenses
------------
not paid prior to the Closing or accrued on the Closing Balance Sheet.
5.7 Intercompany Balances. Except for any amounts due and owing
---------------------
under the terms of any Company Plan (a) immediately prior to the Closing,
Company and the Subsidiaries shall pay any amounts accrued and payable to Seller
or any Affiliate of Seller (other than amounts incurred in contravention of
Section 4.2), including, but not limited to, any declared but unpaid dividends
or other distributions permitted by Section 5.12 and amounts accrued under the
Intercompany Agreements, and (b) Seller or any Affiliate of Seller shall pay any
amounts accrued and payable to Company or any Subsidiary, including, but not
limited to, amounts accrued under the Intercompany Agreements.
5.8 Facilities. Seller shall take all reasonable efforts to effect
----------
the assignment to Buyer of the real property leases set forth on Schedule 5.8
------------
and, subject to such assignment, Buyer shall assume all obligations of Seller
under such leases as of the Closing Date.
5.9 Nondisclosure of Proprietary Data. Subject to applicable law,
---------------------------------
neither Seller nor its controlled Affiliates shall, at any time, make use of,
divulge or otherwise disclose, directly or indirectly, any trade secret or other
similar proprietary data (including, but not limited to, any customer list,
record or financial information) concerning the Business or policies of Company
and the Subsidiaries. Seller shall further protect such information by applying
the same standards and procedures of confidentiality which it applies generally
to its own trade secret or other similar proprietary data.
5.10 Nonsolicitation. During the period beginning on the date of
---------------
this Agreement and ending three years after the Closing Date, neither Seller, on
the one hand, nor
36
<PAGE>
Buyer, on the other hand (nor any of their respective controlled Affiliates),
will, without the other's prior consent (which consent may be withheld in the
other's sole discretion), directly or indirectly, solicit for employment, in the
case of Seller, any employee of Buyer, Company or any of their subsidiaries, and
in the case of Buyer, any employee of Seller or any of its subsidiaries. For
purposes of this Section 5.10, the term "solicit" shall be deemed not to include
advertisements or other generalized employment searches, including
advertisements in any media (including trade media) or any job postings system
not specifically directed to a particular employee. Seller and Buyer recognize
and agree that a breach of their respective covenants set forth in this Section
5.10 could cause irreparable harm to the other, that remedies at law in the
event of such breach would be inadequate, and that accordingly, in the event of
such breach, a restraining order or injunction or both may be issued against it,
in addition to any other rights and remedies which are available. If this
Section 5.10 is more restrictive than permitted by the Laws of any jurisdiction
in which enforcement is sought, this Section 5.10 shall be limited to the extent
required to permit enforcement under such Laws.
5.11 Noncompetition.
--------------
(a) Seller agrees that, for the period from the Closing to the
date which is the fifth anniversary of the Closing Date, neither Seller nor any
of Seller's controlled Affiliates will, directly or indirectly, for its own
benefit or as agent of another, carry on or own, manage or operate, participate
in, or control the management or operation of, or allow its name to be used in,
the Device Business (i) in the County of Santa Clara, (ii) in the State of
California, (iii) in the State of Oregon and (iv) in the United States of
America. For purposes of this Section 5.11, the "Device Business" shall mean the
design, marketing or sale of (or the investment in or acquisition of any
manufacturer of) any "stand alone" integrated circuit comprising (i) a general
37
<PAGE>
purpose array of logic gates (whether AND arrays or OR arrays) which can be
interconnected by programming a matrix of interconnect lines between the logic
gates, including any accompanying circuitry to provide I/O buffer control and
protection, programming control and data path, embedded memory and other
embedded subsidiary circuitry, timing control and distribution clocking, voltage
control and regulation, and chip protection functions (a "Programmable Logic
Device") or (ii) a general purpose array of logic blocks built from basic logic
gates or LUTs (Look Up Tables) which can be interconnected by programming a
matrix of interconnect lines between the logic blocks, including any
accompanying circuitry to provide I/O buffer control and protection, programming
control and data path, embedded memory and other embedded subsidiary circuitry,
timing control and distribution clocking, voltage control and regulation, and
chip protection functions (a "Field Programmable Gate Array").
The Device Business shall not include the manufacture, design,
marketing or sale of any Programmable Logic Device or Field Programmable Gate
Array that is combined on an integrated circuit with other devices (including
without limitation flash memory, microprocessors, microprocessors with or for
embedded applications, or other functions of integrated circuitry) or is
otherwise not a single purpose, "stand alone" integrated circuit that
constitutes or is otherwise not marketed as a Programmable Logic Device or Field
Programmable Gate Array.
(b) Nothing contained herein shall (i) limit Seller (A) from
acquiring (including through a merger) or investing in any business, development
arrangement or joint venture whose primary business activities do not constitute
a Device Business, or (B) from, directly or indirectly, holding or making
investments in securities of any business listed on a national securities
exchange, admitted to trading in an automated quotations market, or traded
38
<PAGE>
generally on the over-the-counter market, so long as Seller's direct or indirect
holdings do not exceed 5% of the outstanding Equity Securities thereof, or (ii)
apply to any Person who acquires, directly or indirectly, the Equity Securities
of, or control of, Seller or to the activities of any Person merging with or
into Seller as conducted prior to such merger by any Person merging with or into
Seller.
(c) Seller recognizes and agrees that compliance with the
covenant contained in this Section 5.11 is necessary to protect Buyer, Company
and the Subsidiaries and that a breach by Seller of any of the covenants set
forth in this Section 5.11 could cause irreparable harm to Buyer, that Buyer's
remedies at law in the event of such breach would be inadequate, and that,
accordingly, in the event of such breach, a restraining order or injunction or
both may be issued against Seller, in addition to any other rights and remedies
which are available to Buyer. If this Section 5.11 is more restrictive than
permitted by the Laws of any jurisdiction in which Buyer seeks enforcement
hereof, this Section 5.11 shall be limited to the extent required to permit
enforcement under such Laws. In particular, the parties intend that the
covenants contained in the preceding portions of this Section 5.11 shall be
construed as a series of separate covenants, one for each location specified.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this Section 5.11, then
such unenforceable covenant shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced. If any court of competent jurisdiction shall
determine the foregoing covenant to be unenforceable with respect to the term or
the scope of the subject matter or geography covered thereby, then such covenant
shall nevertheless be enforceable by such court against the other
39
<PAGE>
party upon such shorter term or within such lesser scope as may be determined by
such court to be reasonable and enforceable.
5.12 Dividends. At any time prior to the Closing, Company may pay
---------
cash dividends to its stockholders of record. In no event, however, will such
dividends paid from the date hereof to the Closing exceed, in the aggregate, $60
million.
5.13 Access for Environmental Review. Prior to the Closing, Buyer
-------------------------------
and its consultants and other representatives shall have access to all of
Seller's and Company's records of environmental inspections and tests and soil
and groundwater samples, in each instance relating to the Historic Company
Business Facilities.
5.14 Contract Rights. If any necessary Approval of a third party
---------------
with respect to a contract that is used in the conduct of the Business is not
obtained prior to the Closing, or as a result of the failure to have obtained
any such Approval Buyer would not, at the Closing, receive substantially all
rights under any such Contract, (a) Seller shall continue to use its best
efforts to obtain such Approval from and after the Closing, and (b) Seller and
Company shall cooperate in a mutually agreeable arrangement under which Company
or the Subsidiaries obtain or retain the benefits and assume the obligations
under such Contract, including subcontracting, sub-licensing or sub-leasing to
Company or the Subsidiaries, or under which Seller would enforce for the benefit
of Company and the Subsidiaries any and all rights of Seller against a third
party thereto, provided that Seller shall not be required to incur any out-of-
--------
pocket expenses in connection with the same, unless and to the extent advanced
by Buyer.
5.15 Patents. As provided in Section 2.8(b), Schedule 2.8(b) sets
------- ---------------
forth a list of all patents and patent applications that are owned by Company
or will be owned by Company as
40
<PAGE>
of the Closing. To the extent any patents or patent applications on such
Schedule have not been assigned to Company as of the date hereof, Seller shall
assign such patents or patent applications (together with any associated past
unrecovered damages claims and future damages claims), as the case may be, to
Company prior to the Closing. Seller agrees that, during the six (6) month
period following the date hereof, Seller will discuss with Buyer in good faith
whether any patent or patent application not on Schedule 2.8(b) should
---------------
reasonably be added thereto and, if Seller and Buyer agree that a patent or
patent application should reasonably be added thereto, Seller shall promptly
assign such patent or patent application (together with any associated past
unrecovered damages claims and future damages claims) to Company.
5.16 Transfer of Certain Business-Related Assets.
-------------------------------------------
(a) This Section 5.16 does not apply to Intellectual Property
or trade secrets.
(b) Seller shall use commercially reasonable efforts to assign
and transfer or cause to be assigned and transferred to Company prior to Closing
(i) all of the assets, properties and rights contemplated to be transferred to
Company by the resolutions adopted by Seller's board of directors at its
December 1997 meeting, (ii) the assets, properties and rights of Seller and its
controlled Affiliates (including contract rights and intangible assets,
properties and rights) predominantly related to the Business, and (iii) the
assets, properties and rights of Seller and its controlled Affiliates currently
treated by the Company as a part of the Business (collectively, the "Other
Business Assets").
41
<PAGE>
(c) To the extent any Other Business Assets have not been
assigned and transferred prior to Closing, Seller shall take such additional
commercially reasonable actions after the Closing to effect such assignments and
transfers as are reasonably requested by Buyer.
(d) The assignments and transfers pursuant to this Section 5.16
shall be at no cost to Buyer, Company or their respective subsidiaries and
Affiliates.
ARTICLE VI
GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect the Closing shall be subject
to the following conditions unless waived in writing by each of the parties
hereto:
6.1 No Orders; Legal Proceedings. No Law or Order shall have been
----------------------------
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending by any Governmental
Entity at what would otherwise be the Closing Date, which prohibits or restricts
or would (if successful) prohibit or restrict the sale and purchase of Stock
contemplated by this Agreement.
6.2 Approvals. To the extent required by applicable Law, all
---------
material Permits and Approvals required to be obtained from any Governmental
Entity in connection with consummation of the transactions contemplated by this
Agreement shall have been received or obtained on or prior to the Closing Date,
without the imposition of any burdensome conditions materially adverse to the
party entitled to the benefit thereof, and any applicable waiting period under
the Hart-Scott-Rodino Act shall have expired or been terminated and any
applicable merger notification requirements under statutes of foreign
Governmental Entities shall have been
42
<PAGE>
complied with, except to the extent that noncompliance with any such foreign
merger notification statute is not reasonably likely to have a material adverse
impact on the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Closing shall be subject to the
following conditions, except to the extent waived in writing by Buyer:
7.1 Representations and Warranties and Covenants of Seller. The
------------------------------------------------------
representations and warranties of Seller herein contained shall be true in all
material respects (provided, however, that where a representation or warranty is
-------- -------
already qualified as to materiality, such representation or warranty shall be
true in all respects) at the Closing Date with the same effect as though made at
such time, Seller shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed, or complied
with by it (except in immaterial respects), on or prior to the Closing Date, and
Seller shall have delivered to Buyer a certificate of Seller ("Seller's Closing
Certificate") dated as of the Closing Date and signed by its president to such
effect. The representations and warranties made by Seller in Seller's Closing
Certificate shall constitute, upon execution and delivery thereof,
representations and warranties of Seller for all purposes of this Agreement
including Article II hereof.
7.2 Resignation of Directors. The directors of Company and the
------------------------
Subsidiaries shall have submitted their respective resignations in writing to
Company and the Subsidiaries, as applicable. Such resignations shall be
effective as of the Closing.
43
<PAGE>
7.3 Continuing Intercompany Agreements. The Continuing Intercompany
----------------------------------
Agreements shall be in the amended forms executed on the date hereof and as
attached to the letter agreement dated as of the date of this Agreement by and
between Seller and Buyer and shall be in full force and effect.
7.4 Amended Schedules. The additions to the Schedules, as reflected
-----------------
in the amendment delivered to Buyer pursuant to Section 2.22 shall not have
indicated any change in, or the occurrence of an event affecting, Company or any
of the Subsidiaries that, individually or in the aggregate, has or would have a
material adverse effect on the Business (other than matters of general
applicability to Company's industry.
7.5 Financing. (x) There shall not have occurred a material
---------
adverse change or disruption in the loan syndication or capital markets after
the date of this Agreement which results in (i) termination of the Commitment
Letter (including any extension thereof), (ii) Buyer being unable to extend the
Commitment Letter beyond its scheduled expiration on terms not significantly
worse than those contemplated by the Commitment Letter or (iii) Buyer otherwise
being unable to consummate the Financing and (y) Buyer, despite commercially
reasonable efforts, is unable to obtain alternate financing (on terms not
significantly worse than those set forth in the Commitment Letter) sufficient,
with Buyer's available cash, to pay the Purchase Price.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
44
<PAGE>
8.1 Representations and Warranties and Covenants of Buyer. The
-----------------------------------------------------
representations and warranties of Buyer herein contained shall be true in all
material respects (provided, however, that where a representation or warranty is
-------- -------
already qualified as to materiality, such representation or warranty shall be
true in all respects) at the Closing Date with the same effect as though made at
such time, Buyer shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed, or complied
with by it (except in immaterial respects), on or prior to the Closing Date, and
Buyer shall have delivered to Seller a certificate of Buyer ("Buyer's Closing
Certificate") dated as of the Closing Date and signed by its president to such
effect. The representations and warranties made by Buyer in Buyer's Closing
Certificate shall constitute, upon execution and delivery thereof,
representations and warranties of Buyer for all purposes of this Agreement
including Article III hereof.
ARTICLE IX
TERMINATION OF OBLIGATIONS; SURVIVAL
9.1 Termination of Agreement. Anything herein to the contrary
------------------------
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall automatically terminate, without any notice, demand or action by
either party, if the Closing does not occur on or before the close of business
on August 31, 1999 unless extended by mutual, written consent of Buyer and
Seller and otherwise may be terminated at any time before the Closing as follows
and in no other manner:
(a) Mutual Consent. By mutual written consent of Buyer and
--------------
Seller.
45
<PAGE>
(b) Conditions to Buyer's Performance Not Met. By Buyer by
-----------------------------------------
written notice to Seller if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the obligations
of Buyer to consummate the transactions contemplated by this Agreement as set
forth in Articles VI or VII.written notice to
(c) Conditions to Seller's Performance Not Met. By Seller by
------------------------------------------
written notice to Buyer if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the obligation
of Seller to consummate the transactions contemplated by this Agreement as set
forth in Articles VI or VIII.
(d) Material Breach. By Buyer or Seller if there has been a
---------------
material misrepresentation or other material breach by the other party in its
representations, warranties and covenants set forth herein; provided, however,
-------- -------
that the breaching party shall have 20 business days after receipt of notice
from the other party of its intention to terminate this Agreement if such breach
continues, in which to cure such breach.
9.2 Effect of Termination. In the event that this Agreement shall be
---------------------
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement shall terminate; provided that the obligations of the parties
--------
contained in Sections 12.2, 14.12, 14.13 and 14.16 shall survive any such
termination, and that a termination under Section 9.1 shall not relieve either
party of any liability for a breach of, or for any misrepresentation under, this
Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
misrepresentation.
9.3 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties contained in Article II and Article III of this Agreement
(including the representations
46
<PAGE>
and warranties made in Seller's Closing Certificate and Buyer's Closing
Certificate) shall expire 18 months after the Closing Date, except that (i) the
representations and warranties contained in Section 2.4 shall continue through
the expiration of the applicable statute of limitations as the same may be
extended; and (ii) if a claim or notice is given under Article X with respect to
any representation or warranty prior to the applicable expiration date, such
claim shall continue indefinitely until it is finally resolved.
9.4 Notice of Known Unsatisfied Conditions or Breached
---------------------------------------------------
Representations, Warranties or Covenants. Prior to the Closing, each of Buyer
----------------------------------------
and Seller agrees to promptly inform the other party of any failure to be
satisfied of any condition in its favor or the breach of any representation,
warranty or covenant by the other of which such party becomes aware.
ARTICLE X
INDEMNIFICATION
10.1 Obligations of Seller. Subject to the provisions of Section
---------------------
10.4, from and after the Closing, Seller agrees to indemnify Buyer, Company and
each Subsidiary, and their respective directors, officers, employees,
Affiliates, agents and assigns for, and save and hold harmless each from and
against, any and all Losses, directly or indirectly, as a result of, arising
from, incurred in connection with, or incident to:
(a) any inaccuracy in or breach of any of the representations
and warranties made by Seller in or pursuant to this Agreement (other than any
set forth in Section 2.4);
47
<PAGE>
(b) any breach or nonperformance of any covenants or
agreements made by Seller in or pursuant to this Agreement;
(c) any breach of Law under ERISA or the Code in connection
with, any employee benefit plan or arrangement maintained, sponsored,
contributed to or administered by Seller or its ERISA Affiliates other than
under, as a result of, or based upon or arising from, the Company Plans;
(d) Seller's Retained Environmental Liabilities;
(e) claims asserted against Company in connection with matters
listed on Schedule 2.3(b) Item 2; in respect of invoices in an approximate
----------------------
aggregate amount of $750,000; and
(f) any claim that additional royalties are payable under
Buyer's license described in the letter of even date herewith, as a result of
Buyer's acquisition of the Business provided that such Losses exceed $75,000.
--------
Notwithstanding the foregoing, in the case of any Losses described in
(a), (b) or (c) above, liabilities specifically identified and accrued or
reserved in the Closing Balance Sheet shall not be indemnified under this
Section 10.1 to the extent so accrued or reserved. Except as provided in this
Section 10.1, Buyer releases Seller from any liability to Buyer arising out of
any Environmental Claim in connection with the conduct of the Business or the
use of the Historic Company Business Facilities by Seller, Company or any of
their respective Subsidiaries.
10.2 Obligations of Buyer. Subject to the provisions of Section
--------------------
10.4, from and after the Closing, Buyer agrees to indemnify, Seller and its
directors, officers, employees,
48
<PAGE>
Affiliates, agents and assigns for, and save and hold harmless each, from and
against any Losses, directly or indirectly, as a result of or arising from,
incurred in connection with, or incident to:
(a) any inaccuracy in or breach of any of the representations
and warranties made by Buyer in or pursuant to this Agreement;
(b) any breach or nonperformance of any covenants or agreements
made by Buyer in or pursuant to this Agreement;
(c) Buyer's Environmental Liabilities; and
(d) if such lease is assigned to Company, any claims against
Seller under the Sunnyvale Technology Park Lease between Stewart Drive LLC and
Seller dated September 17, 1997 (other than any consent fee or other one
time payment incurred directly as a result of the assignment of such lease to
the Company or the transactions contemplated by this Agreement) (until such
time as Seller shall have been forever released from all liability by the
lessor thereunder with respect to events occurring after the Closing Date).
Except as provided in this Section 10.2, Seller releases Buyer from
any liability to Seller arising out of any Environmental Claim in connection
with the conduct of the Business or the use of the Historic Company Business
Facilities by Buyer, Company or any of their respective Subsidiaries.
10.3 Procedure.
---------
(a) Notice. Any party seeking indemnification of any Loss or
------
potential Loss arising from a claim asserted by a third party shall give
written notice (a "Claim Notice") to the party from whom indemnification is
sought. Written notice to the Indemnifying Party of the
49
<PAGE>
existence of such third-party claim shall be given by the Indemnified Party
within the later of (i) 30 days after its receipt of a written assertion of
liability from the third party or (ii) upon Indemnified Party's determination
to seek indemnification for such claim from the Indemnifying Party (but in any
event within 30 days of Indemnified Party's receipt of notice of the intended
commencement of an Action or investigation in respect of such claim). Neither
the failure of the Indemnified Party to provide notice of any such third party
claim to the Indemnifying Party within the 30 days contemplated by clause (i)
of the preceding sentence nor the failure of the Indemnified Party to provide
notice of any such claim in accordance with clause (ii) of the preceding
sentence shall affect the Indemnified Party's rights to indemnification
hereunder, except to the extent that the Indemnifying Party incurs an out-of-
pocket expense or otherwise has been prejudiced as a result of such delay.
(b) Defense. The Indemnifying Party shall be entitled to
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assume the defense, control and settlement (at its cost) of any Indemnifiable
Claim (including Environmental Claims) asserted by a third party. Without
prejudice to the foregoing, in the event the Indemnifying Party assumes defense,
control and settlement of any Indemnifiable Claim which is an Environmental
Claim (an "Indemnifiable Environmental Claim"), the Indemnifying Party shall
undertake, and shall be entitled to control, the remediation of the release and
shall be entitled to control the defense of any third party claims arising
therefrom, provided that the Indemnifying Party shall take all reasonable steps
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to minimize any adverse impact of such remediation on the Indemnified Party. If
the Indemnifying Party assumes the defense of any such Indemnifiable Claim, it
shall retain experienced counsel reasonably satisfactory to the Indemnified
Party. With respect to Indemnifiable Environmental Claims, the Indemnifying
Party shall be entitled to (i) retain environmental engineers and other experts
and
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advisors as it may determine to be advisable and (ii) to remediate the Release
as it may determine to be advisable. If the Indemnifying Party does not assume
such defense, the Indemnified Party may compromise or settle any claim for the
payment of money on behalf of and for the account and risk of the Indemnifying
Party, who shall be bound by the result.
(c) Settlement Limitations. Notwithstanding anything in this
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Section 10.3 to the contrary, the Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent may not be unreasonably
withheld), settle or compromise any third party Indemnifiable Claim or permit a
default or consent to entry of any judgment therein. Notwithstanding the
foregoing, if a settlement offer solely for money damages (and which otherwise
(i) has no material adverse impact on the Indemnified Party, (ii) does not
limit, restrict or otherwise affect Indemnified Party's ability to conduct the
Business, (iii) does not require any admission of wrongdoing on the part of
Indemnified Party and (iv) does not require payment of any amount by Indemnified
Party) is made by the applicable third party claimant, which settlement includes
an unqualified release from all liability in respect of such claim, and the
Indemnifying Party notifies the Indemnified Party in writing of the Indemnifying
Party's willingness to accept the settlement offer and pay the amount called for
by such offer, and the Indemnified Party fails to accept such offer in writing
within a reasonable period, the Indemnified Party may continue to contest such
claim, free of any participation by the Indemnifying Party, and the amount of
any ultimate liability with respect to such Indemnifiable Claim that the
Indemnifying Party has an obligation to pay hereunder shall be limited to the
lesser of (i) the amount of the settlement offer that the Indemnified Party
failed to accept, or (ii) the aggregate Losses of the Indemnified Party with
respect to such claim. If the Indemnifying Party makes any payment on any claim,
the Indemnifying Party shall be
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subrogated, to the extent of such payment, to all rights and remedies of the
Indemnified Party to any claims of the Indemnified Party against third parties
(other than the Indemnified Party's insurers) with respect to such claim.
10.4 Limitations on Indemnification.
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(a) The Indemnified Party shall provide reasonable evidence and
documentation of the nature and extent of any Loss payable by the Indemnifying
Party upon request by the Indemnifying Party.
(b) Any Indemnifiable Claim governed by this Article X shall be
limited to the amount of Losses sustained by the Indemnified Party, net of the
dollar amount of any insurance proceeds received by the Indemnified Party with
respect to such Losses, (net of any Tax liabilities in respect thereof and any
incremental cumulative additional insurance costs as a result thereof as
reasonably determined by Indemnified Party). The Indemnified Party shall proceed
in good faith using commercially reasonable efforts to make claims for any
insurance proceeds receivable with respect to Losses. Seller shall not be
required to pay any amounts under Section 10.1(a) unless (i) the aggregate of
all amounts which would otherwise be payable by Seller thereunder exceeds
$2,750,000 or (ii) the amount of any individual Indemnifiable Claim which would
otherwise be payable by Seller thereunder exceeds $75,000, and, if an
Indemnifiable Claim or Indemnifiable Claims, as the case may be, is in excess of
such individual or aggregate limits, Seller shall be responsible for the total
amount of such Indemnifiable Claim or Indemnifiable Claims. Buyer shall not be
required to pay any amounts under Section 10.2(a) unless (i) the aggregate of
all amounts for which indemnity would otherwise be payable by Buyer exceeds
$2,750,000, or (ii) the amount of any individual Indemnifiable Claim which
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would otherwise be payable by Buyer thereunder exceeds $75,000, and if an
Indemnifiable Claim or Indemnifiable Claims, as the case may be, is in excess of
such individual or aggregate limits, Buyer shall be responsible for the total
amount of such Indemnifiable Claim or Indemnifiable Claims. For purposes of
indemnification in respect of Losses, any representation or warranty shall be
deemed to exclude any limitation or qualification as to materiality set forth in
such representation or warranty, but in no event shall an individual breach or
inaccuracy of any such representation or warranty be considered until the Losses
relating thereto exceed $75,000. Seller's indemnity obligations under Section
10.1(a) shall be limited, in the aggregate, to $75,000,000.
10.5 Remedies Exclusive. The remedies provided for in this Article
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X shall constitute the sole and exclusive remedy for any post-Closing claims
made for breach of this Agreement, except for claims arising out of any breach
of Sections 5.9 or 12.2, or arising under Article XI. Nothing in this Section
10.5, however, shall constitute a waiver or limitation by any party of its
rights or remedies based on fraud or intentional misrepresentation. Each party
hereby waives any provision of law to the extent that it would limit or restrict
the agreement contained in this Section 10.5. Notwithstanding anything to the
contrary elsewhere in this Agreement, nothing herein shall preclude a party from
exercising its rights under this Agreement and applicable law to equitable
remedies, including, without limitation, specific performance and injunction,
and no party or its Affiliates shall seek or be liable for any punitive or
consequential damages, including, but not limited to, loss of revenue or income,
or los