AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS

 

TABLE OF CONTENTS

 

			Page
1.	DEFINITIONS		1
	1.1	Defined Terms	1
	1.2	Other Definitional and Interpretive Matters	7
2.	PURCHASE AND SALE OF ASSETS		8
	2.1	Acquired Assets	8
	2.2	Excluded Assets	9
	2.3	Assumed Liabilities	9
	2.4	Excluded Liabilities	10
	2.5	Assumption of Assigned Contracts	11
	2.6	Closing Date	11
	2.7	Purchase Price	11
	2.8	Net Working Capital Adjustment	12
	2.9	Nonassignable Contracts	13
	2.10	Taxes	14
	2.11	Option Plan and Phantom Stock Units	14
	2.12	Purchase Price Allocation	15
3.	REPRESENTATIONS AND WARRANTIES OF SELLER		15
	3.1	Organization and Authority	15
	3.2	Authorization; Binding Obligation	15
	3.3	Subsidiaries and Joint Ventures	15
	3.4	No Violations	16
	3.5	Capitalization	16
	3.6	Title to Assets	16
	3.7	Sufficiency of Assets	16
	3.8	Tangible Personal Property	17
	3.9	Real Property	17
	3.10	Compliance With Laws; Litigation	17
	3.11	Business Employees and Consultants	17
	3.12	Intellectual Property	18
	3.13	Financial Statements	21
	3.14	Material Contracts	21

 

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TABLE OF CONTENTS

(continued)

 

			Page
	3.15	Accounts Receivable; Accounts Payable	22
	3.16	Inventory	22
	3.17	Brokers	22
	3.18	Books and Records	22
	3.19	Suppliers and Customers	22
	3.20	Governmental Permits	23
	3.21	Absence of Changes	23
	3.22	Prism India	24
	3.23	Disclosure	24
4.	REPRESENTATIONS AND WARRANTIES OF PURCHASER		24
	4.1	Organization and Authority	25
	4.2	Authorization; Binding Obligations	25
	4.3	No Violations	25
	4.4	Brokers	25
5.	COVENANTS		26
	5.1	Access; Further Assurances	26
	5.2	Conduct of Business Prior to Closing	27
	5.3	Employees	27
	5.4	Non-Competition	27
	5.5	Non-Solicitation	27
	5.6	Tax Reporting and Allocation of Consideration	28
	5.7	Legal Conditions to Transactions	28
	5.8	Exclusivity	28
	5.9	Seller Subsidiaries	29
	5.10	Equity Incentives for Business Employees	29
	5.11	Notification	29
	5.12	Change of Name	30
	5.13	Payment of Other Excluded Liabilities	30
	5.14	Restrictions on Dissolution	30
	5.15	Indemnification of Samir Mitra by Prism India	30
	5.16	Retention and Access to Records	30

 

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TABLE OF CONTENTS

(continued)

 

			Page
6.	CONFIDENTIAL NATURE OF INFORMATION		31
	6.1	Confidentiality Agreement	31
	6.2	Public Announcements	31
	6.3	Protection of Confidential Information	31
7.	CLOSING CONDITIONS		32
	7.1	Conditions to Purchaser’s Obligation to Close	32
	7.2	Conditions to Seller’s Obligation to Close	34
	7.3	Contemporaneous Effectiveness	35
8.	INDEMNIFICATION; INFRINGEMENT		35
	8.1	Survival of Representations and Warranties	35
	8.2	General Agreement to Indemnify	35
	8.3	General Procedures for Indemnification	36
	8.4	Right of Set-Off	37
	8.5	Dispute Resolution	37
	8.6	Limitations on Indemnification Obligations	38
	8.7	Sole and Exclusive Remedy	38
9.	TERMINATION		38
	9.1	Right to Terminate	38
	9.2	Effects of Termination	39
10.	MISCELLANEOUS PROVISIONS		39
	10.1	Notices	39
	10.2	Expenses	40
	10.3	Entire Agreement; Amendment; Waiver	40
	10.4	Assignment; Binding Effect; Severability	40
	10.5	Governing Law; Forum	41
	10.6	Public Announcement	41
	10.7	No Third-Party Beneficiaries	41
	10.8	Execution in Counterparts	41

 

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TABLE OF CONTENTS

(continued)

 

EXHIBITS
Exhibit A	Form of Non-Competition Agreement
Exhibit B	Form of Share Control Agreement

 

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AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS

 

THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS (this “Agreement” ) is made as of June 5, 2009 by and between Prism Circuits, Inc., a Delaware corporation, having its principal office at 2560 Mission College Blvd., Suite 102, Santa Clara, CA 95054 ( “Seller” ), and MoSys, Inc., a Delaware corporation, having its principal office at 755 N. Mathilda Avenue, Sunnyvale, CA 94085 ( “Purchaser” ).

 

RECITALS

 

A.             Seller and its Subsidiaries are engaged in the business of designing, developing and licensing integrated circuit design technology and providing related services (the “Acquired Business” ).

 

B.             Seller and its Subsidiaries own certain assets relating to, necessary for or material to the Acquired Business and Seller desires to sell, transfer, convey and assign to Purchaser the specified assets and operations of the Acquired Business described in this Agreement for the purchase price and upon the terms and subject to the conditions contained in this Agreement,  and Purchaser desires to purchase such assets from Seller and its Subsidiaries for the purchase price and upon the terms and subject to the conditions contained in this Agreement.

 

NOW THEREFORE, in consideration of the mutual agreements and covenants contained in this Agreement and intending to be legally bound by this Agreement, the parties to this Agreement hereby agree as follows:

 

1.              Definitions

 

1.1           Defined Terms.   For the purposes of this Agreement, the following words and phrases shall have the following meanings:

 

“Accounts Payable” has the meaning assigned by Section 2.3(a).

 

“Accounts Receivable” has the meaning assigned by Section 2.1(f).

 

“Acquired Assets” has the meaning assigned by Section 2.1.

 

“Acquired Business” has the meaning assigned by Recital A.

 

“ Acquired Corporation IP ” shall mean all worldwide proprietary information and intellectual property rights of Seller and its Subsidiaries that relate to or are used in the Acquired Business, including, without limitation:  (i) all patents, patent rights, copyrights and works of authorship in any media (including, without limitation, computer programs, software and applications therefor (including, without limitation, source code and object code, development documentation, programming tools, drawings, specifications, test software, laser programs, sort programs, packaged unit test programs, characterization programs and data)), labels and other trade rights, product displays, know-how, inventions, invention disclosures, discoveries, improvements, designs, design rights, masks, mask works, circuit designs, algorithms, behavior models, hardware description language models, proprietary design tools, tooling, dies, molds, layouts, test keys, cells,

 

 

databases, libraries, customer lists, trade secrets, technology, formulae, recipes, shop rights, development work-in-process, graphics, artwork, photography, advertising and promotional materials, trademarks, service marks, trade names, brand names, domain names, logos, trade dress, source indicators, and other proprietary or confidential technology and information, in each case, (x) including, without limitation, all authors’, moral, common law and other rights to any of the foregoing, and (y) whether or not registrable, patentable or copyrightable; (ii) all Intellectual Property Rights in the Acquired Corporation Products, (iii) all Registered IP that is identified, or required to be identified, in Schedule 3.12(a), (iv) all development or deployment tools (including scripts and makefiles) developed by or on behalf of any Acquired Corporation, and (v) all other Intellectual Property and Intellectual Property Rights developed by or on behalf of any Acquired Corporation or in which any Acquired Corporation otherwise has, or purports to have, an ownership interest or exclusive rights.

 

“ Acquired Corporation Products ” shall mean and include (a) the design databases and documentation for all products, including, without limitation, all multi-protocol Serializer/ Deserializer, DDR2, DDR3 and DDR3/2 combo PHY macro designs, evaluation boards and product support deliverables designed, developed, licensed or sold by Seller and the directly-related Intellectual Property Rights, and (b) all Acquired Corporation Software.

 

“ Acquired Corporation Software ” shall mean and include all software or firmware (including microcode) that is incorporated into, or otherwise is or is a part of, any Acquired Corporation Product.

 

“ Acquired Corporation Source Code ” shall mean any source code, or any portion, aspect or segment of any source code for the Acquired Corporation Software.

 

“ Acquired Corporations ” shall mean, collectively, Seller, its Subsidiaries and their respective predecessors.

 

“Acquisition Proposal” has the meaning assigned by Section 5.8.

 

“Affiliate” of a Person means any Person controlling, controlled by, or under common control with, such Person.  For purposes of this definition, “control” means the power to direct the management and policies of a Person, whether through the ownership of voting securities, by agreement or otherwise.

 

“Agreement” has the meaning assigned by the introduction.

 

“Assigned Contracts” means all Contracts listed on Schedule 2.5 .

 

“Assumed Liabilities” has the meaning assigned by Section 2.3.

 

“Business Consultants” has the meaning assigned by Section 3.11(a).

 

“Business Day” means a day that is not a Saturday, a Sunday or a statutory or civic holiday in California or any other day on which the principal offices of either Seller or Purchaser are closed, whether in accordance with established company policy or as a result of unanticipated events, and which began at 12:01 a.m. and ends at midnight on such day.

 

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“Business Employees” means all Persons currently employed by Seller or its Subsidiaries and listed on Schedule 3.11(a) .

 

“Business Records” has the meaning assigned by Section 2.1(g).

 

“Closing” has the meaning assigned by Section 2.6.

 

“Closing Date” has the meaning assigned by Section 2.6.

 

“ Closing Date Net Working Capital ” has the meaning assigned by Section 2.8(c).

 

“ Closing Date Net Working Capital Statement ” has the meaning assigned by Section 2.8(c).

 

“Closing Payment” has the meaning assigned by Section 2.7(b).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock, par value $0.0001 per share, of Seller.

 

“Common Stock Issuances” has the meaning assigned by Section 3.5.

 

“Confidential Information” has the meaning assigned by Section 6.3(a).

 

“Confidentiality Agreement” has the meaning assigned by Section 6.1.

 

“Consultant Confidentiality Agreements” has the meaning assigned by Section 3.11(b).

 

“Contract” means any agreement, contract, lease, license, promissory note, conditional sales contract, indenture, mortgage, deed of trust, commitment, undertaking, instrument or arrangement of any kind, whether or not in writing, under which (in each case) any obligation is legally enforceable against any Person, asset or right.  Without limiting the generality of the foregoing, any agreement, commitment, undertaking or arrangement of any kind with a Governmental Body shall constitute a “Contract” whether it was entered into voluntarily or pursuant to applicable law or in settlement of a claim or possible claim by such Governmental Body, or otherwise.

 

“ Earn-out Payment ” has the meaning assigned by Section 2.7(c)(i).

 

“ Earn-out Milestones ” has the meaning assigned by Section 2.7(c)(ii).

 

“Employee Confidentiality Agreements” has the meaning assigned by Section 3.11(b).

 

“Employee Employment Agreements” has the meaning assigned by Section 3.11(c).

 

“Employee Plan” has the meaning assigned by Section 2.4(e).

 

“Encumbrance” means any encumbrance of any kind whatsoever, including, without limitation, any security interest, mortgage, deed of trust, lien, judgment, hypothecation, pledge, Tax lien, rent, assessment, mechanic’s or materialmen’s lien, assignment, easement, servitude, right-of-way, restriction, tenancy, encroachment or burden or any other right, license or claim of any Third

 

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Party affecting the Acquired Assets or any restrictive covenant or other agreement, restriction or limitation on the ownership, use or disposition of any Acquired Assets.

 

“ Estimated Net Working Capital ” has the meaning assigned by Section 2.8(b).

 

“ Estimated Net Working Capital Statement ” has the meaning assigned by Section 2.8(b).

 

“Excluded Assets” has the meaning assigned by Section 2.2.

 

“Excluded Liabilities” has the meaning assigned by Section 2.4.

 

“Exclusivity Period” has the meaning assigned by Section 5.8.

 

“Fixed Assets” has the meaning assigned by Section 2.1(d).

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Governmental Body” means any court, government (foreign, federal, state or local), department, commission, board, agency, bureau, official or other regulatory, administrative or governmental authority.

 

“Governmental Permits” means all governmental permits and licenses, certificates of inspection, approvals or other authorizations issued to Seller or any of its Subsidiaries by a Governmental Body which are necessary or desirable for the use, enjoyment or exploitation of, or other derivation of the benefits from, the Acquired Assets.

 

“Indemnified Party” means the party seeking indemnification under Article 8 and any director, officer, stockholder, Affiliate or any successors or assignees of such party.

 

“Indemnifying Party” means the party against whom indemnification under Article 8 is sought.

 

“ Independent Accounting Firm ” has the meaning assigned by Section 2.8(d).

 

“Infringement Claim” has the meaning assigned by Section 8.4(a).

 

“ Intellectual Property Rights ” shall mean and include all rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (b) trademark and trade name rights and similar rights (including domain name registrations); (c) trade secret rights; (d) patents and industrial property rights; (e) other proprietary rights in intellectual property of every kind and nature; and (f) all registrations, renewals, extensions, combinations, divisions, or reissues of, and applications for, any of the rights referred to in clauses “(a)” through “(e)” above.

 

“IRS” means the U.S. Internal Revenue Service.

 

“Key Employees” has the meaning assigned by Section 7.1(l).

 

“Losses” has the meaning assigned by Section 8.2(a).

 

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“March 31,  2009 Balance Sheet” has the meaning assigned by Section 3.13(a).

 

“ Material Adverse Effect ” means any fact, change, event, violation, inaccuracy, circumstance or effect (any such item, an “ Effect ”), individually or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of the Material Adverse Effect, that is or would reasonably be expected to have a material adverse effect on the Acquired Business, or the condition (financial or otherwise), results of operations or prospects of the Acquired Business, or on the ability of Purchaser or Seller to consummate the transactions contemplated in this Agreement or in the Other Transaction Documents; provided, however that Material Adverse Effect shall not be deemed to include the impact of (a) the implementation of changes in GAAP or interpretations thereof, including, without limitation, changes in revenue recognition policies, (b) actions or omissions of Seller taken or permitted in accordance with the provisions of this Agreement or with the prior written consent of Purchaser, and (c) changes affecting the general economic, financial or political conditions, to the extent such changes do not have a materially disproportionate impact on Seller and its Subsidiaries, taken as a whole, relative to other comparable companies.

 

“Net Working Capital” has the meaning assigned by Section 2.8(a).

 

“ Net Working Capital Adjustment Amount ” has the meaning assigned by Section 2.8(b)

 

“ Net Working Capital Statement ” has the meaning assigned by Section 2.8(a).

 

“ Net Working Capital Target ” has the meaning assigned by Section 2.8(a).

 

“ Net Working Capital Statement ” has the meaning assigned by Section 2.8(a).

 

“Nonassignable Contracts” has the meaning assigned by Section 2.9.

 

“Non-Paying Party” has the meaning assigned by Section 5.6(c).

 

“Non-Transfer Tax Paying Party” has the meaning assigned by Section 2.10.

 

“Other Personal Property” has the meaning assigned by Section 2.1(d).

 

“Other Transaction Documents” means the Non-Competition Agreements and the instruments of transfer or conveyance contemplated by and delivered at the Closing pursuant to Article 7 hereof.

 

“Outstanding Options” has the meaning assigned by Section 3.5.

 

“Paying Party” has the meaning assigned by Section 5.6(c).

 

“Permitted Encumbrances” means (i) Encumbrances for Taxes that are not yet due and payable, (ii) Encumbrances to secure obligations to landlords, lessors or rentors under leases or rental agreements (all of which Encumbrances are listed on Schedule 3.6 ), (iii)  Encumbrances made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by applicable law, (iv) Encumbrances in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies and other like items, (v) Encumbrances in favor of customers and revenue authorities arising as a matter

 

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of applicable law to secure payments of customs duties in connection with the importation of goods, (vi) the lien of General Electric Capital Corporation on all equipment leased to or financed by Seller pursuant to the Equipment Lease Agreement No. 84178666-001 which is further described in Schedule 3.6 , and (vii) any Encumbrances that do not materially and adversely affect Purchaser’s use, enjoyment or exploitation of, or otherwise derive the benefits from, any Acquired Assets and are listed on Schedule 3.6 .

 

“Person” means any individual, corporation, partnership, firm, association, joint venture, joint stock company, trust or other entity, or any government or regulatory, administrative or political subdivision or agency, department or instrumentality thereof.

 

“Phantom Stock Plan” has the meaning set forth in Section 3.22(c).

 

“Prism India” shall mean Prism Circuits India Private Limited, a company formed under the laws of India.

 

“ Proceeding ” shall mean any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

 

“Purchase Price” has the meaning assigned by Section 2.7(a).

 

“Purchaser” has the meaning assigned by the introduction.

 

“Purchaser Group” has the meaning assigned by Section 5.1(a).

 

“ Purchaser’s Proposed Calculations ” has the meaning assigned by Section 2.8(c).

 

“ Registered IP ” shall mean all Intellectual Property Rights that are registered or filed with, or issued under the authority of, any Governmental Body, including all patents, registered copyrights, registered mask works, and registered trademarks and all applications for any of the foregoing.

 

“ Remaining Disputed Items ” has the meaning assigned by Section 2.8(d).

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” has the meaning assigned by Section 3.5.

 

“Seller” has the meaning assigned by the introduction.

 

“ Seller’s Proposed Calculations ” has the meaning assigned by Section 2.8(d).

 

“Stockholder” means a stockholder of Seller.

 

“Straddle Period Taxes” has the meaning assigned by Section 5.6(c).

 

“Subsidiary” means any Person (other than an individual) in which another Person (other than an individual), or the ultimate parent of such other Person, owns directly or indirectly more than

 

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50 percent of the total voting power for purposes of electing directors or other managers or more than 50 percent of the partnership interests in the case of a partnership.

 

“Tangible Personal Property” means the Fixed Assets and Other Personal Property.

 

“Tax” or “Taxes” means, or shall refer or relate to, any and all taxes, charges, fees, levies, imposts and other assessments, including, without limitation, all income, sales, use, goods and services, value added, capital, capital gains, alternative, net worth, transfer, profits, withholding, payroll, excise, franchise, real property and personal property taxes, and any other taxes, customs duties, fees, assessments or similar charges in the nature of a tax including, without limitation, unemployment and employment insurance payments and workers’ compensation premiums, together with any installments with respect thereto, and any interest, fines and penalties imposed by any Governmental Body (including, without limitation, federal, state, provincial, municipal and foreign governmental authorities), and whether disputed or not.

 

“Third Party” means any Person not an Affiliate of the other referenced Person or Persons; provided that, as used in Sections 8.2, 8.3, 8.5 and 8.7, the term “Third Party” shall be deemed to include and refer to an Affiliate of the Indemnifying Party.

 

“Third-Party Claim” has the meaning assigned by Section 8.3(a).

 

“Transfer Taxes” has the meaning assigned by Section 2.10.

 

“Transfer Tax Paying Party” has the meaning assigned by Section 2.10.

 

“Unaudited Financials” has the meaning assigned by Section 3.13(a).

 

“Updated Disclosure Schedule” has the meaning assigned by Section 7.1(a).

 

1.2           Other Definitional and Interpretive Matters.   Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

 

(a)            Calculation of Time Period .  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

 

(b)            Gender and Number .  Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa;

 

(c)            Headings .  The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.  All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

 

(d)            Knowledge of Seller .  “Seller’s knowledge” and “knowledge of Seller,” with respect to any fact or matter in question, shall be deemed to exist to the extent that either Sundari

 

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Mitra or Samir Mitra is actually aware or should, upon making due inquiry, be aware of such fact or matter.

 

(e)            Schedules and Exhibits .  The Schedules and Exhibits attached to this Agreement shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim in this Agreement.

 

2.              Purchase and Sale of Assets.

 

2.1           Acquired Assets.   Upon the terms and subject to the conditions of this Agreement and in reliance on the representations and warranties contained in this Agreement, on the Closing Date, Seller, on behalf of itself and its Subsidiaries, agrees to sell, transfer, assign, convey and deliver to Purchaser, and Purchaser agrees to purchase, acquire and accept from Seller and its Subsidiaries, all of Seller’s and its Subsidiaries’ right, title and interest (whether beneficial or of record) in, to and under the Acquired Assets as the same shall exist on the Closing Date, free and clear of any Encumbrance (other than Permitted Encumbrances).  For purposes of this Agreement and except as otherwise provided in Section 2.2, “ Acquired Assets ” shall mean all assets, properties and rights set forth or described in subsections (a) through (l) below, inclusive, subject in each and every case to such modification and changes to the identified Schedules as are agreed to by the parties, consistent with the terms of this Agreement and are necessary to reflect all of the Acquired Assets as of the Closing Date, including, without limitation:

 

(a)            all cash, cash equivalents and short-term investments of Seller;

 

(b)            all intangible rights and property of Seller, including the Acquired Corporation IP, goodwill and telephone, telecopy and e-mail lists;

 

(c)            all of Seller’s and its Subsidiaries’ rights under all Assigned Contracts;

 

(d)            any and all furniture, fixtures, improvements, laboratory and other equipment (including office equipment), machinery, parts, computer hardware, tools and all other tangible personal property that is used in the Acquired Business, including those set forth on Schedule 2.1(d)  (collectively, the “ Fixed Assets ”);

 

(e)            all software design tools, supplies and other tangible personal property (including, without limitation, test boards, load boards, probe cards and burn-in boards), wherever located, used or held for use in the Acquired Business, including those set forth on Schedule 2.1(e) , but not including any equipment or machinery (collectively, the “Other Personal Property” );

 

(f)             all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and any claim, remedy or other right related to any of the foregoing (collectively, the “Accounts Receivable” );

 

(g)            all books and records of Seller and its Subsidiaries (including, without limitation, all Contracts, reports of examination and other records and information, including, without limitation, on discs, tapes and other data-storing media) relating to the operations of Seller or

 

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the Acquired Business (collectively, “Business Records” ), other than records that Seller is required by law to retain;

 

(h)            all claims of Seller against third parties relating to the Acquired Business, whether choate or inchoate, known or unknown, contingent or noncontingent, including, without limitation, the right to receive all proceeds and damages therefrom, to the extent transferable to Purchaser;

 

(i)             all Governmental Permits, to the extent transferable to Purchaser;

 

(j)             all rights of Seller relating to deposits and prepaid expenses (including, without limitation, prepaid software and software maintenance), claims for refunds and rights to offset in respect thereof;

 

(k)            all outstanding shares of Prism India held by Seller; and

 

(l)             all goodwill of or relating to any of the foregoing, together with the right to represent to Third Parties that Purchaser is the owner to any and all of the forgoing.

 

2.2           Excluded Assets.  Notwithstanding anything to the contrary in this Agreement, Seller shall retain and not transfer, and Purchaser shall not purchase or acquire, any of the following assets, properties or rights of Seller or its Subsidiaries (collectively, the “Excluded Assets” ):

 

(a)            all of the Contracts designated in Schedule 2.2(a) ;

 

(b)            the property and assets expressly designated in Schedule 2.2(b) ;

 

(c)            Seller’s corporate, financial and operational records designated in Schedule 2.2(c) ; and

 

(d)            all deposits and pre-payments directly related to Excluded Liabilities.

 

2.3           Assumed Liabilities .  On the terms and subject to the conditions and exceptions contained in this Agreement, as of the Closing Date, Purchaser agrees to assume only the following liabilities of Seller and its Subsidiaries (collectively, the “ Assumed Liabilities ”):

 

(a)            any trade account payable (other than a trade account payable to any Stockholder or employee of Seller) (i) reflected on the April 30, 2009 Balance Sheet and set forth in Schedule 2.3(a)  that remains unpaid as of the Closing Date or (ii) incurred by Seller in the ordinary course of business between the date of the April 30, 2009 Balance Sheet  and the Closing Date that remains unpaid as of the Closing Date (collectively, the “Accounts Payable” );

 

(b)            any accrued liability to be settled in cash (other than accrued liabilities relating to Taxes, insurance, vacation or paid time off or any other Excluded Liability) (i) reflected on the April 30, 2009 Balance Sheet and set forth in Schedule 2.3(b)  that remains unpaid as of the Closing Date or (ii) incurred by Seller in the ordinary course of business between the date of the April 30, 2009 Balance Sheet  and the Closing Date that remains unpaid as of the Closing Date;

 

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(c)            any obligations that accrue and are required to be performed after the Closing Date under the Assigned Contracts (other than any liability arising out of or relating to a breach that occurred on or prior to the Closing Date);

 

(d)            any liability to Seller’s customers incurred by Seller in the ordinary course of business for nondelinquent orders outstanding on the Closing Date and reflected on Seller’s books (other than any Liability arising out of or relating to a breach that occurred on or prior to the Closing Date); and

 

(e)            an accrued bonus payable to certain Business Employees in connection with Seller’s satisfaction of all of its delivery obligations relating to the “Final IP Release” under Seller’s Commercial License Agreement with Xilinx, Inc., to the extent such liability does not exceed $300,000.

 

Purchaser does not assume and will not be responsible or liable for any other liabilities of Seller or any of its Subsidiaries, including, without limitation, any Excluded Liabilities.

 

2.4           Excluded Liabilities .  Notwithstanding anything to the contrary contained in this Agreement, other than the Assumed Liabilities, Purchaser will not assume or be liable or otherwise be obligated to pay, perform or otherwise discharge, and Seller will retain and remain responsible for all of its debts, liabilities and obligations of any nature whatsoever with respect to any event, occurrence, circumstance or condition arising or occurring prior to or through the Closing (whether such liabilities become known prior to, on or after the Closing Date), whether accrued or unaccrued, whether absolute or contingent, whether known or unknown, whether due or to become due and whether related to the Acquired Assets or otherwise, and regardless of when asserted (collectively, the “ Excluded Liabilities ”).  The Excluded Liabilities shall include, without limitation, the following liabilities and obligations:

 

(a)            any liability under any Assigned Contract assumed by Purchaser pursuant to Section 2.5 that arises after the Closing Date but that arises out of or relates to any breach or delinquency in performance that occurred prior to the Closing Date, specifically excluding routine warranty work consistent with past practice and in accordance with the terms of Assigned Contracts with customers of Seller;

 

(b)            any liability for Taxes, including (A) any Taxes arising as a result of Seller’s operation of its business or ownership of the Assets prior to the Closing Date, (B) any Taxes that will arise as a result of the sale of the Assets pursuant to this Agreement (except as set forth in Section 2.10) and (C) any deferred Taxes of any nature;

 

(c)            any liability under any Contract not assumed by Purchaser under Section 2.5;

 

(d)            any and all environmental and occupational health and safety liabilities arising out of or relating to the operation of Seller’s business or Seller’s leasing, ownership or operation of real property;

 

(e)            any liability under or relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans (including, without limitation, Seller’s 2006 Stock Incentive Plan), health care plans or benefits

 

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or any other employee plans or benefits of any kind for Seller’s employees or former employees or both (collectively, “Employee Plans” ), except as provided in Section 2.11(b);

 

(f)             any liability under any employment, severance, retention or termination agreement with any employee of Seller or any of its Subsidiaries;

 

(g)            any liability to distribute to any of Seller’s stockholders or otherwise apply all or any part of the consideration received hereunder;

 

(h)            any liability arising out of any Proceeding pending as of the Closing Date or commenced after the Closing Date and arising out of or relating to any occurrence or event happening prior to the Closing Date;

 

(i)             any liability arising out of or resulting from Seller’s compliance or noncompliance with any judgment, decree or order of any Governmental Body; and

 

(j)             any liability of Seller based upon Seller’s acts or omissions occurring after the Closing Date.

 

2.5           Assumption of Assigned Contracts .  At the Closing, Seller shall assign to Purchaser all of Seller’s and its Subsidiaries’ rights, and Purchaser shall agree to assume all of the Assumed Liabilities (which have not been waived or excused prior to the Closing Date), under each of the Assigned Contracts.  On Schedule 2.5 , each Assigned Contract is identified by the date of the Assigned Contract and the other Person(s) party to such Assigned Contract(s).  To the extent any such information set forth on Schedule 2.5 is later determined by Seller to be inaccurate in any material respect, Seller shall promptly notify Purchaser of any such inaccuracy.

 

2.6           Closing Date.  Upon the terms and subject to the satisfaction of the conditions specified in Article 7 of this Agreement, the closing of the sale of the Acquired Assets and the assumption of the Assumed Liabilities contemplated by this Agreement (the “Closing” ) shall occur at the offices of Bingham McCutchen LLP at 1900 University Avenue, East Palo Alto, California within three Business Days after all the conditions specified in Article 7 have been satisfied or waived (other than the conditions with respect to actions the respective parties to this Agreement will take at the Closing itself), or at such other place, time and date as Seller and Purchaser may agree upon in writing (such date and time being referred to in this Agreement as the “Closing Date” ).

 

2.7           Purchase Price.

 

(a)            Purchase Price .  The consideration for the Assets (the “ Purchase Price ”) will be up to (a) Twenty-one Million Five Hundred Thousand Dollars ($21,500,000), plus or minus the Net Working Capital Adjustment Amount determined in accordance with Section 2.8, and (b) the assumption of the Assumed Liabilities, subject to the terms and conditions of this Section 2.7.

 

(b)            Closing Payment .  At the Closing, Purchaser shall deliver to Seller by wire transfer in immediately available funds a portion of the Purchase Price (the “ Closing Payment ”) equal to Fifteen Million Dollars ($15,000,000) of the Purchase Price, plus or minus the Net Working Capital Adjustment Amount determined in accordance with Section 2.8.

 

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(c)                                   Earn-Out .

 

(i)                                      Six Million Five Hundred Thousand Dollars ($6,500,000) of the Purchase Price (the “ Earn-out Payment ”) shall not be payable to Seller at Closing but shall instead be payable to Seller (subject to Purchaser’s right of set-off under, and to the extent provided in, Section 8.5 hereof) on or around the first anniversary of the Closing Date, subject to the terms and conditions of this Section 2.7(c).

 

(ii)                                   The Earn-out Payment (or a portion thereof) shall become due and payable contingent upon the achievement by Purchaser of certain milestones as set forth on Schedule 2.7(c)  hereto (the “ Earn-out Milestones ”) on or prior to the first anniversary of the Closing Date, as determined by Purchaser in its reasonable judgment and in accordance with the standards and methodology set forth in Schedule 2.7(c) .  Purchaser shall deliver to Seller by wire transfer in immediately available funds any portion of the Earn-out Payment so determined to be due and payable to Seller (net of any amount set off by Purchaser pursuant to Section 2.8 or 8.5 hereof) on or promptly following the first anniversary of the Closing Date.

 

(iii)                                Not later than 30 days prior to the first anniversary of the Closing Date, Purchaser shall provide written notice to Seller of its determination as to whether each of the Earn-out Milestones have been achieved as of such date and, with respect to any unachieved Earn-out Milestone(s), a detailed description of the deficiency or deviation.  In the event that Seller contests Purchaser’s determination, Seller shall provide written notice to Purchaser identifying the disputed Earn-Out Milestone(s) and the basis for Seller’s dispute not later than 20 days following Seller’s receipt of Purchaser’s determination.  The parties shall cooperate and attempt to resolve any disputes in good faith and in a manner that could not reasonably be expected to materially impair the operations or value of the Acquired Business.

 

(iv)                               Purchaser shall use commercially reasonable efforts to provide any and all resources necessary or appropriate, in Purchaser’s judgment, to allow Purchaser to achieve the Earn-out Milestones by the first anniversary of the Closing Date.

 

2.8                                Net Working Capital Adjustment.

 

(a)                                   The target value (the “ Net Working Capital Target ”) of Net Working Capital (as defined below) as of the Closing Date shall be determined as set forth in the statement attached hereto as Schedule 2.8(a)(i)  (the “ Net Working Capital Target Statement ”).  For purposes of this Agreement, the term “ Net Working Capital ” means the book value of the cash, cash equivalents and short-term investments, trade accounts receivables and prepaid assets of Seller (net of allowances for bad debt), less the book value of the accounts payables and accrued liabilities of Seller, in each case as set forth in Schedule 2.8(a)(i) , subject to the following provisions:

 

(i)                                      Net Working Capital shall not include any Excluded Assets; and

 

(ii)                                   no Excluded Liabilities shall be deducted in calculating Net Working Capital.

 

An example of the determination of Net Working Capital as of the Closing Date is set forth in Schedule 2.8(a)(ii) .

 

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(b)                                  Seller shall deliver to Purchaser on or one day prior to the Closing Date a statement (the “ Estimated Net Working Capital Statement ”) setting forth Seller’s good faith estimation of the Net Working Capital of Seller (the “ Estimated Net Working Capital ”) as of the Closing Date, along with Seller’s calculations of the Estimated Net Working Capital.  The Estimated Net Working Capital Statement shall be prepared on a basis consistent with the preparation of, and shall be substantially identical to the form of, the Net Working Capital Target Statement.  The Closing Payment shall be increased to the extent of any excess of the Estimated Net Working Capital above the Net Working Capital Target or reduced to the extent any excess of the Net Working Capital Target above the Estimated Net Working Capital (the “ Net Working Capital Adjustment Amount ”), in accordance with Section 2.7(b).

 

(c)                                   Purchaser shall prepare and deliver to Seller, no later than 60 days following the Closing Date, a statement of the Net Working Capital of Seller as of the Closing Date (the “ Closing Date Net Working Capital ”, with such statement referred to as the “ Closing Date Net Working Capital Statement ”), setting forth Purchaser’s calculations of the Closing Date Net Working Capital (“ Purchaser’s Proposed Calculations ”).  The Closing Date Net Working Capital Statement shall be prepared on a basis consistent with the preparation of, and shall be substantially identical to the form of, the Net Working Capital Target Statement.  Within 30 days after receipt of the Closing Date Net Working Capital Statement, Seller shall notify Purchaser in writing of its agreement or disagreement with the Closing Date Net Working Capital Statement and the accuracy of Purchaser’s Proposed Calculations (including its own calculations of the Closing Date Net Working Capital in such notice (“ Seller’s Proposed Calculations ”), if it disagrees with Purchaser).  If Seller does not so dispute within such period, the Closing Date Net Working Capital Statement and Purchaser’s Proposed Calculations shall become final and binding for purposes of paragraph (d) below.  If Seller timely disputes any such aspect of the Closing Date Net Working Capital Statement or the amount of any of Purchaser’s Proposed Calculations, then Seller and Purchaser shall select a nationally recognized independent accounting firm (the “ Independent Accounting Firm ”), as agreed to by Purchaser and Seller, or, in the absence of such agreement, shall select Grant Thornton LLP, to resolve the remaining disputed items (the “ Remaining Disputed Items ”) by conducting its own review and test of the Closing Date Net Working Capital Statement and thereafter selecting either Purchaser’s Proposed Calculations or Seller’s Proposed Calculations of the Remaining Disputed Items.  Purchaser and Seller agree that they shall be bound by the determination of the Remaining Disputed Items by the Independent Accounting Firm.  The fees and expenses of the Independent Accounting Firm shall be paid one-half by Purchaser and one-half by Seller.

 

(d)                                  Upon final determination pursuant to paragraph (c) of this Section 2.8 of the Closing Date Net Working Capital: (i)  in the event that the Closing Date Net Working Capital is less than the Estimated Net Working Capital, Seller shall, within 10 business days, pay Purchaser an amount equal to the deficiency; and (ii) in the event that the Closing Date Net Working Capital is more than the Estimated Net Working Capital, Purchaser shall, within 10 business days, pay Seller an amount equal to the excess.  Purchaser may recover any amount due and payable to Purchaser under this Section 2.8(d) by setting off such amount against any portion of the Earn-Out Payment otherwise due and payable to Seller under Section 2.7(c).

 

2.9                                Nonassignable Contracts.   Nothing in this Agreement shall be construed as an attempt or agreement to assign any Acquired Asset which by its terms or by law is nonassignable, or is nonassignable without the consent of any Third Party, including, without limitation, the Assigned Contracts listed in Schedule 2.9 (the “ Nonassignable Contracts ”).  Unless and until the necessary consents are obtained for the assignment of the Nonassignable Contracts:  (a) Seller agrees to

 

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cooperate with Purchaser and use Seller’s reasonable best efforts to promptly obtain such consents for the Nonassignable Contracts listed in Schedule 2.9(a)  and, if requested by Purchaser, the Nonassignable Contracts listed in Schedule 2.9(b) , in each case at Seller’s expense (provided that Seller shall not be responsible for the payment of any fees not required by the terms of the Nonassignable Contract in connection with its assignment); (b)  Seller and Purchaser shall cooperate with each other in any reasonable and lawful arrangements designed to permit Purchaser to enjoy the rights and benefits of Seller (including, without limitation, the enforcement for the benefit of Purchaser of any and all rights of Seller against a third party thereunder), and to perform the obligations of Seller (including, without limitation, any payment obligations), under the Nonassignable Contracts listed in Schedule 2.9(a)  and, if requested by Purchaser, the Nonassignable Contracts listed in Schedule 2.9(b) , in each case at Purchaser’s expense (provided that Seller shall be responsible for any fees required by the terms of a Nonassignable Contract in connection with its assignment); and (c) Seller appoints Purchaser as its attorney-in-fact to act in its name on its behalf with respect to such  Nonassignable Contracts.  Subject to the performance by Seller of its obligations under this Section 2.9, Purchaser agrees to indemnify, defend and hold harmless the Seller Indemnified Parties from and against any and all liability, damages, judgments, fines, penalties, amounts paid in settlement and any other amounts suffered by the Seller Indemnified Parties (including attorneys’ fees) that arise out of or result from the failure to obtain the required Third Party consent to the assignment of any of the Nonassignable Contracts set forth in Schedule 2.9 .

 

2.10                         Taxes.   Each of Seller and Purchaser agrees to pay 50% of all applicable foreign, federal, state and local sales, transfer, excise, value added, use, duties, stamp fees, tariffs or other similar Taxes and all recording and filing fees (collectively, the “Transfer Taxes” ), whether levied on Seller or Purchaser, that are payable by reason of the sales, transfers, leases, rentals, licenses and assignments contemplated by this Agreement.  The party required by law to pay such Transfer Taxes (the “Transfer Tax Paying Party” ), to the extent such payment exceeds the obligation of the Transfer Tax Paying Party hereunder, shall provide the other party (the “Non-Transfer Tax Paying Party” ) with proof of payment, and within ten (10) days of receipt of such proof of payment, the Non-Transfer Tax Paying Party shall reimburse the Transfer Tax Paying Party for the Non-Transfer Tax Paying Party’s share of such Transfer Taxes.  The party required by law to file a tax return with respect to the Transfer Taxes shall do so within the time period prescribed by law.  Purchaser and Seller shall cooperate in order to reduce the amount of such Transfer Taxes.  Such cooperation shall include, without limitation, (i) delivery of appropriate resale certificates by Purchaser to Seller, (ii) the parties hereto obtaining applicable exemption certificates, and (iii) Seller using commercially reasonable efforts to transfer the Acquired Assets to Purchaser by remote electronic transmission or other reasonable means of transferring assets capable of being so transferred in other tangible form.

 

2.11                         Option Plan and Phantom Stock Units.

 

(a)                                   No Assumption of Seller’s Plans .  For the avoidance of doubt, Purchaser shall not assume Seller’s 2006 Incentive Stock Plan or any other Employee Plan of Seller or any obligations or liabilities thereunder, nor shall Purchaser be required to assume or grant substitute awards for any stock options or other awards outstanding under Seller’s 2006 Incentive Stock Plan or any other Employee Plan of Seller.

 

(b)                                  Prism India’s Phantom Stock Plan .  Purchaser agrees and acknowledges that Purchaser shall be responsible for the payment of any amounts due and payable to employees of Prism India from time to time under the Phantom Stock Plan.

 

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2.12                         Purchase Price Allocation.   Seller and Purchaser agree that the Purchase Price shall be allocated among the Acquired Assets in accordance with the principles and methodology set forth in Schedule 2.12 and as mutually agreed upon by the parties.  In any Proceeding related to the determination of any Tax, neither Purchaser nor Seller shall contend or represent that such allocation is not a correct allocation.

 

3.                                       Representations and Warranties of Seller.   Seller represents and warrants to Purchaser that, as of the date of this Agreement, each of the statements set forth in this Article 3 is true and correct in all respects, except as qualified by the disclosures made in this Agreement or as set forth in the attached schedules (which disclosures shall be deemed to qualify only the identified Section of this Article 3 and any other Section of this Article 3 that requires the same information without modification or additional explanation in order to provide effective notice of the nature and significance of the qualification).

 

3.1                                Organization and Authority.   Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware.  Seller has full corporate power to execute and deliver this Agreement and the Other Transaction Documents required to be executed by it and to effect the transactions contemplated by this Agreement and such Other Transaction Documents, and the execution, delivery and performance of this Agreement and the Other Transaction Documents by Seller have been duly authorized by all necessary corporate action on the part of Seller, and no other action on the part of Seller is necessary to authorize this Agreement or the Other Transaction Documents or the consummation of the transactions contemplated by this Agreement and the Other Transaction Documents.  Seller and its Subsidiaries have all corporate power and authority necessary to operate the Acquired Business.

 

3.2                                Authorization; Binding Obligation.   This Agreement and the Other Transaction Documents to which Seller or any of its Subsidiaries is a party or otherwise is responsible for delivery under this Agreement have been duly executed and/or delivered, as applicable, by Seller or such subsidiaries, and such agreements constitute the valid and legally binding obligations of Seller, enforceable against it in accordance with their terms, except to the extent that enforcement of the rights and remedies created by this Agreement and such Other Transaction Documents may be limited by bankruptcy insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

 

3.3                                Subsidiaries and Joint Ventures.

 

(a)                                   Seller does not own directly or indirectly any capital stock of or other equity interest in any corporation, limited liability company, partnership or other business entity, except for the shares of Prism India described in Section 3.22

 

(b)                                  Except for Prism India, no other Affiliates or joint venture partners of Seller (a) are engaged in activities which are material to the use, manufacture or sale or offer for sale of any Acquired Products, (b) have entered into any Contract with Seller or any of its Subsidiaries with respect to any Acquired Corporation IP (including, without limitation, the use, distribution or license of such Acquired Corporation IP) or (c) own or have any other interest in any of the Acquired Assets.

 

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3.4                                No Violations.

 

(a)                                   Except as set forth on Schedule 3.4(a) , the execution, delivery and performance of this Agreement and the Other Transaction Documents by Seller and its Subsidiaries, and the consummation by Seller and its Subsidiaries of the transactions contemplated by this Agreement and such Other Transaction Documents, do not and will not:  (i) result in a breach or violation of any provision of Seller’s and its Subsidiaries’ articles of incorporation or by-laws (or other organizational documents), or in a material violation of any statute, rule, regulation or ordinance applicable to Seller or any of its Subsidiaries; or (ii) materially violate or result in a material breach of, or constitute a material occurrence of default (or an event that could reasonably be expected to, upon the passage of time or the giving of notice, or both, constitute a material occurrence of default) under any provision of, result in the acceleration or cancellation of any material obligation under, give rise to a right by any party to terminate or amend in any material respect its obligations under, or result in the loss of material rights, incurrence of material obligations or other material modification of terms under, any Assigned Contract; or (iii) materially violate any order, judgment, decree, rule or regulation of any court or any Governmental Body having jurisdiction over Seller, any of its Subsidiaries or the Acquired Assets.

 

(b)                                  No consent, approval, order or authorization of, or registration, declaration or filing with, any Person is required to be obtained or made by Seller and its Subsidiaries in connection with its execution and delivery of this Agreement and the Other Transaction Documents or its consummation of the transactions contemplated by this Agreement or such Other Transaction Documents, except for consents of Third Parties (as specifically listed in Schedule 3.4(b) ) which are required to transfer or assign to Purchaser any Acquired Assets or assign the benefits of or delegate performance with regard to any Acquired Assets.

 

3.5                                Capitalization .  The authorized equity securities of Seller consist of 20,000,000 shares of Common Stock, of which 8,035,132 shares are issued and outstanding after repurchases of unvested stock by Seller immediately prior to the Closing Date (“ Common Stock Issuances ”), and Seller has reserved 9,000,000 shares of Seller’s Common Stock for issuance under the Second Amended and Restated 2006 Stock Incentive Plan (the “ Plan ”), 5,486,708 shares of which are subject to outstanding options granted under the Plan (“ Outstanding Options ”), in each case as of the date of the Agreement.  The Stockholders are and will be on the Closing Date the record and beneficial owners and holders of the shares owned by each of them.  Except for the Contracts related to the Common Stock Issuances and the Outstanding Options (copies of which have been made available to Purchaser), there are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating Seller to issue or to transfer from treasury any additional shares of its capital stock of any class.  None of the outstanding equity securities of Seller was issued in violation of the Securities Act of 1933, as amended (the “ Securities Act ”), or any other applicable laws.

 

3.6                                Title to Assets.   Except as set forth on Schedule 3.6 , Seller and its Subsidiaries are the sole and exclusive owners of and have good and marketable title to, or a valid leasehold interest in, all of the tangible Acquired Assets, free and clear of any Encumbrances (other than Permitted Encumbrances).  Seller and its Subsidiaries own or have legal rights to use all of the intangible Acquired Assets, free and clear of any Encumbrance (other than Permitted Encumbrances).

 

3.7                                Sufficiency of Assets .  The Acquired Assets (a) constitute all of the assets, tangible and intangible, of any nature whatsoever, of Seller and its Subsidiaries that are necessary for the

 

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ownership and operation of the Acquired Business as presently conducted by Seller and its Subsidiaries and (b) include all of the operating assets of Seller.

 

3.8                                Tangible Personal Property.   The Tangible Assets that Seller and its Subsidiaries own, lease or use in the Acquired Business are being sold to Purchaser “AS IS” without representation or warranty.

 

3.9                                Real Property.   None of the Acquired Corporations own any real property or any interest in real property, except for the leaseholds created under the real property leases identified in Schedule 3.9 .

 

3.10                         Compliance With Laws; Litigation.   Except as set forth on Schedule 3.10 , the Acquired Assets have been used by Seller and its Subsidiaries in compliance in all material respects with all applicable laws, rules, regulations, ordinances, decrees, orders, injunctions, judgments, permits and licenses of or from Governmental Bodies.  Except as set forth on Schedule 3.10 , there have not been within the last four years any, and presently there are no pending Proceedings of any kind whatsoever asserted by any Third Parties or any governmental investigations or notices of violation or non-compliance under any permits or licenses or otherwise under applicable law pending or, to Seller’s knowledge, threatened against Seller or any of its Subsidiaries with regard to the Acquired Assets or the Acquired Business.

 

3.11                         Business Employees and Consultants

 

(a)                                   Schedule 3.11(a)  is a complete and accurate list of all individuals employed by Seller or any of its Subsidiaries as of the date of this Agreement.  Schedule 3.11(a)  also lists all consultants and independent contractors engaged by Seller or any of its Subsidiaries ( “Business Consultants” ) as of the date of this Ag