SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 5, 1997
Emcore Corporation
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(Exact Name of Registrant as Specified in its Charter)
New Jersey
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(State or Other Jurisdiction of Incorporation)
000-22175 22-2746503
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(Commission File Number) (I.R.S. Employer Identification No.)
394 Elizabeth Avenue, Somerset, New Jersey 08873
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(Address of Principal Executive Offices) (Zip Code)
(732) 271-9090
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 5, 1997 (the "Effective Date"), Emcore
Corporation ("Emcore") acquired MicroOptical Devices, Inc. ("MODE"), a Delaware
corporation, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), among Emcore, EMKR Acquisition Corporation (the "Merger
Subsidiary"), MODE, and certain stockholders of MODE. Pursuant to the Merger
Agreement, the Merger Subsidiary was merged with and into MODE
(the "Merger"). As a result of the Merger, MODE became a wholly-owned
subsidiary of Emcore. A total of 1,461,866 shares of Common Stock of Emcore
were issued to the stockholders of MODE in exchange for all of the issued and
outstanding shares of capital stock of MODE. In addition, Emcore has agreed
to assume certain unexpired and unexercised options and warrants to acquire
Common Stock of MODE, and to issue upon exercise thereof a certain number of
shares of the Common Stock of Emcore, as appropriately adjusted pursuant to
the terms of the Merger Agreement.
MODE designs and develops high-quality optical components and
subsystems based on vertical cavity surface-emitting laser ("VCSEL")
technology. Emcore currently intends to operate MODE as a wholly-owned
subsidiary and to continue MODE's business substantially in the manner
conducted by MODE immediately prior to the Merger.
The foregoing description of the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
full text of the Merger Agreement.
This Form 8-K contains forward-looking statements relating to
future events that involve risks and uncertainties, including, without
limitation, statements about future financial performance of EMCORE and MODE
and the effects of the proposed acquisition on EMCORE's business, financial
performance, and results of operations. Among the factors which could cause
actual results to differ materially from those in the forward-looking
statements are failure of the proposed acquisition to achieve the desired
synergies and efficiencies; risks associated with the reaction to the proposed
acquisition by the market, as well as employees, customers, distributors and
others who affect the businesses of EMCORE and/or MODE; the variability of
future operating results of EMCORE, MODE or the combined companies following
the proposed acquisition; cancellations, rescheduling or delays in product
shipments; manufacturing capacity constraint; lengthy sales and qualification
cycles; difficulties in the production process; the future financial
performance of the combined entity; delays in developing and commercializing
new products; increased competition; changes in the compound semiconductor
industry, including overall growth of the industry and the continued acceptance
of the Company's MOCVD technologies, as well as the newly acquired VCSEL
technologies; and other factors detailed in Emcore's filings with the
Securities and Exchange Commission, including the registration statement on
Form S-1 filed on March 4, 1997.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) Financial Statements of Business Acquired and Pro Forma Financial
Information.
The Registrant has not included the financial statements of the
business acquired or the pro forma financial information for the
transaction described in Item 2 above and will file such financial
information not later than 60 days after this report on Form 8-K is
due by an amendment to this report.
(c) Exhibits.
See the Exhibit Index attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Emcore Corporation
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(Registrant)
By: /s/ Thomas G. Werthan
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Name: Thomas G. Werthan
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Title: Chief Financial Officer and Secretary
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Dated: December 22, 1997
INDEX TO EXHIBITS
Exhibit Number Description
2 Agreement and Plan of Merger, dated as of December 5,
1997, among Emcore, the Merger Subsidiary, MODE and the
Principal Stockholders.
4 Registration Rights Agreement, dated as of December 5,
1997, relating to the shares issued pursuant to the
Merger Agreement.
10.1 Escrow Agreement, dated as of December 5, 1997, among
Emcore, the Principal Stockholders and the Escrow
Agent.
10.2 Employment Agreement, dated as of December 5, 1997,
between Emcore and Robert Bryan.
10.3 Employment Agreement, dated as of December 5, 1997,
between Emcore and Thomas Brennan.
99 Press Release issued December 5, 1997.
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
EMCORE CORPORATION
AND
EMKR ACQUISITION CORPORATION
AND
MICROOPTICAL DEVICES, INC.
AND
THE PRINCIPAL MODE STOCKHOLDERS
DECEMBER 5, 1997
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER...................................................................................................... 1
1.1 The Merger........................................................................... 1
1.2 The Closing.......................................................................... 2
1.3 Actions at the Closing............................................................... 2
1.4 Additional Action.................................................................... 2
1.5 Conversion of Shares................................................................. 3
1.6 Exchange of Shares................................................................... 3
1.7 Escrow............................................................................... 4
1.8 Certificate of Incorporation......................................................... 4
1.9 By-Laws.............................................................................. 4
1.10 Directors and Officers............................................................... 4
1.11 No Further Rights.................................................................... 4
1.12 Closing of Transfer Books............................................................ 4
1.13 Treatment of Options................................................................. 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MODE.......................................................................... 6
2.1 Organization, Qualification, Corporate Power and Authority........................... 6
2.2 Capitalization....................................................................... 6
2.3 Noncontravention..................................................................... 7
2.4 Subsidiaries......................................................................... 8
2.5 Financial Statements................................................................. 8
2.6 Absence of Certain Changes........................................................... 8
2.7 Undisclosed Liabilities.............................................................. 8
2.8 Taxes................................................................................ 8
2.9 Assets............................................................................... 10
2.10 Owned Real Property.................................................................. 10
2.11 Intellectual Property................................................................ 10
2.12 Real Property Leases................................................................. 12
2.13 Contracts............................................................................ 13
2.14 Accounts Receivable; Customer Contracts in Progress.................................. 15
2.15 Powers of Attorney................................................................... 15
2.16 Insurance............................................................................ 15
2.17 Litigation........................................................................... 16
2.18 Product and Service Warranties....................................................... 16
2.19 Employees and Subcontractors......................................................... 16
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2.20 Employee Benefits.................................................................... 17
2.21 Legal Compliance..................................................................... 19
2.22 Permits.............................................................................. 19
2.23 Certain Business Relationships with Affiliates....................................... 19
2.24 Books and Records.................................................................... 19
2.25 Customers and Suppliers.............................................................. 19
2.26 Prepayments, Prebilled Invoices and Deposits......................................... 20
2.27 Banking Facilities................................................................... 20
2.28 Inventories.......................................................................... 20
2.29 Products............................................................................. 21
2.30 Environmental Compliance............................................................. 21
2.31 Brokers' Fees........................................................................ 22
2.32 MODE and MODE Stockholder Action..................................................... 22
2.33 Affiliates........................................................................... 22
2.34 Tax Matters.......................................................................... 22
2.35 Disclosure........................................................................... 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL MODE STOCKHOLDERS.............................................................................. 23
3.1 Authority............................................................................ 23
3.2 Investment Representations........................................................... 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMCORE
AND ACQUISITION SUBSIDIARY ..................................................................................... 25
4.1 Organization......................................................................... 25
4.2 Capitalization....................................................................... 25
4.3 Authorization of Transaction......................................................... 26
4.4 Noncontravention..................................................................... 26
4.5 Brokers' Fees........................................................................ 26
4.6 SEC Filings.......................................................................... 27
4.7 Intellectual Property................................................................ 27
4.8 Litigation........................................................................... 28
4.9 Legal Compliance..................................................................... 28
4.10 Absence of Certain Changes........................................................... 28
4.11 Tax Matters.......................................................................... 28
4.12 Environmental Compliance............................................................. 29
4.13 Disclosure........................................................................... 30
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ARTICLE V
COVENANTS....................................................................................................... 30
5.1 Conduct of Business.................................................................. 30
5.2 Absence of Material Changes.......................................................... 30
5.3 Delivery of Interim Financial S ..................................................... 32
5.4 Communications with Customers and Suppliers.......................................... 32
5.5 Compliance with Laws................................................................. 32
5.6 Continued Truth of Representations and Warranties of MODE and
Principal MODE Stockholders.......................................................... 32
5.7 Continued Truth of Representations and Warranties of Emcore.......................... 32
5.8 Continuing Obligation to Inform...................................................... 32
5.9 Exclusive Dealing.................................................................... 33
5.10 Reports, Taxes....................................................................... 33
5.11 Best Efforts to Obtain Satisfaction of Conditions.................................... 33
5.12 Full Access.......................................................................... 33
5.13 Customers and Suppliers.............................................................. 33
5.14 Reorganization under Section 368(a).................................................. 33
5.15 Retained Employees and Noncompetition and/or Nondisclosure
Agreements........................................................................... 34
5.16 Listing of Merger Shares............................................................. 34
5.17 Indemnification...................................................................... 34
ARTICLE VI
CONDITIONS TO CLOSING........................................................................................... 35
6.1 Conditions to Obligations of Emcore and Acquisition Subsidiary....................... 35
6.2 Conditions to Obligations of MODE and Principal MODE Stockholders.................... 37
ARTICLE VII
INDEMNIFICATION................................................................................................. 39
7.1 Indemnification...................................................................... 39
7.2 Method of Asserting Claims........................................................... 39
7.3 Survival and Limitations............................................................. 40
ARTICLE VIII
TERMINATION..................................................................................................... 42
8.1 Termination of Agreement............................................................. 42
8.2 Effect of Termination................................................................ 43
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ARTICLE IX
DEFINITIONS..................................................................................................... 43
ARTICLE X
GENERAL PROVISIONS.............................................................................................. 46
10.1 Press Releases and Announcements..................................................... 46
10.2 No Third-Party Beneficiaries......................................................... 46
10.3 Entire Agreement..................................................................... 46
10.4 Succession and Assignment............................................................ 46
10.5 Counterparts......................................................................... 46
10.6 Headings............................................................................. 46
10.7 Notices.............................................................................. 46
10.8 Governing Law........................................................................ 47
10.9 Amendments and Waivers............................................................... 48
10.10 Severability......................................................................... 48
10.11 Expenses............................................................................. 48
10.12 Specific Performance................................................................. 48
10.13 Construction......................................................................... 48
10.14 Incorporation of Exhibits and Schedules.............................................. 48
SCHEDULES AND EXHIBITS
Schedule I The Principal Mode Stockholders
Schedule II Merger Shares
Schedule III List of MODE Employees
Schedule IV List of MODE Employees who signed noncompetition and/or
confidential information and inventions agreements
Exhibit A Escrow Agreement
Exhibit B Certificate of Incorporation of Surviving Corporation
Exhibit C Form of Assumption Agreement
Exhibit D Form of Noncompetition and Nondisclosure Agreement
Exhibit E Form of Employment Agreement
Exhibit F Opinion of Counsel to the Company
Exhibit G Investment Representation Letter
Exhibit H Termination Acknowledgement
Exhibit I Opinion of Counsel to the Buyer
Exhibit J Registration Rights Agreement
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into
as of December 5, 1997 (the "Agreement Date") by and among Emcore Corporation,
a New Jersey corporation ("Emcore"), EMKR Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Emcore ("Acquisition
Subsidiary"), MicroOptical Devices, Inc., a Delaware corporation ("MODE"), and
the stockholders of MODE identified on Schedule I hereto (collectively, the
"Principal MODE Stockholders"). Emcore, Acquisition Subsidiary, MODE and the
Principal MODE Stockholders are referred to collectively herein as the
"Parties."
Preliminary Statement
1. Subject to the terms and conditions of this Agreement, Acquisition
Subsidiary will merge with and into MODE, in a transaction that will qualify
as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code
(as defined below), pursuant to which MODE will become a wholly-owned
subsidiary of Emcore and the MODE Stockholders will receive shares of common
stock of Emcore ("Emcore Common Stock") as hereinafter set forth.
2. The Board of Directors of MODE has determined that the Merger (as
defined in Section 1.1) is fair to, and in the best interest of, MODE and its
stockholders (the "MODE Stockholders") and has approved and adopted this
Agreement and the transactions contemplated hereby.
3. The Board of Directors of Emcore has determined that the Merger
(as defined in Section 1.1) and the other transactions contemplated by this
Agreement are consistent with and in furtherance of the long-term business
strategy of Emcore and is fair to and in the best interests of Emcore and its
shareholders and has approved and adopted this Agreement and the transactions
contemplated hereby.
4. The MODE Stockholders have approved and adopted this
Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement and pursuant to Section 251 of the Delaware General Corporation
Law (the "Delaware
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Law"), Acquisition Subsidiary shall merge with and into MODE (with such merger
referred to herein as the "Merger") at the Effective Time (as defined below).
From and after the Effective Time, the separate corporate existence of
Acquisition Subsidiary shall cease and MODE shall continue as the surviving
corporation in the Merger (the "Surviving Corporation"). The "Effective Time"
shall be the time at which Acquisition Subsidiary and MODE file a certificate
of merger or other appropriate documents prepared and executed in accordance
with the relevant provisions of the Delaware Law (the "Certificate of Merger")
with the Secretary of the State of Delaware, or at such later time as
specified in the Certificate of Merger.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Brobeck, Phleger
& Harrison LLP, New York, New York 10021, commencing at 10:00 a.m. local time
on December 5, 1997, or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby have not been
satisfied or waived by such date, on such mutually agreeable later date as
soon as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Closing Date").
1.3 Actions at the Closing. At the Closing:
(a) MODE shall deliver to Emcore the various
certificates, instruments and documents referred to in Section 6.1 below;
(b) Emcore and Acquisition Subsidiary shall deliver to
MODE the various certificates, instruments and documents referred to in
Section 6.2 below;
(c) Acquisition Subsidiary and MODE shall file with the
Secretary of State of the State of Delaware the Certificate of Merger;
(d) MODE shall deliver to Emcore for cancellation
certificates (the "Certificates") evidencing all of the issued and outstanding
shares of capital stock of MODE (the "MODE Shares"), including any MODE shares
subject to an escrow or pledge arrangement, duly endorsed in blank or with
stock powers duly executed in blank by each such MODE Stockholder; and
(e) the MODE Principal Stockholders and the Escrow Agent (as
defined therein) shall execute and deliver the Escrow Agreement attached
hereto as Exhibit A (the "Escrow Agreement") and Emcore shall deliver to the
Escrow Agent a certificate for the Escrow Shares (as defined in Section 1.5
below) being placed in escrow on the Closing Date pursuant to Section 1.7
below.
1.4 Additional Action. The Surviving Corporation may, at any time
after the Effective Time, take any action, including executing and delivering
any document, in the name and on behalf of either MODE or the Acquisition
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
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1.5 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party:
(a) Each issued and outstanding share of MODE Common Stock
(as defined in Section 2.2) shall be automatically converted into the right to
receive such number of shares of Emcore Common Stock determined by multiplying
such share of MODE Common Stock by the Conversion Ratio. For purposes hereof,
the "Conversion Ratio" shall be the number obtained by dividing (i) 1,547,189
by (ii) the sum of (A) the outstanding shares of MODE Common Stock immediately
prior to the Effective Time, (B) the number of shares of MODE Common Stock
into which the MODE Preferred Stock (as defined in Section 2.2) outstanding
immediately prior to the Effective Time are then convertible (the "Underlying
MODE Common Stock"), (C) the number of shares of MODE Common Stock for which
the Vested Options (as defined in Section 2.2) are exercisable immedately
prior to the Effective Time and (D) the number of shares of MODE Common Stock
underlying the Warrants (as defined in Section 2.2).
(b) Each issued and outstanding share of MODE Preferred
Stock (as defined in Section 2.2) shall be automatically converted into the
right to receive such number of shares of Emcore Common Stock determined by
multiplying (i) the number of shares of Underlying MODE Common Stock
represented by such shares of MODE Preferred Stock immediately prior to the
Effective Time by (ii) the Conversion Ratio.
(c) Such number of shares of Emcore Common Stock issuable to
the Principal MODE Stockholders in connection with the Merger that equal five
percent (5%) of the aggregate number of shares of Emcore Common Stock issuable
to the MODE Stockholders pursuant to the Merger Agreement shall be deposited
in escrow, determined on a pro rata basis (the "Escrow Shares"), pursuant to
Section 1.7 below and shall be held and disposed of in accordance with the
terms of the Escrow Agreement and Section 1.7 below. All shares of Emcore
Common Stock issuable hereunder at the Effective Time, other than the Escrow
Shares, shall be referred to herein as the "Initial Shares." The Initial
Shares and the Escrow Shares shall together be referred to herein as the
"Merger Shares."
(d) Each and every share of capital stock held in MODE's
treasury immediately prior to the Effective Time shall be cancelled and
retired without payment of any consideration therefor.
(e) No fractional shares shall be issued in the Merger. All
fractional Merger Shares to which a MODE Stockholder would otherwise be
entitled shall be cancelled and such MODE Stockholder shall be entitled to
receive cash in lieu thereof based upon a price of $19.39 per share of Emcore
Common Stock.
1.6 Exchange of Shares. On the Closing Date, the MODE
Stockholders shall surrender to Emcore the Certificates held by the MODE
Stockholders and shall be entitled to receive in exchange therefor the Initial
Shares issuable pursuant to Section 1.5 above. Until
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properly surrendered, the Certificates shall be deemed for all purposes to
evidence only the right to receive the Initial Shares issuable to the MODE
Stockholders pursuant to Section 1.5 above. The MODE Stockholders shall not be
entitled to receive certificates for the Initial Shares to which such
stockholders would otherwise be entitled until the Certificates are properly
surrendered. A complete and accurate list of the MODE Stockholders and the
number of Merger Shares which each such MODE Stockholder is entitled to
receive on the Closing Date, together with the number of Escrow Shares
deposited in escrow pursuant to Section 1.7 by each Principal MODE
Stockholder, is attached hereto as Schedule II.
1.7 Escrow. On the Closing Date, Emcore shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, for the purpose of securing the
indemnification obligations of the Principal MODE Stockholders set forth in
this Agreement. The Escrow Shares shall be held by the Escrow Agent under the
Escrow Agreement pursuant to the terms thereof. The Escrow Shares shall be
held as a trust fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party, and shall
be held and disbursed solely for the purposes and in accordance with the terms
of the Escrow Agreement.
1.8 Certificate of Incorporation. The Certificate of Incorporation of
Surviving Corporation in effect at the Effective Time shall be amended as of
the Effective Time so as to read in its entirety in the form attached hereto
as Exhibit B.
1.9 By-Laws. The By-Laws of Acquisition Subsidiary in effect at the
Effective Time shall be the By-laws of the Surviving Corporation, except that
the name of the corporation set forth therein shall be changed to MicroOptical
Devices, Inc.
1.10 Directors and Officers. The directors and officers of the
Acquisition Subsidiary at the Effective Time shall be the directors and
officers of the Surviving Corporation.
1.11 No Further Rights. From and after the Effective Time, no MODE
Shares shall be deemed to be outstanding, and holders of certificates formerly
representing MODE Shares shall cease to have any rights with respect thereto
except as provided herein or by law.
1.12 Closing of Transfer Books. At the Effective Time, the stock
transfer books of MODE shall be closed and no transfer of MODE Shares shall
thereafter be made. If, after the Effective Time, Certificates formerly
representing MODE Shares are presented to the Surviving Corporation, they
shall be cancelled and exchanged for Initial Shares in accordance with Section
1.5(a) and 1.5(b), as applicable, subject to Sections 1.5(c) and 1.7.
1.13 Treatment of Options.
(a) Assumption of Options. At the Effective Time, the MODE
1996 Stock Option Plan (the "MODE Stock Option Plan") and the Options (as
defined in Section 2.2), whether vested or unvested, shall be assumed by
Emcore. Each such Option so assumed by
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Emcore under this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the MODE Stock Option Plan immediately
prior to the Effective Time, except that (i) such assumed Option will be
exercisable for that number of whole shares of Emcore Common Stock equal to
the product of the number of shares of MODE Common Stock that were purchasable
upon exercise of such Option multiplied by the Conversion Ratio (as defined in
Section 1.5(a)) and rounded down to the nearest whole number of shares of
Emcore Common Stock, and (ii) the per share exercise price for the shares of
Emcore Common Stock purchasable upon exercise of such assumed Option will be
equal to the quotient determined by dividing the exercise price per share of
MODE Common Stock at which such Option was exercisable by the Conversion
Ratio, rounded up to the nearest whole cent. In addition, the exercisability
or vesting of such Options and the securities issuable upon exercise thereof
will accelerate in connection with the Merger in accordance with the
provisions of the agreements evidencing each such Option. Consistent with the
terms of the MODE Stock Option Plan and the documents governing the
outstanding Options under such Plan, the Merger will not terminate any of the
outstanding Options under the MODE Stock Option Plan.
It is the intention of the parties that the Options so
assumed by Emcore qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code (as defined in Section 2.8(c))
to the extent such options qualified as incentive stock options prior to the
Effective Time.
At the Effective Time or as soon as practicable thereafter,
Emcore will issue to each person who, immediately prior to the Effective Time
was a holder of an outstanding Option under the MODE Stock Option Plan a
document evidencing the foregoing assumption of such Option by Emcore, in
substantially the form attached hereto as Exhibit C.
(b) Assignment of Repurchase Rights. All outstanding
Repurchase Rights which MODE may hold immediately prior to the Effective Time
to repurchase unvested shares of MODE Common Stock purchased or purchasable
upon the exercise of Options granted under the MODE Stock Option Plan shall be
assigned to Emcore in the Merger and shall thereafter be exercisable by Emcore
upon the same terms and conditions in effect immediately prior to the
Effective Time, except that the shares purchasable thereunder and the purchase
price per share shall be adjusted to reflect the Conversion Ratio.
(c) Form S-8. Emcore agrees to file, no later than 90 days
after the Closing, a registration statement on Form S-8 covering the shares of
Emcore Common Stock issuable pursuant to outstanding options under the MODE
Stock Option Plan assumed by Emcore.
(d) Listing of Additional Shares. Emcore shall, no later
than 90 days after the Closing, file with the Nasdaq Market a Notification
Form for Listing of Additional Shares with respect to the shares issuable upon
exercise of the Options assumed by Emcore in accordance with the provisions of
this Section 1.13.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MODE
MODE hereby represents and warrants to Emcore that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Article II.
2.1 Organization, Qualification, Corporate Power and Authority.
(a) MODE is a corporation duly organized, validly existing
and in corporate and tax good standing under the laws of the State of
Delaware. MODE is duly qualified to conduct business and is in corporate and
tax good standing under the laws of each jurisdiction in which the nature of
its businesses or the ownership or leasing of its properties requires such
qualification, each of which jurisdiction is set forth in Section 2.1 of the
Disclosure Schedule. MODE has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. MODE has furnished to Emcore true and
complete copies of its Certificate of Incorporation and By-laws, each as
amended and as in effect on the Agreement Date. MODE has at all times complied
with, and is not in default under or in violation of, any provision of its
Certificate of Incorporation and By-laws.
(b) MODE has all requisite power and authority to execute
and deliver the Fundamental Agreements (as defined below in this Section
2.1(b)) and to perform its obligations under the Fundamental Agreements. The
Fundamental Agreements have each been (or in the case of the Escrow Agreement,
shall be when delivered) duly and validly (i) executed and delivered by MODE
and (ii) authorized by all necessary corporate action on the part of MODE.
Each Fundamental Agreement constitutes (or, in the case of the Escrow
Agreement, shall constitute) a valid and binding obligation of MODE,
enforceable against MODE in accordance with its terms. For purposes of this
Agreement, the term "Fundamental Agreements" means this Agreement and the
Escrow Agreement.
2.2 Capitalization. The authorized capital stock of MODE consists of:
(i) 12,000,000 shares of common stock, $.001 par value per share, of which
3,505,000 shares are issued and outstanding (the "MODE Common Stock"), and
(ii) 6,000,000 shares of preferred stock, $.001 par value per share, of which
(A) 666,666 shares have been designated Series A Convertible Preferred Stock,
$.001 par value per share, of which 666,666 shares are issued and outstanding
(the "MODE Series A Stock") and (B) 5,333,334 shares have been designated
Series B Convertible Preferred Stock, $.001 par value per share, of which
4,076,088 shares are issued and outstanding (the "MODE Series B Stock",
together with the MODE Series A Stock, hereinafter shall be referred to as the
"MODE Preferred Stock"). A complete and
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accurate list of the MODE Stockholders and the number of MODE Shares held by
them is set forth in Section 2.2 of the Disclosure Schedule. All of the issued
and outstanding MODE Shares are duly authorized and are validly issued, fully
paid, nonassessable and were not issued in violation of any preemptive rights.
Section 2.2 of the Disclosure Schedule sets forth (i) a complete and accurate
list of all persons and entities holding any outstanding options or warrants
to purchase MODE Shares, (ii) the aggregate number of options which are
outstanding and unexercised held by each such person or entity (the
"Options"), (iii) the number of warrants which are outstanding and unexercised
held by each such person or entity (the "Warrants") and (iv) the number of
Options exercisable immediately prior to the Effective Time to purchase shares
of MODE Common Stock that would be, at the time of such purchase, vested,
non-forfeitable and not subject to any repurchase right by MODE (the "Vested
Options"). Except as set forth in Section 2.2 of the Disclosure Schedule,
there are no outstanding or authorized options, warrants, rights, agreements
or commitments to which MODE is a party or which are binding upon MODE
providing for the issuance, disposition or acquisition of any of its capital
stock. Except as set forth in Section 2.2 of the Disclosure Schedule, there
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to MODE. There are no agreements, voting trusts, proxies
or understandings with respect to the voting, or registration under the
Securities Act of 1933, as amended (the "Securities Act"), of any MODE Shares.
All of the issued and outstanding MODE Shares and Options were issued in
compliance with applicable federal and state securities laws.
2.3 Noncontravention. Subject to compliance with (a) the applicable
requirements of the Securities Act, (b) any applicable state securities laws,
and (c) the Delaware Law, and except as set forth on Section 2.3 of the
Disclosure Schedule, neither the execution and delivery by MODE or the
Principal Mode Stockholders of this Agreement or the Escrow Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will (i)
conflict with or violate any provision of the Certificate of Incorporation or
By-laws of MODE, (ii) require on the part of MODE any filing with, or any
permit, authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"), (iii) conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice,
consent or waiver under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which MODE is a party or by which MODE is bound or to which its
assets is subject, (iv) result in the imposition of any Security Interest upon
any assets of MODE, or (v) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to MODE or any of its properties or
assets. For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien
(whether arising by contract or by operation of law).
-7-
2.4 Subsidiaries. MODE does not own, directly or indirectly, or have
the power to vote, directly or indirectly, any securities of any corporation,
partnership, limited liability company or other form of business association.
2.5 Financial Statements. MODE has previously furnished to Emcore
complete and accurate copies, all of which are included in Section 2.5 of the
Disclosure Schedule, of its (a) audited balance sheets and related statements
of income, retained earnings, stockholders' equity and cash flows for the
years ended December 31, 1995 and 1996, together with the reports thereon by
Arthur Andersen LLP, independent auditors for MODE, and (b) unaudited balance
sheet (the "Most Recent Balance Sheet") and related statement of income for
the nine months ended September 30, 1997 (the "Balance Sheet Date"). The
foregoing financial statements (the "Financial Statements") have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto and except for
normal recurring adjustments in the Most Recent Balance Sheet), fairly present
in all material respects the financial condition, results of operations and
cash flows of MODE as of the respective dates thereof and for the periods
referred to therein, and are consistent with the books and records of MODE.
2.6 Absence of Certain Changes. Since the Balance Sheet Date and
except as otherwise set forth in the Disclosure Schedule, (a) there has not
been any event or development that would have a material adverse effect upon
the business, condition (financial or otherwise), assets or liabilities of
MODE (a "MODE Material Adverse Effect") nor has there occurred any event or
development that could reasonably be foreseen to result in such a MODE
Material Adverse Effect and (b) MODE has not taken any of the actions set
forth in subsections (a) through (s) of Section 5.2 below.
2.7 Undisclosed Liabilities. MODE has no liability (whether known or
unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for (a) liabilities shown on the
Most Recent Balance Sheet, (b) liabilities that have arisen since the Balance
Sheet Date in the ordinary course of business consistent with past custom and
practice (including with respect to frequency and amount) ("Ordinary Course of
Business"), and (c) contractual liabilities that individually, or in the
aggregate, would not have a MODE Material Adverse Effect.
2.8 Taxes.
(a) MODE has filed all material Tax Returns (as defined
below) that it was required to file and all such Tax Returns were correct and
complete in all material respects. MODE has paid all Taxes (as defined below)
that are shown to be due on any such Tax Returns. The accruals and reserves
for Taxes set forth on the Most Recent Balance Sheet are sufficient to pay all
unpaid Taxes of MODE (excluding, for this purpose, any accruals or reserves
for "deferred taxes" or similar items that reflect timing differences in the
recognition of income or deductions for tax and financial accounting purposes)
attributable to all taxable
-8-
periods (and portions of taxable periods) through the date of the Most Recent
Balance Sheet, and all Taxes attributable to the period from and after the
Balance Sheet Date and continuing through the Closing Date are attributable to
the operation of MODE in the Ordinary Course of Business of MODE. Except as
set forth in Section 2.8(a) of the Disclosure Schedule, MODE has no actual or
potential liability for any Tax obligation of any taxpayer (including, without
limitation, any affiliated or combined group of corporations or other entities
that included MODE during a prior period) other than MODE. All Taxes that MODE
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other similar assessments or liabilities, including,
without limitation, income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, transfer, transfer
gains, withholding, employment, payroll and franchise taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any
such government, and any interest, fines, penalties, assessments or additions
to tax resulting from, attributable to or incurred in connection with any tax
or any contest or dispute thereof. For purposes of this Agreement, "Tax
Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) MODE has delivered or otherwise made available to Emcore
correct and complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by MODE
since its inception. No examination or audit of any Tax Returns of MODE by any
Governmental Entity is currently in progress or, to the best knowledge of MODE
and MODE Stockholders, threatened or contemplated.
(c) MODE is not a "consenting corporation" within the
meaning of Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), and none of the assets of MODE are "subsection (f) assets" as
defined in Section 341(f) of the Code. MODE has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the
Code. MODE is not a party to any Tax allocation or sharing agreement or any
Tax indemnity agreement. The Company has not waived any statute of limitations
with respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency. MODE has not ever been a member of an affiliated
group of corporations, within the meaning of Section 1504 of the Code and has
never filed Tax Returns on a combined or consolidated basis with any other
corporation, partnership, limited liability company or other form of business
association (a "Business Entity") in any jurisdiction. MODE has not agreed to
make, nor is it required to make, any adjustments under Section 481(a) of the
Code by reason of a change in accounting method or otherwise (other than as a
result of the transactions contemplated hereby). MODE has not participated in,
nor will participate in, an international boycott within the meaning of
Section 999 of the Code.
(d) MODE uses the accrual method of accounting for all
income Tax
-9-
purposes.
2.9 Assets.
(a) MODE owns or leases all tangible assets necessary for
the conduct of its businesses as presently conducted. Such tangible assets, in
the aggregate, are free from material defects, have been maintained in
accordance with normal industry practice, are in good operating condition and
repair (subject to normal wear and tear) and are suitable for the purposes for
which they presently are used.
(b) Except as set forth in Section 2.9(b) of the Disclosure
Schedule, no asset of MODE (tangible or intangible) is subject to any Security
Interest (other than any Security Interest imposed by law, such as carriers',
warehousemen's, or mechanic's liens, incurred by MODE, in good faith, in the
Ordinary Course of Business of MODE.
(c) Section 2.9(c) of the Disclosure Schedule sets forth (i)
a complete and accurate list of all items of tangible personal property owned
by MODE as of the Agreement Date, or not owned by MODE but in the possession
of or used in the business of MODE (the "Personal Property"), other than
individual assets with a book value of less than $1,500; and (ii) a
description of the owner of, and any agreement relating to the use of, each
item of Personal Property not owned by MODE and the circumstances under which
such Personal Property is used. Each item of Personal Property not owned by
MODE is in such condition that upon the return of such property to its owner
in its present condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between MODE and the owner or lessor
thereof, the obligations of MODE to such owner or lessor will be discharged.
2.10 Owned Real Property. MODE does not own, nor has it ever owned,
any real property.
2.11 Intellectual Property.
(a) Except as set forth in Section 2.11(a) of the Disclosure
Schedule, MODE owns or has the right to use all Intellectual Property (as
defined below in this Section 2.11) used in the operation of its business or
necessary for the operation of its business as presently proposed to be
conducted. Each item of Intellectual Property owned by or used in the
operation of the business of MODE at any time during the period covered by the
Financial Statements will be owned or available for use by Emcore on identical
terms and conditions immediately following the Closing. MODE has taken
reasonable measures to protect each item of Intellectual Property and to
maintain in confidence all trade secrets and confidential information that it
owns or uses. To the best knowledge of MODE, and except as set forth in
Section 2.11(a) of the Disclosure Schedule, no other person or Business Entity
has any rights to any of the Intellectual Property owned or used by MODE, and
no other person or Business Entity is infringing, violating or
misappropriating any of the Intellectual Property that MODE
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owns or uses. For purposes of this Agreement, "Intellectual Property" means
all of the following in the United States and elsewhere in the world (i)
patents, patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications,
registrations and applications for registrations, (ii) trademarks, service
marks, trade dress, logos, trade names, domain names on the Internet, and
corporate names and registrations and applications for registration thereof,
(iii) copyrights, mask works and registrations and applications for
registration thereof, (iv) computer software, data and documentation, (v)
trade secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing
and production processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (vi) other proprietary rights relating to any of the foregoing,
and (vii) copies and tangible embodiments thereof.
(b) None of the activities or business conducted by MODE
infringes, violates or constitutes a misappropriation of (or in the past
infringed, violated or constituted a misappropriation of) any rights to any
Intellectual Property of any other person or Business Entity. MODE has not
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation, and to the best knowledge of MODE, there is no
basis for any such complaint, claim or notice.
(c) Section 2.11(c) of the Disclosure Schedule identifies
each (i) patent or registration that has been issued to MODE with respect to
any of its Intellectual Property, (ii) pending patent application or
application for registration that MODE has made with respect to any of its
Intellectual Property, and (iii) license or other agreement pursuant to which
MODE has granted any rights to any third party with respect to any of its
Intellectual Property. MODE has delivered to Emcore correct and complete
copies of all such patents, registrations, applications, licenses and
agreements (as amended to date) and has specifically identified and made
available to Emcore correct and complete copies of all other written
documentation evidencing ownership of, and any claims or disputes relating to,
each such item. Except as set forth in Section 2.11(c) of the Disclosure
Schedule, with respect to each item of Intellectual Property that MODE owns:
(A) subject to such rights as have been granted by MODE
under license agreements entered into in the Ordinary Course of Business of
MODE, MODE possesses all right, title and interest in and to such item, free
and clear of any and all licenses, liens, security interests or other
encumbrances.
(B) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction; and
(C) MODE has not agreed to indemnify any person or
Business Entity for or against any infringement, misappropriation or other
conflict with respect to such
-11-
item.
(d) Section 2.11(d) of the Disclosure Schedule identifies
each item of Intellectual Property used in the operation of the business of
MODE at any time during the period covered by the Financial Statements that is
owned by a party other than MODE. MODE has supplied Emcore with correct and
complete copies of all licenses, sublicenses or other agreements (as amended
to date) pursuant to which MODE uses such Intellectual Property, all of which
are listed on Section 2.11(d) of the Disclosure Schedule. Except as set forth
in Section 2.11(d) of the Disclosure Schedule, with respect to each such item
of Intellectual Property:
(i) the license, sublicense or other agreement covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect prior to the Closing;
(iii) neither MODE nor, to the best knowledge of MODE
any other party to such license, sublicense or other agreement is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation or injunction;
(v) MODE has not agreed to indemnify any person or
Business Entity for or against any interference, infringement,
misappropriation or other conflict with respect to such item; and
(vi) no license or other fee is payable upon any
transfer or assignment of such license, sublicense or other agreement.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to MODE and
lists the term of such lease, any extension and expansion options, and the
rent payable thereunder. MODE has delivered to Emcore correct and complete
copies of the leases and subleases (as amended to date) listed in Section 2.12
of the Disclosure Schedule. With respect to each lease and sublease listed in
Section 2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable against MODE, and to the best knowledge of MODE, in full force and
effect;
(b) the lease or sublease will continue to be legal, valid,
binding,
-12-
enforceable against MODE, and to the best knowledge of MODE, will remain in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing;
(c) neither MODE nor, to the knowledge of MODE, any other
party to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration thereunder; and
(d) MODE has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold.
2.13 Contracts.
(a) Section 2.13 of the Disclosure Schedule lists the
following arrangements (including, without limitation, written agreements) to
which MODE is a party:
(i) any arrangement (or group of related arrangements)
for the lease of personal property from or to third parties providing for
lease payments in excess of $15,000 per annum;
(ii) any arrangement (or group of related arrangements),
including without limitation any OEM, VAR, distribution or other arrangement,
which involves or is expected to involve more than the sum of $15,000, or in
which MODE has granted "most favored nation" pricing provisions or marketing
or distribution rights relating to any products or territory or has agreed to
purchase a minimum quantity of goods or services or has agreed to purchase
goods or services exclusively from a certain party;
(iii) any arrangement establishing a partnership or
joint venture;
(iv) any arrangement (or group of related arrangements)
under which it has created, incurred, assumed or guaranteed (or may create,
incur, assume or guarantee) indebtedness (including capitalized lease
obligations) involving more than $5,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or intangible;
(v) any arrangement concerning confidentiality,
nonsolicitation or noncompetition (other than MODE's standard form of
confidentiality, nonsolicitation and noncompetition agreement (a) with its
employees, a copy of which has been provided to Emcore or (b) entered into in
the Ordinary Course of Business of MODE);
(vi) any arrangement with any of its Affiliates (for the
purposes of this Agreement, "Affiliate" shall mean (A) in the case of an
individual, the members of the immediate family (including parents, siblings
and children) of (i) the individual and (ii) his or
-13-
her spouse and (iii) any Business Entity that directly or indirectly, through
one or more intermediaries controls, or is controlled by, or is under common
control with any of the foregoing individuals, or (B) in the case of a
Business Entity, another Business Entity or a person that directly or
indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with the Business Entity);
(vii) any arrangement under which the consequences of a
default or termination could have a MODE Material Adverse Effect; and
(viii) any other arrangement (or group of related
written arrangements) either involving more than $5,000 or not entered into in
the Ordinary Course of Business of MODE.
(ix) any agreement, contract, mortgage, indenture,
lease, instrument, license, franchise, permit, concession, arrangement,
commitment or authorization which may be, by its terms, terminated or breached
by reason of the execution of this Agreement, the Merger, or the consummation
of the transactions contemplated hereby or thereby;
(x) except for trade indebtedness incurred in the
Ordinary Course of Business of MODE, any instrument evidencing or related in
any way to indebtedness in excess of $5,000 incurred in the acquisition of
companies or other entities or indebtedness in excess of $5,000 for borrowed
money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, indemnification or otherwise;
(xi) any license agreement, either as licensor or
licensee,
(xii) any contract containing covenants purporting to
limit MODE's freedom to compete in any line of business or in any geographic
area or with any third party;
(xiii) any agreement, contract or commitment relating to
capital expenditures and involving future obligations in excess of $15,000; or
(xiv) any other agreement, contract or commitment which
is material to MODE.
(b) MODE has delivered to Emcore (i) a complete and accurate
copy of each written arrangement (as amended to date) listed in Section 2.13
of the Disclosure Schedule and (ii) a complete and accurate description of
each oral arrangement listed in Section 2.13 of the Disclosure Schedule. With
respect to each written arrangement so listed: (i) the written arrangement is
legal, valid, binding and enforceable against MODE, and to the best knowledge
of MODE, in full force and effect; (ii) the written arrangement will continue
to be legal, valid, binding and enforceable against MODE, and to the best
knowledge of MODE, in full force and effect immediately following the Closing
in accordance with the terms thereof as in effect prior to the Closing; and
(iii) neither MODE nor, to the best
-14-
knowledge of MODE, any other party, is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration, under the
written arrangement.
2.14 Accounts Receivable; Customer Contracts in Progress. All
accounts receivable of MODE reflected on (i) the Most Recent Balance Sheet
(net of the applicable reserve for bad debts and sales returns shown on the
Most Recent Balance Sheet) and (ii) the financial or accounting records of
MODE that have arisen since September 30, 1997 (collectively, the "Accounts
Receivable") are valid receivables of MODE subject to no setoffs or
counterclaims. Section 2.14 of the Disclosure Schedule sets forth a complete
and accurate list of the Accounts Receivable, including the aging thereof as
of the Agreement Date.
2.15 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of MODE.
2.16 Insurance. Section 2.16 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
fire, theft, casualty, general liability, workers' compensation, business
interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements but excluding medical, dental and
life insurance policies otherwise set forth in Section 2.20 of the Disclosure
Schedule) to which MODE has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past two years:
(a) the name of the insurer, the name of the policyholder
and the name of each covered insured;
(b) the policy number and the period of coverage;
(c) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(d) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
Except as set forth in Section 2.16 of the Disclosure Schedule, (i) each such
insurance policy is enforceable and in full force and effect as to MODE, and
to the best knowledge of MODE, as to the insurer; (ii) such policy will
continue to be enforceable and in full force and effect as to MODE, and to the
best knowledge of MODE, as to the insurer, immediately following the Closing
in accordance with the terms thereof as in effect prior to the Closing; (iii)
MODE is not in breach or default (including with respect to the payment of
premiums or the giving of notices) under such policy, and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration, under
such policy; and (iv) MODE has not received any notice from the insurer
-15-
disclaiming coverage or reserving rights with respect to a particular claim or
such policy in general. Section 2.16 of the Disclosure Schedule identifies all
claims asserted by MODE pursuant to any insurance policy in excess of $10,000
since its inception and describes the nature and status of each such claim.
MODE has not incurred any loss, damage, expense or liability in excess of
$10,000 covered by any such insurance policy for which it has not properly
asserted a claim under such policy. MODE is covered by insurance in scope and
amount customary and reasonable for the businesses in which it is engaged.
2.17 Litigation. Except as identified and described in Section 2.17
of the Disclosure Schedule, (a) there is no action, suit, proceeding or
investigation to which MODE is a party (either as a plaintiff or defendant)
pending or, to the best knowledge of MODE, threatened before any court,
Governmental Entity or arbitrator, and to the best knowledge of MODE, there is
no basis for any such action, suit, proceeding or investigation; (b) neither
MODE nor, to the best knowledge of MODE, any officer, director or employee of
MODE has been permanently or temporarily enjoined by any order, judgment or
decree of any court or Governmental Entity from engaging in or continuing to
conduct the business of MODE; and (c) no order, judgment or decree of any
court or Governmental Entity exists that enjoins or requires MODE to take any
action of any kind with respect to its business, assets or properties. None of
the actions, suits, proceedings or investigations set forth in Section 2.17 of
the Disclosure Schedule, individually or collectively, could reasonably be
expected to have a MODE Material Adverse Effect.
2.18 Product and Service Warranties. Except as set forth in Section
2.18 of the Disclosure Schedule, no product or service manufactured, sold,
leased or delivered by MODE is subject to any guaranty, warranty, right of
return or other indemnity other than (a) MODE's applicable standard terms and
conditions of sale or lease that are set forth in Section 2.18 of the
Disclosure Schedule and (b) manufacturers' pass-through warranties. Section
2.18 of the Disclosure Schedule sets forth the aggregate expenses incurred by
MODE in fulfilling its obligations under its guaranty, warranty, right of
return and indemnity provisions during each of the fiscal years and the
interim period covered by the Financial Statements.
2.19 Employees and Subcontractors.
(a) Section 2.19(a) of the Disclosure Schedule contains a
list of (i) all employees of MODE (the "Employees"), along with the position,
date of hire, annual rate of compensation (or, with respect to Employees
compensated on an hourly or per diem basis, the hourly or per diem rate of
compensation) and estimated or target annual incentive compensation of each
such Employee, (ii) all employment contracts or agreements relating to
employment, and (iii) all Employees who have executed confidentiality,
noncompetition or nonsolicitation agreements. None of the Employees is a party
to any collective bargaining agreement. MODE has not experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes and no organizational effort is presently being made or threatened by
or on behalf of any labor union with respect to the Employees.
-16-
(b) Section 2.19(b) of the Disclosure Schedule sets forth
(i) a list of all subcontractors currently performing services or under
contract to perform future services for MODE and (ii) the start date, type of
services to be provided, estimated completion date and hourly or per diem pay
rate of such subcontractors.
(c) To the best knowledge of MODE, no key employee or group
of employees employed by MODE has any plans to terminate employment with MODE.
2.20 Employee Benefits.
(a) Section 2.20(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as defined below in
this Section 2.20(a)) maintained, or contributed to, by MODE, or any ERISA
Affiliate (as defined below in this Section 2.20(a) within six years prior to
the Closing Date). For purposes of this Agreement, "Employee Benefit Plan"
means any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement involving direct or
indirect compensation, including, without limitation, insurance coverage,
employment agreements, consulting agreements, vacation benefits, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any member of (i) a controlled group of corporations
(as defined in Section 414(b) of the Code), (ii) a group of trades or
businesses under common control (as defined in Section 414(c) of the Code),
(iii) an affiliated service group (as defined under Section 414(m) of the Code
or the regulations under Section 414(o) of the Code), any of which at any time
after December 31, 1989 included MODE. Complete and accurate copies of (i) all
Employee Benefit Plans that have been reduced to writing and any amendments
thereto, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan
descriptions that exist, and (iv) all annual reports filed on IRS Form 5500,
5500C or 5500R for the last three plan years for each Employee Benefit Plan,
and (v) all qualification letters issued by the Internal Revenue Service with
respect to every Employee Benefit Plan that is intended to qualify under
Section 401(a) of the Code, have been delivered to Emcore. Each Employee
Benefit Plan has been administered substantially in all material respects in
accordance with its terms, and each of MODE and the ERISA Affiliates has met
its obligations with respect to such Employee Benefit Plan in all material
respects and has made all required contributions thereto. MODE and all
Employee Benefit Plans have complied in all material respects in form and
operation with the applicable provisions of ERISA, the Code and other
applicable federal and state laws and the regulations thereunder. Each
Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Code is so qualified. Each Employee Benefit Plan that is intended to qualify
under Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the Internal Revenue Service regarding such
qualified status and covering amendments required under the Tax Reform Act of
1986, the Unemployment Compensation Amendments
-17-
of 1992, the Omnibus Reconciliation Act of 1993, the final nondiscrimination
regulations under Section 401(a)(4) of the Code, and all other amendments
required to be filed within the TRA '86 remedial amendment period described in
Internal Revenue Procedure 95-12. Nothing has occurred that could cause a loss
of such qualification and no loss of qualification has been threatened by the
Internal Revenue Service.
(b) To the best knowledge of MODE, there are no inquiries or
investigations by any Governmental Entity, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Employee Benefit Plans and proceedings with respect to qualified domestic
relations orders), suits or proceedings against or involving any Employee
Benefit Plan or asserting any rights or claims to benefits under any Employee
Benefit Plan other than routine claims for benefits.
(c) Neither MODE nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code, Part 3 of
Subtitle B of Title I or ERISA, or Title IV of ERISA. At no time has MODE or
any ERISA Affiliate been obligated to contribute to any "multiemployer plan"
as defined in Section 3(37) of ERISA. No act or omission has occurred and no
condition exists with respect to any Employee Benefit Plan maintained by MODE
or any ERISA Affiliate that would subject MODE or any ERISA Affiliate to any
fine, penalty, tax or liability of any kind imposed under ERISA or the Code
that would have a MODE Material Adverse Effect. To the best knowledge of MODE,
no prohibited transaction (as defined in Section 406 of ERISA or Section 4975
of the Code) has occurred. No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits MODE from amending or
terminating any Employee Benefit Plan which is an employee benefit plan as
defined in Section 3(3) or ERISA and any such Employee Benefit Plan may be
terminated without liability to MODE or Emcore, except for benefits accrued
through the date of termination. Except as set forth in Section 2.20(c) of the
Disclosure Schedule, no former employees participate in any Employee Benefit
Plan. Neither MODE nor any ERISA Affiliate maintains any plan or arrangement
pursuant to which former employees or other service providers are entitled to
post-retirement health care benefits, except to the extent required by Section
4980B of the Code. No Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code and its trust exempt from tax under Section
501(a) of the Code includes in its assets any securities issued by MODE. No
Employee Benefit Plan has been subject to tax.
(d) Section 2.20(d) of the Disclosure Schedule discloses
each: (i) agreement with any director, executive officer or other key employee
of MODE (A) the benefits of which are contingent, in whole or in part, or the
terms of which are materially altered, upon the occurrence of a transaction
involving MODE of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee, or
(C) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii)
agreement, plan or arrangement under which any person may receive payments
from MODE
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that may be subject to the tax imposed by Section 4999 of the Code or included
in the determination of such person's "parachute payment" under Section 280G
of the Code; and (iii) agreement or plan binding MODE, including, without
limitation, any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan, or any other Employee
Benefit Plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, in whole or in part, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
2.21 Legal Compliance. MODE and the conduct and operations of its
business are and have been in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity that (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to MODE or its business
the noncompliance with which could reasonably be expected to result in a MODE
Material Adverse Effect.
2.22 Permits. Section 2.22 of the Disclosure Schedule sets forth a
list of all material permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including, without limitation, those
issued or required under Environmental Laws and those relating to the
occupancy or use of owned or leased real property) ("Permits") issued to or
held by MODE. Such listed Permits are the only Permits that are required for
MODE to conduct its business as presently conducted or as proposed to be
conducted. Each such Permit is in full force and effect and, to the best
knowledge of MODE, no suspension or cancellation of such Permit is threatened
and there is no basis for believing that such Permit will not be renewable
upon expiration. Except as set forth in Section 2.22 of the Disclosure
Schedule, each such Permit will continue in full force and effect following
the Closing.
2.23 Certain Business Relationships with Affiliates. Except as set
forth in Section 2.23 of the Disclosure Schedule, no Affiliate of MODE (a)
owns any property or right, tangible or intangible, which is used in the
business of MODE (b) has any claim or cause of action against MODE, or (c) is
a party to any contract or other arrangement, written or verbal, with MODE.
2.24 Books and Records. The minute books and other similar records of
MODE contain complete and accurate records of all actions taken at any
meetings of MODE's stockholders, Board of Directors or any committee thereof
and of all written consents executed in lieu of the holding of any such
meeting.
2.25 Customers and Suppliers. No customer of MODE has indicated
within the past year that it will stop, or decrease the rate of, buying
materials, products or services from MODE. Section 2.25 of the Disclosure
Schedule identifies (a) each customer of MODE, that purchased products in
excess of $10,000 during (i) the last full fiscal year and (ii) the first nine
months of 1997, respectively, and the amount of revenues accounted for by such
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customer during each such period, and (b) each supplier that is the sole
supplier of any significant product, component or service used by MODE which
is not readily available from other sources. Except as set forth in Section
2.25 of the Disclosure Schedule, MODE has good customer relations and none of
the customers of MODE has notified MODE that it intends to discontinue its
relationship with MODE.
2.26 Prepayments, Prebilled Invoices and Deposits.
(a) Section 2.26(a) of the Disclosure Schedule sets forth
(i) all prepayments, prebilled invoices and deposits in excess of $1,000 that
have been received by MODE as of the Agreement Date from customers for
products to be shipped, or services to be performed, after the Closing Date,
and (ii) with respect to each such prepayment, prebilled invoice or deposit,
(A) the party and contract credited, (B) the date received or invoiced, (C)
the products and/or services to be delivered, and (D) the conditions for the
return of such prepayment, prebilled invoice or deposit. All such prepayments,
prebilled invoices and deposits prior to September 30, 1997 are properly
accrued for on the Most Recent Balance Sheet in accordance with GAAP applied
on a consistent basis with the past practice of MODE.
(b) Section 2.26(b) of the Disclosure Schedule sets forth
(i) all prepayments, prebilled invoices and deposits in excess of $1,000 that
have been made or paid by MODE as of the Agreement Date for products to be
purchased, services to be performed or other benefits to be received after the
Closing Date, and (ii) with respect to each such prepayment, prebilled invoice
or deposit, (A) the party to whom such prepayment, prebilled invoice or
deposit was made or paid, (B) the date made or paid, (C) the products and/or
services to be delivered, and (D) a summary of the conditions for the return
of such prepayment, prebilled invoice or deposit. All such prepayments,
prebilled invoices and deposits prior to September 30, 1997 are properly
accrued for on the Most Recent Balance Sheet in accordance with GAAP applied
on a consistent basis with the past practices of MODE.
2.27 Banking Facilities. Section 2.27 of the Disclosure Schedule
identifies:
(a) Each bank, savings and loan or similar financial
institution in which MODE has an account or safety deposit box and the numbers
of the accounts or safety deposit boxes maintained by the Company; and
(b) The names of all persons authorized to draw on each such
account or to have access to any such safety deposit box facility, together
with a description of the authority (and conditions thereof, if any) or each
such person with respect thereto.
2.28 Inventories. All of the inventory recorded on the Most Recent
Balance Sheet consists of, and all inventory on the Closing Date will consist
of, items of a quality usable or saleable within six (6) months in the
ordinary course of business consistent with past practices
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and are and will be in qualities sufficient for the normal operation of the
business of MODE in accordance with past practice.
2.29 Products. Each of the products produced or sold by MODE (i) is,
and at all times has been, in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (ii) is,
and at all relevant times has been, fit for the ordinary purposes for which it
is intended to be used and conforms in all material respects to any promises
or affirmations of fact made in connection with its sale. There is no known
design defect with respect to any of such products and each of such products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance with applicable laws and current industry practice with respect to
its use. Except as set forth in Section 2.29 of the Disclosure Schedule, MODE
has no products placed with its customers under an understanding permitting
its return to MODE other than pursuant a breach of warranty.
2.30 Environmental Compliance. Except for matters disclosed in
Section 2.30 of the Disclosure Schedule and except for matters which,
individually or in the aggregate, will not have a MODE Material Adverse
Effect, (a) the properties, operations and activities of MODE are in
compliance with all applicable Environmental Laws; (b) MODE and the properties
and operations of MODE are not subject to any existing, pending or, to the
knowledge of MODE, threatened action, suit, investigation, inquiry or
proceeding by or before any court or governmental authority under any
Environmental Law; (c) all permits, licenses and similar authorizations, if
any, required to be obtained or filed by MODE under any Environmental Law in
connection with the business of MODE have been obtained or filed and are valid
and currently in full force and effect or have been applied for; (d) there has
been no release of any hazardous substance, pollutant or contaminant into the
environment by MODE or in connection with its properties or operations; (e)
there has been no exposure of any Person or property to any hazardous
substance, pollutant or contaminant in connection with the properties,
operations and activities of MODE; and (f) MODE has made available to Emcore
all internal and external environmental audits and studies and all
correspondence on substantial environmental matters (in each case relevant to
MODE) in the possession of MODE.
"Environmental Law or Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any governmental authority
pertaining to health or the environment in effect as of the date of this
Agreement, including the Clean Air Act, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), the Federal
Water Pollution Control Act, the Occupational Safety and Health Act of 1970,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), the Toxic
Substances Control Act, the Hazardous Material Transportation Act, and the Oil
Pollution Act of 1990, all as amended through the date of this Agreement, any
state or local Laws implementing the foregoing federal laws, and any state
laws pertaining to the handling of oil and gas exploration and production
wastes or the use, maintenance, and closure of pits and impoundments, and all
other environmental conservation or protection laws. For purposes of this
Agreement, the
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terms "hazardous substance" and "release" have the meanings specified in
CERCLA; provided, however, that to the extent any applicable laws of a state
or locality establish a meaning for "hazardous substance" or "release" that is
broader than the meaning specified in CERCLA, such broader meaning shall
apply, and provided, further, that the term "hazardous substance" shall
include all dehydration and treating wastes, waste (or spilled) oil, and waste
(or spilled) petroleum products and (to the extent in excess of background
levels) radioactive material, even if such are specifically exempt from
classification as hazardous substances pursuant to CERCLA or RCRA or analogous
state or local Laws.
2.31 Brokers' Fees. Neither MODE nor any of the Principal MODE
Stockholders has any liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
2.32 MODE and MODE Stockholder Action. The Board of Directors of MODE
has by unanimous written action (a) determined that the Merger is fair and in
the best interests of MODE and the MODE Stockholders and (b) adopted this
Agreement in accordance with the provisions of the Delaware Law. The MODE
Stockholders have by unanimous written action adopted and approved this
Agreement and the Merger.
2.33 Affiliates. There are no Affiliates of MODE other than the
persons and or entities identified on Section 2.33 of the Disclosure Schedule.
2.34 Tax Matters.
(a) Neither MODE nor, to the knowledge of MODE, any of its
Affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
(b) There is a no plan or intention on the part of the MODE
Stockholders who own one percent (1%) or more of the MODE Shares (by value),
and to the best knowledge of MODE, there is no plan or intention on the part
of remaining MODE Stockholders, to sell, exchange, or otherwise dispose of a
number of Merger Shares that would reduce such MODE Stockholders' ownership of
Emcore Common Stock to a number of shares having a value, as of the date of
the Merger, of less than fifty percent (50%) of the value of all the formerly
outstanding MODE Shares as of the same date. For purposes of this
representation, MODE Shares exchanged for cash in lieu of fractional shares of
Emcore Common Stock or surrendered by dissenters, if any, are to be treated as
outstanding MODE Shares on the date of the Merger. Moreover, MODE Shares and
shares of Emcore Common Stock held by MODE shareholders and otherwise sold,
redeemed, or disposed of prior to the Merger, or subsequent to the Merger
pursuant to a plan or intention as of the date of the Merger, are also to be
taken into account in connection with this representation.
(c) At the time of the Merger, MODE will not have
outstanding any warrants, options, convertible securities, or any other type
of right pursuant to which any
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person could acquire stock in MODE that, if exercised or converted, would
affect Emcore's acquisition or retention of "control" of MODE. For purposes of
this Section 2.34 and Section 4.11 below, "control" shall consist of direct
ownership of shares of stock possessing at least eighty percent (80%) of the
total combined voting power of shares of all classes of stock entitled to vote
and at least eighty percent (80%) of the total number of shares of all other
classes of stock of MODE.
(d) MODE is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(e) MODE is not under the jurisdiction of a court in a title
11 or similar case within the meaning of section 368(a)(3)(A) of the Code.
(f) MODE has not used any assets to make distributions,
redemptions or other payments in respect of its stock (except for regular,
normal distributions) or in respect of rights to acquire such stock that were
made in contemplation of the Merger or that are related thereto, and MODE's
expenses or liabilities incurred in connection with Merger will not exceed
$200,000.
2.35 Disclosure. No representation or warranty by MODE contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be
delivered by or on behalf of MODE pursuant to this Agreement, and no other
statement made by MODE, or any of its representatives in connection with this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL MODE STOCKHOLDERS
Each Principal MODE Stockholder hereby, severally and not jointly,
represents and warrants to Emcore as follows:
3.1 Authority.
(a) Such Principal MODE Stockholder has all requisite power
and authority to execute and deliver the Fundamental Agreements and to perform
his, her or its obligations
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under the Fundamental Agreements. The Fundamental Agreements have each been
(or in the case of the Escrow Agreement, shall be when delivered) duly and
validly executed and delivered by such stockholder, and each constitutes (or,
in the case of the Escrow Agreement, shall constitute) a valid and binding
obligation of such stockholder, enforceable against such stockholder in
accordance with its terms.
(b) Subject to compliance with (a) the applicable
requirements of the Securities Act, (b) any applicable state securities laws,
and (c) Delaware Law, and except as set forth on Section 2.3 of the Disclosure
Schedule, the execution and delivery of the Fundamental Agreements by such
stockholder and the consummation by such stockholder of the transactions
contemplated thereby will not (i) require on the part of such stockholder any
filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (ii) conflict with, result in breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in the
acceleration of, create in any party any right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which such stockholder is a party or by which
such stockholder is bound or to which any of its assets are subject, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to such stockholder or any of its properties or assets.
(c) For purposes of this Section 3.1, all references to the
term "Fundamental Agreements" shall be deemed to include the Employment
Agreements (as defined in Section 6.1(f)) and the Registration Rights
Agreement (as defined in Section 6.2(h)).
3.2 Investment Representations.
(a) Such Principal MODE Stockholder is acquiring the Merger
Shares for his, her or its own account for investment only, and not with a
view to, or for sale in connection with, any distribution of such Merger
Shares in violation of the Securities Act or any rule or regulation under the
Securities Act.
(b) Such Principal MODE Stockholder has had adequate
opportunity to obtain from representatives of Emcore such information, in
addition to the representations set forth in the Agreement, as is necessary to
evaluate the merits and risks of his, her or its investment in Emcore.
(c) Such Principal MODE Stockholder has sufficient
experience in business, financial and investment matters to be able to
evaluate the risks involved in the acquisition of the Merger Shares to be
issued to him, her or it and to make an informed investment decision with
respect to such investment.
(d) Such Principal MODE Stockholder understands that the
Merger Shares have not been registered under the Securities Act and are
"restricted securities" within the
-24-
meaning of Rule 144 under the Securities Act; and the Merger Shares cannot be
sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from registration is then
available.
(e) A legend substantially in the following form will be
placed on the certificate representing the Merger Shares to be issued to such
stockholder:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such
Act or an opinion of counsel satisfactory to Emcore
Corporation to the effect that such registration is not
required."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMCORE
AND ACQUISITION SUBSIDIARY
Each of Emcore and Acquisition Subsidiary represents and warrants to
MODE as follows:
4.1 Organization. Emcore is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey.
Acquisition Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Emcore is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except for
any jurisdiction in which the failure to so qualify would not have a material
adverse effect on the business, condition (financial or otherwise) assets or
liabilities of Emcore ("Emcore Material Adverse Effect"). Emcore has all
requisite corporate power and authority to carry on the business in which it
is engaged and to own and use the properties owned and used by it. Each of
Emcore and the Acquisition Subsidiary has furnished to MODE true and complete
copies of its Certificate of Incorporation and By-laws, each as amended and as
in effect on the Agreement Date. Each of Emcore and the Acquisition Subsidiary
has at all times complied with, and is not in default under or in violation
of, any provision of its Certificate of Incorporation and By-laws.
4.2 Capitalization. The authorized capital stock of Emcore consists
of: (i) 23,529,411 shares of common stock, no par value per share, of which
7,854,240 shares are issued and outstanding, and (ii) 5,882,353 shares of
preferred stock, no par value per share, of which no shares are issued and
outstanding. Emcore has reserved 647,059 shares, in the aggregate, for
issuance under its 1995 Incentive and Non-Statutory Stock Option Plan, as
amended (the "Emcore Option Plan"). There are 510,465, in the aggregate,
options issued
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and outstanding under the Emcore Option Plan (the "Emcore Options"). Emcore
has issued certain warrants for the purchase of 1,737,410 shares, in the
aggregate, of its common stock (the "Emcore Warrants"). Except for the Emcore
Options and the Emcore Warrants, and except as otherwise set forth in the SEC
Documents (as defined in Section 4.6), there are no outstanding or authorized
options, warrants, rights, agreements or commitments to which Emcore is a
party or which are binding upon Emcore providing for the issuance, disposition
or acquisition of any of its capital stock.
4.3 Authorization of Transaction. Each of Emcore and the Acquisition
Subsidiary (in the case of agreements to which the Acquisition Subsidiary is a
party) has all requisite power and authority to execute and deliver the
Fundamental Agreements and to perform its obligations under the Fundamental
Agreements. The execution and delivery of the Fundamental Agreements by each
of Emcore and the Acquisition Subsidiary (in the case of agreements to which
the Acquisition Subsidiary is a party) and the performance of the Fundamental
Agreements and the consummation of the transactions contemplated thereby by
Emcore and the Acquisition Subsidiary has been (or, in the case of the Escrow
Agreement, shall be when delivered) duly and validly authorized by all
necessary corporate action on the part of Emcore and the Acquisition
Subsidiary (in the case of agreements to which the Acquisition Subsidiary is a
party). The Fundamental Agreements have been (or, in the case of the Escrow
Agreement, shall be when delivered) duly and validly executed and delivered by
each of Emcore and the Acquisition Subsidiary (in the case of agreements to
which the Acquisition Subsidiary is a party) and constitute valid and binding
obligations of Emcore and the Acquisition Subsidiary (in the case of
agreements to which the Acquisition Subsidiary is a party) enforceable against
each of them in accordance with their terms.
4.4 Noncontravention. Subject to compliance with (a) the applicable
requirements of the Securities Act, (b) any applicable state securities laws,
and (c) Delaware Law, the execution and delivery of the Fundamental Agreements
by Emcore and the consummation by Emcore of the transactions contemplated
thereby will not (i) conflict with or violate any provision of the charter or
By-laws of Emcore, (ii) require on the part of Emcore any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (iii)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create
in any party any right to accelerate, terminate, modify or cancel, or require
any notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which Emcore is a party or by which Emcore is bound or to which any of its
assets are subject, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Emcore or any of its properties or
assets.
4.5 Brokers' Fees. Emcore has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
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4.6 SEC Filings. Emcore has timely filed with the Securities and
Exchange Commission (the "SEC"), and has delivered or made available to the
MODE Stockholders, true and complete copies of, all forms, reports, schedules,
statements and other documents (collectively, the "SEC Documents") required to
be filed by it under the Securities Act or the Securities Exchange Act of 1934
(the "Exchange Act"). The SEC Documents were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the published rules and regulations of the SEC thereunder, and the SEC
Documents when filed, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of Emcore included in the SEC
Documents, have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated
therein or the notes thereto and in the case of quarterly financial
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
present the financial position and the results of operations and cash flows
(and changes in financial position, if any) of Emcore as of the respective
dates and for the respective periods thereof, except that the unaudited
interim quarterly financial statements were or are subject to normal and
recurring year-end adjustments which were or are not expected to be material
in amount.
4.7 Intellectual Property.
(a) Except as otherwise set forth in the SEC Documents (as
defined in Section 4.6 above), Emcore owns or has the right to use all
Intellectual Property (as defined in Section 2.11) used in the operation of
its business or necessary for the operation of its business as presently
proposed to be conducted. Each item of Intellectual Property owned by or used
in the operation of the business of Emcore at any time during the period
covered by the SEC Documents will be owned or available for use by Emcore on
identical terms and conditions immediately following the Closing. Emcore has
taken reasonable measures to protect each item of Intellectual Property and to
maintain in confidence all trade secrets and confidential information that it
owns or uses. To the best knowledge of Emcore, and except as otherwise set
forth in the SEC Documents (as defined in Section 4.6 above), no other person
or Business Entity has any rights to any of the Intellectual Property owned or
used by Emcore, and no other person or Business Entity is infringing,
violating or misappropriating any of the Intellectual Property that Emcore
owns or uses.
(b) Except as otherwise set forth in the SEC Documents (a)
none of the activities or business conducted by Emcore infringes, violates or
constitutes a misappropriation of (or in the past infringed, violated or
constituted a misappropriation of) any rights to any Intellectual Property of
any other person or Business Entity; (b) Emcore has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation, and to the best knowledge of Emcore, there is no basis for
any such complaint, claim or notice.
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4.8 Litigation. Except as otherwise set forth in the SEC Documents,
(a) there is no action, suit, proceeding or investigation to which Emcore is a
party (either as a plaintiff or defendant) pending or, to the best knowledge
of Emcore, threatened before any court, Governmental Entity or arbitrator, and
to the best knowledge of Emcore, there is no basis for any such action, suit,
proceeding or investigation; (b) neither Emcore nor, to the best knowledge of
Emcore, any officer, director or employee of Emcore has been permanently or
temporarily enjoined by any order, judgment or decree of any court or
Governmental Entity from engaging in or continuing to conduct the business of
Emcore; and (c) no order, judgment or decree of any court or Governmental
Entity exists that enjoins or requires Emcore to take any action of any kind
with respect to its business, assets or properties.
4.9 Legal Compliance. Emcore and the conduct and operations of its
business are and have been in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity that (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to Emcore or its
business, the noncompliance with which could reasonably be expected to result
in an Emcore Material Adverse Effect.
4.10 Absence of Certain Changes. Since June 30, 1997, except as
otherwise disclosed in Emcore's press release dated September 9, 1997, (a)
there has not been any event or development that would have an Emcore Material
Adverse Effect nor has there occurred any event or development that could
reasonably be foreseen to result in such an Emcore Material Adverse Effect.
4.11 Tax Matters.
(a) Neither Emcore nor, to the knowledge of Emcore, any of
its Affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code. In making this representation, Emcore is relying
on MODE's representation contained in Section 2.34 above.
(b) Following the Merger, MODE will hold at least ninety
percent (90%) of the fair market value of its net assets and at least seventy
percent (70%) of the fair market value of its gross assets held immediately
prior to the Merger and at least ninety percent (90%) of the fair market value
of Acquisition Subsidiary's net assets and at least seventy percent (70%) of
the fair market value of Acquisition Subsidiary's gross assets held
immediately prior to the Merger. For purposes of determining the percentage of
MODE's and Acquisition Subsidiary's net and gross assets held by MODE
immediately following the Merger, the following assets will be treated as
property held by MODE or Acquisition Subsidiary, as the case may be,
immediately prior but not subsequent to the Merger: (i) assets used by MODE or
Acquisition Subsidiary (other than assets transferred from Emcore to
Acquisition Subsidiary for such purpose) to pay expenses or liabilities
incurred in connection with the Merger, including without limitation amounts
paid to dissenters, if any, and reorganization expenses, and (ii) assets used
to make distributions, redemptions or other
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payments in respect of stock of MODE (except for regular, normal
distributions) or in respect of rights to acquire such stock that are made in
contemplation of the Merger or that are related thereto. In making this
representation, Emcore is relying on MODE's representation contained in
Section 2.34.
(c) Emcore has no plan or intention to (i) liquidate MODE,
(ii) merge MODE with or into another corporation, (iii) sell or otherwise
dispose of the stock of MODE (except for transfers of the stock of MODE to a
corporation controlled (as defined above) by Emcore), (iv) cause or permit
MODE to sell or otherwise dispose of any of its assets or of any of the assets
acquired from Acquisition Subsidiary (except for dispositions made in the
ordinary course of business or to a corporation controlled (as defined above)
by MODE), (v) cause or permit MODE to issue additional shares of stock, or
take any other action, that would result in Emcore losing control (as defined
above in Section 2.34) of MODE after the Merger, or (vi) redeem or otherwise
reacquire any of the Emcore Common Stock issued in the Merger.
(d) Acquisition Subsidiary will have no liabilities assumed
by MODE, and will not transfer to MODE any assets subject to liabilities, in
the Merger.
(e) Following the Merger, MODE will continue its historic
business or use a significant portion of its historic business assets in a
business.
(f) There is no intercorporate indebtedness existing between
MODE and Emcore or between Acquisition Subsidiary and MODE that was issued,
acquired, or will be settled at a discount.
(g) During the past five years, none of the shares of the
capital stock of MODE, including the right to acquire or vote any such shares,
has directly or indirectly been owned by Emcore.
(h) Neither Emcore nor Acquisition Subsidiary is an
investment company as defined in section 368(a)(2(F)(iii) and (iv) of the
Code.
4.12 Environmental Compliance. Except for matters which, individually
or in the aggregate, will not have an Emcore Material Adverse Effect, (a) the
properties, operations and activities of Emcore are in compliance with all
applicable Environmental Laws; (b) Emcore and the properties and operations of
Emcore are not subject to any existing, pending or, to the knowledge of
Emcore, threatened action, suit, investigation, inquiry or proceeding by or
before any court or governmental authority under any Environmental Law; (c)
all permits, licenses and similar authorizations, if any, required to be
obtained or filed by Emcore under any Environmental Law in connection with the
business of Emcore have been obtained or filed and are valid and currently in
full force and effect or have been applied for; (d) there has been no release
of any hazardous substance, pollutant or contaminant into the environment by
Emcore or in connection with its properties or operations; (e) there has been
no exposure
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of any Person or property to any hazardous substance, pollutant or contaminant
in connection with the properties, operations and activities of Emcore; and
(f) Emcore has made available to MODE all internal and external environmental
audits and studies and all correspondence on substantial environmental matters
(in each case relevant to Emcore) in the possession of Emcore.
4.13 Disclosure. No representation or warranty by Emcore contained in
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered to or to be delivered by or on behalf of Emcore
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading.
ARTICLE V
COVENANTS
From and after the Agreement Date and until the Closing Date:
5.1 Conduct of Business. MODE and Emcore shall carry on their
respective businesses diligently and substantially in the same manner as
before the Agreement Date. MODE shall not make or institute any unusual or new
methods of manufacture, purchase, sale, shipment or delivery, lease,
management, accounting or operation, except as agreed to in writing by Emcore.
All of the property of MODE shall be used, operated, repaired and maintained
in a normal business manner consistent with past practice.
5.2 Absence of Material Changes. Without the prior written consent of
Emcore, MODE shall not:
(a) take any action to amend its charter documents or
bylaws;
(b) issue any stock, bonds or other corporate securities or
grant any option or issue any warrant to purchase or subscribe for any of such
securities or issue any securities convertible into such securities;
(c) incur any obligation or liability (absolute or
contingent), except current liabilities incurred and obligations under
contracts entered into in the Ordinary Course of Business of MODE;
(d) declare or make any payment or distribution to its
stockholders with respect to its stock or purchase or redeem any shares of its
capital stock;
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(e) mortgage, pledge, or subject to any lien, charge or any
other encumbrance any of its assets or properties;
(f) sell, assign, or transfer any of its assets, except in
the Ordinary Course of Business of MODE;
(g) cancel any debts or claims, except in the Ordinary
Course of Business of MODE;
(h) merge or consolidate with or into any Business Entity
other than the Acquisition Subsidiary;
(i) make, accrue or become liable for any bonus, profit
sharing or incentive payment, except for accruals under existing plans, if
any, or increase the rate of compensation payable or to become payable by it
to any of its officers, directors or employees;
(j) make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
(k) modify, amend, alter or terminate any of its executory
contracts of a material value or which are material in amount;
(l) take or permit any act or omission constituting a breach
or default under any contract, indenture or agreement by which it or its
properties are bound;
(m) fail to use commercially reasonable efforts to (i)
preserve the possession and control of its assets and business, (ii) keep in
faithful service its present officers and key employees, and (iii) preserve
the goodwill of its consumers, suppliers, agents, brokers and others having
business relations with it;
(n) fail to operate its business and maintain its books,
accounts and records in the customary manner and in the Ordinary Course of
Business of MODE and maintain in good repair its business premises, fixtures,
machinery, furniture and equipment;
(o) enter into any lease, contract, agreement or
understanding, other than in the Ordinary Course of Business of MODE;
(p) incur any capital expenditure in excess of $5,000 in an
instance or $25,000 in the aggregate;
(q) engage any new employee for a salary in excess of
$45,000 per annum;
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(r) materially alter the terms, status or funding condition
of any Employee Benefit Plan;
(s) commit or agree to do any of the foregoing in the
future.
5.3 Delivery of Interim Financial Statements. As promptly as possible
following the last day of each month after the Agreement Date until the
Closing Date, and in any event within thirty (30) days after the end of each
such month, MODE shall deliver to Emcore the balance sheet of MODE and the
related statements of income, shareholders' equity, retained earnings and cash
flows for the one-month period then ended, all certified by the chief
financial officer of MODE to the effect that such interim financial statements
are prepared in accordance with GAAP on a basis consistent with the Financial
Statements and fairly present the financial condition of MODE as of the date
thereof and for the period covered thereby (collectively, the "Interim
Financial Statements").
5.4 Communications with Customers and Suppliers.
(a) Unless instructed otherwise by Emcore in writing, MODE
will continue to accept customer orders in the Ordinary Course of Business of
MODE for all products and services offered by MODE, whether expected to be
shipped before or after the Closing Date.
(b) The Parties will cooperate in communications with MODE's
suppliers and customers in connection with the transfer of MODE Shares to
Emcore on the Closing Date.
5.5 Compliance with Laws. Each of MODE and Emcore will comply with
all laws and regulations that are applicable to it or to the conduct of their
respective businesses and will perform and comply with all contracts,
commitments and obligations by which it is bound.
5.6 Continued Truth of Representations and Warranties of MODE and
Principal MODE Stockholders. Neither MODE nor the Principal MODE Stockholders
will take any actions that would result in any of the representations or
warranties set forth in Articles II and III above being untrue.
5.7 Continued Truth of Representations and Warranties of Emcore.
Emcore will not take any actions that would result in any of representations
and warranties set forth in Article IV above being untrue.
5.8 Continuing Obligation to Inform. From time to time prior to the
Closing, each Party will deliver or cause to be delivered to the other Party
supplemental information concerning events subsequent to the Agreement Date
that would render any statement, representation or warranty in this Agreement
or any information contained in any Schedule attached hereto pertaining to
such Party inaccurate or incomplete at any time after the
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Agreement Date until the Closing Date; provided, that such supplemental
information shall not constitute an amendment of any statement, representation
or warranty in this Agreement or any Schedule, Exhibit or document furnished
pursuant hereto.
5.9 Exclusive Dealing. Until the earlier of the Closing or the
termination of this Agreement pursuant to Section 8.1 hereof, neither MODE nor
the Principal MODE Stockholders will, directly or indirectly, through any
officer, director, employee, Affiliate or agent or otherwise, (a) take any
action to solicit, initiate, seek, entertain, or encourage or support any
inquiry, proposal or offer from any person or Business Entity relating to an
acquisition or purchase of all or any portion of the assets of (other than in
the Ordinary Course of Business) or an equity interest in MODE or any merger,
consolidation or business combination with MODE, or (b) participate in any
discussions or negotiations regarding, or furnish to any other person or
Business Entity, any information with respect to or 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. MODE and the
Principal MODE Stockholders shall promptly notify Emcore of any such proposal
or offer, or any inquiry or contact with respect thereto received by MODE or,
to their knowledge, any MODE Stockholder.
5.10 Reports, Taxes. MODE will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign
authorities and will promptly pay all federal, state, local and foreign Taxes,
assessments and governmental charges levied or assessed upon them or any of
their properties (unless contesting such in good faith and adequate provision
has been made therefor).
5.11 Best Efforts to Obtain Satisfaction of Conditions. The Parties
shall use their best efforts, to the extent commercially reasonable, to obtain
the satisfaction of the conditions specified in this Agreement.
5.12 Full Access. MODE and Emcore shall each permit representatives
of the other Party to have full access (at all reasonable times, and in a
manner so as not to interfere with its normal business operations) to all
premises, properties, financial and accounting records, contracts, other
records and documents, and personnel, of or pertaining to such Party. The
officers and management of such Party shall cooperate fully with the
representatives and agents of the other Party and shall make themselves
available to the other Party.
5.13 Customers and Suppliers. MODE shall, at the request of Emcore,
introduce Emcore to MODE's principal suppliers, customers and employees to
facilitate discussions between such persons and Emcore in regard to the
conduct of the business of MODE following the Closing.
5.14 Reorganization under Section 368(a). Emcore shall take no
action, and shall use all reasonable efforts to prevent any of its Affiliates
from taking any action, inconsistent with the treatment of the transaction as
a reorganization intended to qualify under Section 368(a) of
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the Code.
5.15 Retained Employees and Noncompetition and/or Nondisclosure
Agreements. MODE and the Principal MODE Stockholders shall use their best
efforts to obtain on or prior to the Closing from each of MODE employees
identified on Schedule IV attached hereto, an executed form of Emcore's
standard noncompetition and/or nondisclosure agreement, as applicable, in the
form attached hereto as Exhibit D, together with any and all other documents
reasonably requested by Emcore in connection with the retention of such
employees by Emcore. Effective as of the Closing Date, Emcore shall continue
the employment of each such person identified on Schedule III (the "MODE
Employees").
5.16 Listing of Merger Shares. Emcore shall use its best efforts to
list the Merger Shares on the Nasdaq National Market before the Closing Date.
5.17 Indemnification. Emcore shall indemnify and hold harmless the
present and former officers and directors of MODE in respect of acts or
omissions occurring prior to the Effective Time to the extent provided under
the Amended and Restated Certificate of Incorporation and Bylaws of MODE in
effect on the date hereof.
5.18 Employees and Employee Benefits.
(a) Effective as of the Closing Date, Emcore shall cause the
Surviving Corporation to continue the employment of each individual who was
employed by MODE on the day prior to the Closing Date, except for the
employees listed on Section 5.18(a) of the Disclosure Schedule, at the same or
greater cash compensation as each such employee was receiving immediately
prior to the Closing Date. Each of the MODE employees who continues employment
with the Surviving Corporation as of the Closing Date shall be referred to
herein as a "MODE Employee."
(b) Effective as of the Closing Date, MODE shall terminate
or discontinue the "simplified employee pension" (within the meaning of
Section 408(k) of the Code) maintained by MODE. Effective with the Closing
Date, Emcore shall, in its sole discretion, either (i) cause the Surviving
Corporation to maintain, in substantially the same form, MODE's existing
employee welfare benefit plans (as defined in Section 3(1) of ERISA) or (ii)
replace any or all of such plans with comparable programs. Except for benefits
described in the previous sentence, MODE Employees shall, to the extent
otherwise eligible, be allowed to participate in all employee benefit plans,
programs or arrangements maintained by Emcore on the same terms as existing
Emcore employees. Emcore shall cause each such MODE Employee, for the year
during which the Closing Date occurs, to be credited under any applicable
Emcore group health plan with any deductibles and copayments already incurred
during such year under the MODE group health plan, and cause to be waived
under each applicable Emcore group health plan any preexisting condition
restrictions to the extent necessary to provide immediate coverage of all MODE
Employees. Emcore shall recognize or cause to be recognized each MODE
Employee's years of service and level of seniority with
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MODE, its ERISA Affiliates, and the Subsidiaries for purposes of (i) terms of
employment and (ii) eligibility, vesting and benefit determination under all
employee benefit plans, programs or arrangements maintained by Emcore or
Surviving Corporation, to the extent permissible under applicable law,
including, but not limited to, ERISA.
(c) Emcore agrees that it will comply with the continuation
coverage requirements of Section 4980B of the Code and Part 6 of Title I of
ERISA after the Closing Date with respect to all qualified beneficiaries who
had a qualifying event as of or prior to the Closing Date.
(d) Each MODE Employee shall be credited under the
applicable Emcore Plan with all vacation, sick, and other paid time off
accrued by such MODE Employee as of the day prior to the Closing Date.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Emcore and Acquisition Subsidiary.
The obligation of each of Emcore and the Acquisition Subsidiary to consummate
the transactions to be performed by Emcore and the Acquisition Subsidiary in
connection with the Closing and the Merger is subject to the satisfaction, or
waiver by Emcore and the Acquisition Subsidiary, of the following conditions:
(a) MODE shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, necessary for the consummation by MODE and
the Principal MODE Stockholders of the transactions contemplated hereby;
(b) the representations and warranties of MODE and the
Principal MODE Stockholders set forth in Articles II and III above shall have
been true and correct in all material respects when made on the Agreement Date
and shall be true and correct in all material respects as of the Closing Date
as if made as of the Closing Date, except for representations and warranties
made as of a specific date, which shall be true and correct in all material
respects as of such date; it being understood and agreed by Emcore that this
condition shall be deemed satisfied unless any failure to be true and correct
(without giving effect to any materiality or material adverse effect
qualifications or materiality exceptions contained therein), has, or could
reasonably be expected to have, individually or in the aggregate, a MODE
Material Adverse Effect.
(c) MODE shall have performed or complied in all material
respects with their agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Closing;
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(d) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of MODE to own,
operate or control any of its assets or operations, and no such judgment,
order, decree, stipulation or injunction shall be in effect;
(e) MODE shall have delivered to Emcore a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a) through (d) of
this Section 6.1 is satisfied in all respects;
(f) on the Agreement Date, each of Robert Bryan and Thomas
Brennan shall have executed and delivered to Emcore an employment agreement in
the form attached hereto as Exhibit E (each, an "Employment Agreement") and
such employment agreement shall be in full force and effect on the Closing
Date in accordance with its terms;
(g) Emcore and Acquisition Subsidiary shall have received
from Vinson & Elkins, L.L.P., counsel to MODE and the MODE Stockholders, an
opinion in the form attached hereto as Exhibit F addressed to it and dated as
of the Closing Date;
(h) Emcore, the Principal MODE Stockholders and the Escrow
Agent shall have executed and delivered the Escrow Agreement;
(i) MODE shall have delivered to Emcore a certificate of the
Secretary of State of the State of Delaware as of the Closing Date as to the
legal existence and good standing of MODE in Delaware as of the Closing Date;
(j) MODE shall have delivered to Emcore a certificate as of
a date within five business days of the Closing Date as to the tax good
standing of MODE in Delaware;
(k) MODE shall have delivered to Emcore certificates of the
Secretary of MODE attesting to the incumbency of MODE's officers, the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity of the charter
documents of MODE;
(l) MODE shall have delivered to Emcore certificates of
appropriate governmental officials in each state or country in which MODE is
required to qualify to do business as a foreign corporation as to the
qualification and corporate and tax good standing of MODE in each such
jurisdiction;
(m) each MODE Stockholder (other than the Principal MODE
Stockholders) shall have executed and delivered to Emcore an investment
representation letter, in substantially the form of Exhibit G hereto;
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(n) MODE shall have delivered to Emcore resignations of each
director and officer of MODE to be effective immediately upon the Effective
Time;
(o) MODE shall have delivered to Emcore a Termination
Acknowledgement executed by William Patton, in substantially the form of
Exhibit H hereto; and
(p) all actions to be taken by MODE and the MODE
Stockholders in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Emcore and its counsel,
Brobeck, Phleger & Harrison LLP.
6.2 Conditions to Obligations of MODE and Principal MODE
Stockholders. The obligations of MODE and the Principal MODE Stockholders to
consummate the transactions to be performed by them in connection with the
Closing and the Merger are subject to the satisfaction, or waiver by MODE and
the Principal MODE Stockholders, of the following conditions:
(a) the representations and warranties of Emcore and the
Acquisition Subsidiary as set forth in Article IV above shall have been true
and correct in all material respects when made on the Agreement Date and shall
be true and correct in all material respects as of the Closing Date as if made
as of the Closing Date, except for representations and warranties made as of a
specific date, which shall be true and correct in all material respects as of
such date, it being understood and agreed by MODE and the Principal MODE
Stockholders that this condition shall be deemed satisfied unless any failure
to be true and correct (without giving effect to any materiality or material
adverse effect qualifications or materiality exceptions contained therein),
has or could reasonably be expected to have an Emcore Material Adverse Effect;
(b) Emcore shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, necessary for the consummation by Emcore
of the transactions contemplated hereby;
(c) each of Emcore and the Acquisition Subsidiary shall have
performed or complied in all material respects with their agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Closing;
(d) no action, suit or proceeding shall be pending or
threatened by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(e) Emcore shall have delivered to MODE a certificate
(without
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qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified in clauses (a) through (d) of this Section
6.2 is satisfied in all respects;
(f) MODE and the MODE Stockholders shall have received from
Brobeck, Phleger & Harrison LLP, counsel to Emcore, an opinion in the form
attached hereto as Exhibit I, addressed to MODE and the MODE Stockholders and
dated as of the Closing Date;
(g) on the Agreement Date, Emcore shall have executed and
delivered to each of Robert Bryan and Thomas Brennan an employment agreement
in the form attached hereto as Exhibit C and such employment agreement shall
be in full force and effect on the Closing Date in accordance with its terms;
(h) on the Agreement Date, Emcore shall have executed and
delivered to the MODE Stockholders a Registration Rights Agreement (the
"Registration Rights Agreement") in the form attached hereto as Exhibit J and
such Registration Rights Agreement shall be in full force and effect on the
Closing Date in accordance with its terms;
(i) Emcore shall have delivered to MODE certificate of the
Secretary of State of the State of New Jersey of the Closing Date as to the
legal existence and good standing of Emcore in New Jersey as of the Closing
Date;
(j) Emcore shall have delivered to MODE a certificate of the
Secretary of Emcore attesting to the incumbency of the Emcore's officers, the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity of the charter
documents of Emcore; and
(k) all actions to be taken by Emcore in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
MODE.
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ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Indemnification by the Principal MODE Stockholders.
Subject to Section 7.3 hereof, each of the Principal MODE Stockholders shall,
jointly and severally (except with respect to the representations of the
Principal MODE Stockholders contained in Article III as to which the
indemnification obligations herein shall be several and not joint), indemnify
Emcore and the Surviving Corporation, and their respective directors,
officers, employees or agents, or any of their respective successors and
assigns, in respect of, and hold each of them harmless against, any and all
demands, claims, debts, actions, assessments, judgements, settlements,
sanctions, obligations and other liabilities (whether absolute, accrued,
contingent, fixed or otherwise, known or unknown, due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including, without limitation, amounts paid
in settlement, interest, court costs, costs of investigators, fees and
expenses of attorneys, accountants, financial advisors and other experts, and
other expenses of litigation) ("Damages") incurred or suffered by them
resulting from, relating to or constituting any misrepresentation, breach of
warranty or failure to perform any covenant or agreement of MODE or such
Principal MODE Stockholder contained in this Agreement (other than covenants
or agreements of MODE to be performed after the Effective Time) or in the
certificate delivered pursuant to Section 6.1(e).
(b) Indemnification by Emcore. Subject to Section 7.3
hereof, Emcore shall indemnify the MODE Stockholders and their respective
directors, officers, employees or agents in respect of, and hold each of them
harmless against, any and all Damages incurred or suffered by them resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of Emcore or the Acquisition
Subsidiary, as applicable, contained in this Agreement or in the certificate
delivered pursuant to Section 6.2(e).
7.2 Method of Asserting Claims.
(a) All claims for indemnification by an Indemnified Person
pursuant to this Article VII shall be made in accordance with the provisions
of this Section 7.2 and the Escrow Agreement.
(b) A party entitled to indemnification under this Article
VII (the "Indemnified Person") shall give prompt written notification to the
Party obligated to provide such indemnification (the "Indemnifying Person") of
the commencement of any action, suit or proceeding relating to a third party
claim for which indemnification pursuant to this Article VII may be sought;
provided, however, that no delay on the part of the Indemnified Person in
notifying the Indemnifying Person shall relieve the Indemnifying Person from
any liability or
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obligation under this Article VII except to the extent of any damage or
liability caused solely by or arising out of such delay. Within 20 days after
delivery of such notification, the Indemnifying Person may, upon written
notice thereof to the Indemnified Person, assume control of the defense of
such action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Person, provided (i) the Indemnifying Person acknowledges in
writing to the Indemnified Person that the Indemnifying Person shall indemnify
the Indemnified Person with respect to all elements of such action, suit or
proceeding and any damages, fines, costs or other liabilities that may be
assessed against the Indemnified Person in connection with such action, suit
or proceeding, and (ii) the third party seeks monetary damages only. If the
Indemnifying Person does not so assume control of such defense, the
Indemnified Person shall control such defense. The party not controlling such
defense may participate therein at its own expense; provided, that if the
Indemnifying Person assumes control of such defense and the Indemnified Person
is advised by counsel in writing that the Indemnifying Person and the
Indemnified Person may have conflicting interests or different defenses
available with respect to such action, suit or proceeding, the reasonable fees
and expenses of counsel to the Indemnified Person shall be considered
"Damages" for purposes of this Agreement. The party controlling such defense
shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. Except as
provided in Section 7.2(c) below, an Indemnified Person shall not agree to any
settlement of such action, suit or proceeding without the prior written
consent of the Indemnifying Person, which shall not be unreasonably withheld
or delayed. The Indemnifying Person shall not agree to any settlement or the
entry of a judgment in any action, suit or proceeding without the prior
written consent of the Indemnified Person, which shall not be unreasonably
withheld (it being understood that it is reasonable to withhold such consent
if, among other things, the settlement or the entry of a judgment (A) lacks a
complete release of the Indemnified Person for all liability with respect
thereto or (B) imposes any liability or obligation on the Indemnified Person).
7.3 Survival and Limitations.
(a) Unless otherwise specified in this Section 7.3, all
provisions of this Agreement shall survive the Closing and the consummation of
the transactions contemplated hereby and shall continue forever in full force
and effect in accordance with their terms.
(b) The representations and warranties and covenants and
agreements of MODE and the Principal MODE Stockholders set forth in Articles
II, III and V above (other than the representations and warranties of MODE set
forth in Section 2.11 and the indemnification obligations set forth in this
Article VII relating thereto) (i) shall survive the Closing and the
consummation of the transactions contemplated hereby and continue for a period
of six (6) months after the Closing Date and (ii) shall not be affected by any
examination made for or on behalf of Emcore or the knowledge of any of
Emcore's officers, directors, stockholders, employees or agents.
(c) The representations and warranties of MODE set forth in
Section 2.11
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of Article II above and the indemnification obligations set forth in this
Article VII relating thereto (i) shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the
longer of (A) six (6) months after the Closing Date or (B) the earlier of (x)
such time as the Surviving Corporation or Emcore shall have entered into a
license agreement, in form and substance similar to the license agreement
described in Section 2.11 (a) of the Disclosure Schedule, and such license
agreement shall be in full force and effect, or (y) twelve (12) months after
the Closing Date, and (ii) shall not be affected by any disclosure contained
in the Disclosure Schedule or otherwise made by MODE or any other person
relating to the license agreement or any examination made for or on behalf of
Emcore or the knowledge of any of Emcore's officers, directors, stockholders,
employees or agents.
(d) The date on which any particular representation,
warranty or indemnification obligation of the Principal MODE Stockholders
terminates shall be referred to herein and in the Escrow Agreement as the
"Termination Date." If a notice of a claim is given in accordance with the
notice provisions of this Agreement or the Escrow Agreement before the
Termination Date, then (notwithstanding the occurrence of the Termination
Date) the representation, warranty or indemnification obligation applicable to
such claim shall survive until, but only for purposes of, the resolution of
such claim. Neither Emcore nor the Principal MODE Stockholders shall have any
obligation to indemnify or hold each other harmless with respect to any
Damages resulting from, relating to or constituting any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of Emcore,
MODE or a MODE Principal Stockholder, as applicable, unless written notice of
such claim is made pursuant to Section 7.2 hereof prior to the Termination
Date.
(e) The representations and warranties of Emcore set forth
in Article IV above (i) shall survive the Closing and the consummation of the
transactions contemplated hereby and shall continue for a period of six (6)
months after the Closing Date and (ii) shall not be affected by any
examination made for or on behalf of MODE, the MODE Stockholders, or their
respective officers, directors, stockholders, employees or agents, or the
knowledge of any of MODE, the MODE Stockholders, or their respective officers,
directors, stockholders, employees or agents.
(f) Notwithstanding anything in this Agreement to the
contrary, the Principal MODE Stockholders shall not be liable under this
Article VII unless and until the aggregate Damages (without giving effect to
any materiality or material adverse effect qualifications or materiality
exceptions contained in any provision of this Agreement) to the Indemnified
Persons incurred or suffered by them resulting from, relating to or
constituting any misrepresentation, breach of warranty or failure to perform
any covenant or agreement of MODE or the Principal MODE Stockholder contained
in this Agreement or in the certificate delivered pursuant to Section 6.1(e)
exceed $100,000 (at which point the Principal MODE Stockholders shall become
liable for the aggregate Damages, and not just amounts in excess of $100,000).
Except with respect to claims based on willful or intentional fraud, the
obligations (in a claim for indemnification or otherwise) of the Principal
MODE Stockholders to Emcore, the Surviving Corporation and the other
Indemnified Persons for all Damages
-41-
resulting from, relating to or constituting any misrepresentation, breach of
warranty or failure to perform any covenant or agreement of MODE or the
Principal MODE Stockholders shall be limited solely to the Escrow Shares.
(g) Notwithstanding anything in this Agreement to the
contrary, Emcore shall not be liable under this Article VII unless and until
the aggregate Damages (without giving effect to any materiality or material
adverse effect qualifications or materiality exceptions contained in any
provision of this Agreement) to the Indemnified Persons exceed $100,000 (at
which point Emcore shall become liable for the aggregate Damages, and not just
amounts in excess of $100,000). Except with respect to claims based on willful
or intentional fraud, the obligations (in a claim for indemnification or
otherwise) of Emcore to the MODE Stockholders and the other Indemnified
Persons for all Damages resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of Emcore or the Acquisition Subsidiary shall be limited to
$1,500,000, in the aggregate.
(h) The indemnification provisions of this Article VII shall
be the sole and exclusive remedy of the Parties for breaches of the
representations, warranties, covenants and agreements contained in this
Agreement or relating to the transactions contemplated hereby, and each Party
hereby waives any other statutory, equitable or common law remedy any Party
would otherwise have for breach of this Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this
Agreement prior to the Closing Date only as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) Emcore may terminate this Agreement by giving written
notice to MODE and the MODE Stockholders in the event that MODE or the MODE
Stockholders are in breach, and MODE may terminate this Agreement by giving
written notice to Emcore in the event Emcore is in breach, of any material
representation, warranty, or covenant contained in this Agreement, and such
breach is not remedied within 10 days of receipt of written notice thereof;
(c) Emcore may terminate this Agreement by giving written
notice to MODE if the Effective Time shall not have occurred on or before
December 10, 1997 by reason of the failure of any condition precedent under
Section 6.1 above (unless the failure results primarily from a breach by
Emcore of any representation, warranty or covenant contained in this
Agreement); and
-42-
(d) MODE may terminate this Agreement by giving written
notice to Emcore if the Effective Time shall not have occurred on or before
December 10, 1997 by reason of the failure of any condition precedent under
Section 6.2 above (unless the failure results primarily from a breach by MODE
or MODE Stockholders of any representation, warranty or covenant contained in
this Agreement).
8.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 8.1 above, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for
any liability of any Party for breaches of this Agreement).
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following
defined terms is defined in the Section of this Agreement indicated below.
Defined Term Section
- ------------ -------
Accounts Receivable 2.14
Acquisition Subsidiary Introduction
Affiliate 2.13(a)(vi)
Agreement Introduction
Agreement Date Introduction
Balance Sheet Date 2.5
Business Entity 2.8(c)
CERCLA 2.30
Certificates 1.3(d)
Certificate of Merger 1.1
Closing 1.2
Closing Date 1.2
Code 2.8(c)
Conversion Ratio 1.5(a)
Damages 7.1(a)
Delaware Law 1.1
Disclosure Schedule Article II
Effective Time 1.1
Emcore Introduction
Emcore Common Stock Preliminary Statement
Emcore Material Adverse Effect 4.1
Emcore Option Plan 4.2
-43-
Defined Term Section
- ------------ -------
Emcore Options 4.2
Emcore Warrants 4.2
Employees 2.19(a)
Employee Benefit Plan 2.20(a)
Employment Agreement 6.1(f)
Environmental Law or Laws 2.30
ERISA 2.20(a)
ERISA Affiliate 2.20(a)
Escrow Agreement 1.3(e)
Escrow Shares 1.5(c)
Exchange Act 4.6
Financial Statements 2.5
Fundamental Agreements 2.1(b) and 3.1(c)
GAAP 2.5
Governmental Entity 2.3
Indemnified Persons 7.2(b)
Indemnifying Persons 7.2(b)
Initial Shares 1.5(c)
Intellectual Property 2.11(a)
Interim Financial Statements 5.3
Merger 1.1
Merger Shares 1.5(c)
MODE Introduction
MODE Common Stock 2.2
MODE Employee 5.18(a)
MODE Employees 5.15
MODE Series A Stock 2.2
MODE Series B Stock 2.2
MODE Material Adverse Effect 2.6
MODE Preferred Stock 2.2
MODE Shares 1.3(d)
MODE Stock Option Plan 1.13(a)
MODE Stockholders Preliminary Statement
Most Recent Balance Sheet 2.5
Options 2.2
Ordinary Course of Business 2.7
Parties Introduction
Permits 2.22
Personal Property 2.9(c)
Principal MODE Stockholders Introduction
RCRA 2.30
Registration Rights Agreement 6.2(h)
-44-
Defined Term Section
- ------------ -------
SEC 4.6
SEC Documents 4.6
Securities Act 2.2
Security Interest 2.3
Surviving Corporation 1.1
Tax Returns 2.8(a)
Taxes 2.8(a)
Termination Date 7.3(d)
Underlying MODE Common Stock 1.5(a)
Vested Options 2.2
Warrants 2.2
-45-
ARTICLE X
GENERAL PROVISIONS
10.1 Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however,
that any Party may, upon advice of counsel, make any public disclosure that it
believes in good faith is required by law or regulation (in which case the
disclosing Party shall advise the other Parties and provide them with a copy
of the proposed disclosure prior to making the disclosure).
10.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns except for current or former
directors and officers of MODE who shall be third party beneficiaries of the
covenant set forth in Section 5.17.
10.3 Entire Agreement. The Fundamental Agreements and the exhibits
and schedules attached thereto, together with that certain Mutual
Nondisclosure Agreement, dated September 19, 1997, by and between Emcore and
MODE, constitute the entire agreement among the Parties and supersede any
prior understandings, agreements, or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter of the
Fundamental Agreements.
10.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Parties, provided that the Surviving Corporation
may assign its rights, interests and/or obligations under this Agreement to
Emcore.
10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set
-46-
forth below:
If MODE: Copy to:
MicroOptical Devices, Inc. Vinson & Elkins L.L.P.
5601-C Midway Park 1001 Fannin Street
Albuquerque, NM 87109 Suite 2300
Attention: President Houston, TX 77002-6760
Attention: Keith R. Fullenweider
If to the Principal MODE Stockholders: Copy to:
Robert Bryan Vinson & Elkins L.L.P.
4701 Winnetka Ct, NE 1001 Fannin Street
Albuquerque, NM 87111 Suite 2300
Houston, TX 77002-6760
Thomas Brennan Attention: Keith R. Fullenweider
1340 Douglas MacArthur Road, NW
Albuquerque, NM 87107
If to Emcore or the Acquisition
Subsidiary: Copy to:
Emcore Corporation Brobeck, Phleger & Harrison LLP
394 Elizabeth Avenue 1633 Broadway
Somerset, NJ 08873 47th Floor
Attention: Reuben F. Richards, Jr. New York, NY 10019
Attention: Ellen B. Corenswet
Babak Yaghmaie
Any Party may give any notice, request, demand, claim or other communication
hereunder by personal delivery or telecopy, but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the Party for whom it is intended.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
10.8 Governing Law. This Agreement and the legal relations between
the parties hereto will be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the choice of law
principles thereof; provided, however, that the law governing the fiduciary
duties of each party hereto and their respective boards of
-47-
directors and the law governing any other matters of internal corporate
governance of any of the parties hereto shall be the law of their respective
jurisdictions of incorporation.
10.9 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time by a
written instrument signed by all of the Parties. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and this Agreement shall be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.
10.11 Expenses. Each of Emcore and MODE shall bear their own costs
and expenses (including fees and expenses of their respective legal,
accounting and financial advisors) incurred in connection with this Agreement
and the transactions contemplated hereby.
10.12 Specific Performance. Each of the Parties acknowledges and
agrees that one or more of the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which it may be entitled, at law or in equity.
10.13 Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any Party.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
10.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified
-48-
in this Agreement are incorporated herein by reference and made a part hereof.
[SIGNATURES ARE ON THE FOLLOWING PAGE]
-49-
IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan
of Merger as of the date first above written.
EMCORE CORPORATION
By: /s/ Reuben F. Richards, Jr.
----------------------------------------
Reuben F. Richards, Jr., President
EMKR ACQUISITION
CORPORATION
By: /s/ Reuben F. Richards, Jr.
----------------------------------------
Reuben F. Richards, Jr., President
MICROOPTICAL DEVICES, INC.
By: /s/ William B. Patton, Jr.
----------------------------------------
Name: William B. Patton, Jr.
Title: Chairman
/s/ Robert Bryan
---------------------------------------
Name: Robert Bryan
Title: Co-President
/s/ Thomas Brennan
---------------------------------------
Name: Thomas Brennan
Title: Co-President
PRINCIPAL MODE STOCKHOLDERS:
/s/ Robert Bryan
------------------------------------
Robert Bryan
/s/ Thomas Brennan
------------------------------------
Thomas Brennan
-50-
SCHEDULE I
LIST OF PRINCIPAL MODE STOCKHOLDERS
Robert Bryan, Ph.D.
Thomas Brennan
-51-
SCHEDULE II
Merger Shares1
- -------------------------------------------------------------------------------------------------------------------
Number of Initial Number of Escrow Number of Merger
Name Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
Richard L. Hardison 2,658 0 2,658
Robert Bryan 214,688 11,299 225,987
Thomas M. Brennan 214,688 11,299 225,987
William B. Patton, Jr. 86,850 0 86,850
ARCH Venture Fund II, L.P. 329,701 0 329,701
AM Fund I, L.P. 104,034 0 104,034
Murphree New Mexico 173,391 0 173,391
Investors I, L.C.
AMP, Inc. 184,951 0 184,951
Shelby Private Placement 46,238 0 46,238
Group (MODE), LLC
Falcon Technology 23,118 0 23,118
Partners II, L.P.
Harvey B. Cash 5,779 0 5,779
BDM International, Inc. 26,586 0 26,586
Clinton W. Bybee 26,586 0 26,586
- ------------------------ ---------- ------- ----------
Totals 1,439,268 22,598 1,461,866
- ---------
1 Does not include issued and outstanding warrants or options.
-52-
SCHEDULE III
Tom Brennan
Rob Bryan
Marcia Salazar
Monty Seitz
Bill Leasure
Tim Cockerill
Diane Barney
Mike Favaro
Ying Gao
Pat Glarborg
John Joseph
Rich Carson
Tom Probst
Gary Oppedahl
Eddie Zamora
Scott Brooks
Kevin Lear
Randy Hickman
-53-
SCHEDULE IV
NONCOMPETION,
CONFIDENTIAL CONFIDENTIAL
INFORMATION AND INFORMATION AND
INVENTIONS INVENTIONS
NAME AGREEMENT AGREEMENT
- ---- --------- ---------
Tom Brennan X
Rob Bryan X
Bill Leasure X
Tim Cockerill X
Mike Favaro X
Rich Carson X
Gary Oppedahl X
Kevin Lear X
Marcia Salazar
Monty Seitz X
Diane Barney X
Ying Gao X
Pat Glarborg X
John Joseph X
Tom Probst X
Eddie Zamora X
Scott Brooks X
Randy Hickman X
X
-54-
BPH DRAFT
11/25/97
---------
REGISTRATION RIGHTS AGREEMENT
---------
December 5, 1997
TABLE OF CONTENTS
Page
----
1. Registration Rights........................................................................... 1
1.1 Definitions.......................................................................... 1
1.2 Request for Registration............................................................. 2
1.3 Emcore Registration.................................................................. 3
1.4 Obligations of Emcore................................................................ 4
1.5 Furnish Information.................................................................. 5
1.6 Expenses of Demand Registration...................................................... 5
1.7 Expenses of Emcore Registration...................................................... 6
1.8 Underwriting Requirements............................................................ 6
1.9 Delay of Registration................................................................ 6
1.10 Indemnification...................................................................... 6
1.11 Form S-3 Registration................................................................ 8
1.12 Assignment of Registration Rights.................................................... 9
1.13 "Market Stand-Off" Agreement......................................................... 9
1.14 Limitation on Registration........................................................... 10
1.15 Termination of Registration Rights................................................... 10
2. Miscellaneous................................................................................. 10
2.1 Successors and Assigns............................................................... 10
2.2 Governing Law........................................................................ 11
2.3 Counterparts......................................................................... 11
2.4 Titles and Subtitles................................................................. 11
2.5 Notices.............................................................................. 11
2.6 Expenses............................................................................. 11
2.7 Amendments and Waivers............................................................... 11
2.8 Severability......................................................................... 11
2.9 Aggregation of Stock................................................................. 12
2.10 Entire Agreement; Amendment; Waiver.................................................. 12
Schedule A Schedule of Holders
i.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 5th day
of December, 1997, by and among Emcore Corporation, a New Jersey corporation
("Emcore"), the persons or entities listed on Schedule A hereto, each of whom
is herein referred to as a "Holder", and MicroOptical Devices, Inc., a Delaware
corporation ("MODE").
RECITALS
WHEREAS, Emcore and MODE are parties to that certain
Agreement and Plan of Merger of even date herewith (the "Merger Agreement")
pursuant to which MODE will merge with and into Emcore;
WHEREAS, pursuant to the terms of the Merger Agreement and
in order to induce the Holders to consummate the transactions contemplated
thereby, Emcore has agreed to grant certain registration rights to the Holders
as herein set forth.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. Emcore covenants and agrees
as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by Emcore with the SEC.
(c) The term "Holder" means (i) the persons or entities
listed on Schedule A or (ii) any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with Section 1.13
hereof.
(d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance
with the Act, and the declaration or ordering of effectiveness of such
registration statement or document by the SEC.
(f) The term "Registrable Securities" means (i) such number
of shares of Common Stock of Emcore, issuable or issued to the Holders
pursuant to the Merger Agreement, set forth opposite the name of each Holder
on Schedule A hereto or (ii) any shares of Common Stock of Emcore issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of the Emcore Common Stock referenced in
(i) above, excluding in all cases, however, any Registrable Securities sold by
a person in a transaction in which his rights under this Section 1 are not
assigned.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
All defined terms used, and not otherwise defined herein,
shall have the meaning ascribed to such terms in the Merger Agreement.
1.2 Request for Registration.
(a) Subject to Section 1.14 below, in the event that Emcore
(i) has not filed a registration statement for the sale of its Common Stock
within ninety (90) days after the Closing Date and (ii) receives, at any time
thereafter, a written request from the Holders of the Registrable Securities
then outstanding that Emcore file a registration statement under the Act
covering the registration of at least 35% of the Registrable Securities then
outstanding, then Emcore shall (i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and (ii) effect as
soon as practicable, and in any event within 90 days of the receipt of such
request, the registration under the Act of all Registrable Securities which
the Holders request to be registered, subject to the limitations of subsection
1.2(b), within twenty (20) days of the mailing of such notice by Emcore in
accordance with Section 2.5.
(b) If the Holders initiating request hereunder (the
"Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise Emcore as a
part of their request made pursuant to subsection 1.2(a) and the Company shall
include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by Emcore and shall be reasonably
acceptable to a majority in interest of the Holders. In such event, the right
of any Holder to include his Registrable Securities in such registration shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's
2.
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with Emcore as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating
Holders, in proportion (as nearly as practicable) to the amount of Registrable
Securities owned by each Holder.
(c) Notwithstanding the foregoing, if Emcore shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of Emcore stating that in
the good faith judgment of the Board of Directors of Emcore, it would be
detrimental to Emcore and its shareholders for such registration statement to
be filed and it is therefore essential to defer the filing of such
registration statement, Emcore shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after
receipt of the request of the Holders; provided, however, that Emcore may not
utilize this right more than once in any twelve-month period.
(d) In addition, Emcore shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
(i) After Emcore has effected one
registration pursuant to this Section 1.2 and such registration has been
declared or ordered effective;
(ii) During the period starting with the date
sixty (60) days prior to Emcore's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective
date of, a registration subject to Section 1.3 hereof; provided that Emcore is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 1.11 below.
1.3 Emcore Registration. Subject to Section 1.14 below, if
(but without any obligation to do so) Emcore proposes to register (including
for this purpose a registration effected by Emcore for shareholders other than
the Holders) any of its stock or other securities under the Act in connection
with the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in an
Emcore stock plan, a registration on any form which does not include
substantially the same
3.
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), Emcore shall, at such time,
promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by Emcore in accordance with Section 2.5, Emcore shall, subject to
the provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.4 Obligations of Emcore. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, Emcore
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
twenty (120) days or until the distribution contemplated in the Registration
Statement has been completed; provided, however, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of Emcore; and (ii) in the
case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
4.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that Emcore shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by Emcore are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.
(i) Cause the Registration Statement to include in the plan
of distribution (and other relevant sections) the names of the distributees or
transferees of any Holders that are limited partnerships or limited liability
companies provided in writing to Emcore so as to permit such transferees and
distributees to make sales pursuant to such registration statement.
1.5 Furnish Information. It shall be a condition precedent
to the obligations of Emcore to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to Emcore such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.6 Expenses of Demand Registration. Emcore shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to a registration
pursuant to Section 1.2 for each Holder (which right may be assigned as
provided in Section 1.13), including (without limitation) all registration,
filing, and qualification fees, printers, legal and accounting fees relating
or apportionable
5.
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities.
1.7 Expenses of Emcore Registration. Emcore shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.13), including (without limitation) all registration,
filing, and qualification fees, printers, legal and accounting fees relating
or apportionable thereto, but excluding underwriting discounts and commissions
relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of Emcore's capital stock, Emcore
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between Emcore and the underwriters selected by
it, and then only in such quantity as the underwriters determine in their sole
discretion will not, jeopardize the success of the offering by Emcore. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by Emcore that the underwriters determine in their sole
discretion is compatible with the success of the offering, then Emcore shall
be required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders according
to the total amount of securities entitled to be included therein owned by
each Holder or in such other proportions as shall mutually be agreed to by
such Holders.
1.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, Emcore will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein
a material fact
6.
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by Emcore of the Act,
the 1934 Act or any rule or regulation promulgated under the Act or the 1934
Act; and Emcore will pay to each such Holder, underwriter or controlling
person any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of Emcore, nor shall Emcore be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each Holder will
indemnify and hold harmless Emcore, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls Emcore within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act or the 1934 Act to the extent and
only to the extent such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation that occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration, and each such
Holder will pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.10(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
subsection 1.10(b) exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified
7.
party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.10.
(d) If the indemnification provided for in this Section 1.10
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission, provided that,
in no event shall the amount contributed by any Holder under this subsection
1.10(d) exceed the gross proceeds from the offering received by such Holder.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of Emcore and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in
a registration statement under this Section 1, and otherwise.
1.11 Form S-3 Registration. Subject to Section 1.14 below,
in case Emcore shall receive from any Holder or Holders a written request or
requests that Emcore effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, Emcore will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and
8.
distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 15 days after
receipt of such written notice from Emcore; provided, however, that Emcore
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this section 1.11: (1) if Form S-3 is not available
for such offering by the Holders; (2) if the Holders, together with the
holders of any other securities of Emcore entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters'
discounts or commissions) of less than $10,000,000; (3) if Emcore shall
furnish to the Holders a certificate signed by the President of Emcore stating
that in the good faith judgment of the Board of Directors of Emcore, it would
be seriously detrimental to Emcore and its shareholders for such Form S-3
Registration to be effected at such time, in which event Emcore shall have the
right to defer the filing of the Form S-3 registration statement for a period
of not more than 90 days after receipt of the request of the Holder or Holders
under this Section 1.11; provided, however, that Emcore shall not utilize this
right more than once in any twelve month period; (4) if Emcore has, within the
twelve (12) month period preceding the date of such request, already effected
one registration on Form S-3 for the Holders pursuant to this Section 1.11; or
(5) in any particular jurisdiction in which Emcore would be required to
qualify to do business or to execute a general consent to service of process
in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, Emcore shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to Section 1.12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling
Holder or Holders and counsel for Emcore, shall be borne pro rata by the
Holder or Holders participating in the Form S-3 Registration. Registrations
effected pursuant to this Section 1.12 shall not be counted as demands for
registration or registrations effected pursuant to Sections 1.2 or 1.3,
respectively.
1.12 Assignment of Registration Rights. The rights to cause
Emcore to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee
or assignee of such securities, provided: (a) Emcore is furnished with prior
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject
to the terms and conditions of this Agreement, including without limitation
the provisions of Section 1.13 below; and (c) such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
9.
1.13 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration specified by Emcore and an underwriter of
common stock or other securities of Emcore, following the effective date of a
registration statement of Emcore filed under the Act, it shall not, to the
extent requested by Emcore and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of Emcore held
by it at any time during such period except common stock included in such
registration; provided, however, that such market stand-off time period shall
not exceed (180) days and all officers and directors of the Company enter into
similar agreements.
In order to enforce the foregoing covenant, Emcore may
impose stop-transfer instructions with respect to the Registrable Securities
of each Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.
1.14 Limitation on Registration. Emcore shall have no
obligation to register any Registrable Securities under Sections 1.2, 1.3 or
1.11 of this Agreement in excess of 730,000 shares of Registrable Securities.
In the event that the number of shares of Registrable Securities to be
registered exceeds 730,000 shares of Registrable Securities, then the number
of shares of Registrable Securities to be registered pursuant to this
Agreement shall be allocated among all participating Holders as follows: (i)
all participating Holders holding Registrable Securities that prior to the
consummation of the transactions contemplated by the Merger Agreement were
evidenced by shares of MODE common stock shall be entitled to include all of
the Registrable Securities held by such Holders in any such registration and
(ii) participating Holders holding Registrable Securities that prior to the
consummation of the transactions contemplated by the Merger Agreement were
evidenced by shares of MODE preferred stock shall be entitled to include such
number of shares of Registrable Securities as are permissible hereunder in
proportion (as nearly as practicable) to the amount of Registrable Securities
owned by each such participating Holder.
1.15 Termination of Registration Rights. The right of any
Holder to request registration or inclusion in any registration pursuant to
Section 1 shall terminate if (i) Emcore has registered 730,000 shares of
Registrable Securities or (ii) all shares of Registrable Securities held by
such Holder may immediately be sold under Rule 144 during any 90-day period.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any
10.
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements
among New York residents entered into and to be performed entirely within New
York.
2.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice
to the other parties.
2.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
2.7 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Emcore and the holders of a
majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of
all such Registrable Securities, and Emcore.
2.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
11.
2.9 Aggregation of Stock. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
2.10 Entire Agreement; Amendment; Waiver. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. This Agreement shall supersede all prior agreements with
regard to the subjects hereof and thereof in their entirety, including,
without limitation, the registration rights contained in that certain Amended
and Restated Registration Rights Agreement, dated July 16, 1996 by and among
MODE, the Existing Stockholders (as defined therein) and the Purchasers (as
defined therein), as amended, which prior agreements shall be null, void and
of no further force or effect as of the date hereof.
12.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
EMCORE CORPORATION
By: /s/ Reuben F. Richards, Jr.
--------------------------------------
Reuben F. Richards, Jr., President
Address: 394 Elizabeth Ave.
Somerset, New Jersey 08873
HOLDERS
By:
------------------------------------
Address:
------------------------------------
------------------------------------
MICROOPTICAL DEVICES, INC.
By: /s/ Robert Bryan
------------------------------------
Name:
Title:
Address: 5601-C Midway Park Place, N.E.
Albuquerque, New Mexico 87109
13.
SCHEDULE A
NUMBER
OF SHARES
OF NUMBER
NAME EMCORE COMMON STOCK OF SHARES
OF ISSUED TO SUCH OF REGISTRABLE
HOLDER HOLDER SECURITIES
- ------ ------ ----------
Richard L. Hardison 2,658 665
Robert Bryan 225,987 56,497
Thomas M. Brennan 225,987 56,497
William B. Patton, Jr. 86,850 21,713
ARCH Venture Fund II, L.P. 329,701 309,762
AM Fund I, L.P. 104,034 104,034
Murphree New Mexico 173,391 173,391
Investors I, L.C.
AMP, Inc. 184,951 184,951
Shelby Private Placement 46,238 46,238
Group (MODE), LLC
Falcon Technology 23,118 23,118
Partners II., L.P.
Harvey B. Cash 5,779 5,779
BDM International, Inc. 26,586 6,647
Clinton W. Bybee 26,586 6,647
- ------------------------- --------- -------
Totals 1,461,866 995,939
14.
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as
of December 5, 1997, by and among Emcore Corporation, a New Jersey
corporation ("Emcore"), the stockholders of MicroOptical Devices, Inc., a
Delaware corporation ("MODE"), identified on Schedule I hereto (collectively,
the "Principal MODE Stockholders") and First Union National Bank (the "Escrow
Agent"). Emcore and the Principal MODE Stockholders are sometimes referred to
herein as the "Interested Parties."
WHEREAS, Emcore, EMKR Acquisition Corporation, a Delaware
corporation ("Acquisition Subsidiary"), MODE and the Principal MODE
Stockholders have entered into an Agreement and Plan of Merger dated December
5, 1997 (the "Merger Agreement"), pursuant to which Acquisition Subsidiary
will merge with and into MODE, with MODE as the surviving corporation of the
merger; and
WHEREAS, the Merger Agreement provides that an escrow
account will be established to secure the Principal MODE Stockholders'
indemnification obligations to the Indemnified Persons (as defined in Article
VII the Merger Agreement) under the Merger Agreement on the terms and
conditions set forth herein; and
WHEREAS, the parties hereto desire to establish the terms
and conditions pursuant to which such escrow account will be established and
maintained;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement
and not otherwise defined shall have the meanings given them in the Merger
Agreement.
2. Escrow Committee. The Principal MODE Stockholders will
act as the escrow committee (the "Escrow Committee"), with full power and
authority, to act as their attorney-in-fact on behalf of such Principal MODE
Stockholders to contest, settle, compromise or otherwise dispose of any claim
made by any Indemnified Person in accordance with Article VII of the Merger
Agreement and the terms hereof, including without limitation to make, execute,
acknowledge and deliver all stock certificates and powers, waivers, receipts,
notices, instructions, certificates and other documents in connection with the
foregoing. No further documentation shall be required to evidence such
appointment, and such power of attorney shall be coupled with an interest,
thereby confirming such appointment as irrevocable. The Escrow Committee shall
be empowered to act on behalf of the Principal MODE Stockholders with respect
to all matters arising under Article VII of the Merger Agreement and the terms
hereof. If any member of the Escrow Committee shall die, become disabled or
otherwise be unable or unwilling to fulfill his responsibilities hereunder,
the remaining members of the Escrow Committee shall select a
replacement member. Such remaining members of the Escrow Committee shall
notify Emcore and the Escrow Agent in writing of any change in the composition
of the Escrow Committee.
3. Consent of Principal MODE Stockholders. Pursuant to the
Merger Agreement, the Principal MODE Stockholders have consented to the
establishment of this escrow to secure the Principal MODE Stockholders'
indemnification obligations under Article VII of the Merger Agreement in the
manner set forth herein.
4. Escrow and Indemnification.
(a) Escrow of Shares. On the Closing Date, Emcore
shall deposit, on behalf of the MODE Stockholders, with the Escrow Agent a
certificate for the number of Escrow Shares specified in Section 1.5 of the
Merger Agreement, issued in the name of the Escrow Agent or its nominee. The
Escrow Agent agrees to accept delivery of the Escrow Shares and to hold the
Escrow Shares in an escrow account (the "Escrow Account"), subject to the
terms and conditions of this Agreement. The Escrow Account shall not be an
interest bearing account and none of the cash, if any, held in the Escrow
Account shall be invested.
(b) Indemnification. The Principal MODE
Stockholders have agreed in Article VII of the Merger Agreement to indemnify
and hold harmless the Indemnified Persons from and against specified Damages.
In no event shall there be any recovery by Emcore against the Escrow Shares
for any Damages in respect of which a written claim is not made by Emcore on
or prior to the applicable Termination Date (as defined in the Merger
Agreement) with respect to such claim. The Escrow Shares shall be security for
the foregoing obligations of the Principal MODE Stockholders, subject to the
limitations, and in the manner provided, in this Agreement and the Merger
Agreement.
(c) Distributions and Dividends. All dividends and
other distributions on Escrow Shares, when and if received by the Escrow
Agent, shall be remitted and paid by the Escrow Agent directly to the MODE
Stockholders in accordance with their proportionate interests and shall not be
subject to this Agreement or any indemnification claims of Emcore under this
Agreement. Additional shares of Emcore issued on or with respect to the Escrow
Shares as a result of stock splits, stock dividends or other similar capital
adjustments to, or recapitalizations on, the Escrow Shares shall be retained
in the Escrow Account subject to the terms hereof and shall constitute Escrow
Shares.
(d) Voting of Shares. All voting rights with
respect to Escrow Shares may be exercised by the MODE Stockholders in
accordance with their proportionate interests therein, and the Escrow Agent
shall from time to time execute and deliver to the MODE Stockholders such
proxies, consents, or other documents as may be necessary to enable to the
MODE Stockholders to exercise such rights. In the absence of any exercise of
2
such voting rights with respect to Escrow Shares by the MODE Stockholders, the
Escrow Agent shall not vote any of the Escrow Shares.
(e) Transferability. The interest of the Principal
MODE Stockholders in the Escrow Shares and any other property comprising the
Escrow Account (collectively with the Escrow Shares, the "Escrow Property")
shall not be assignable or transferable.
5. Administration of Escrow Account for Indemnification
Claims. The Escrow Agent shall administer the Escrow Account as follows:
(a) If an Indemnified Person has incurred or
suffered Damages for which it is entitled to indemnification under Section
7.1(a) of the Merger Agreement, the Indemnified Person shall, prior to the
Termination Date with respect to a particular claim, give written notice of
such claim (a "Claim Notice") to the Escrow Committee and the Escrow Agent.
Each Claim Notice shall state the amount of Claimed Damages (the "Claimed
Amount") and the basis for such claim.
(b) Claims for indemnification involving a claim or
legal proceeding by a third party shall be made in accordance with the
procedures set forth in Article VII of the Merger Agreement and the provisions
of this Section 5. For indemnification claims not involving any claim or legal
proceeding by a third party, the procedures herein shall apply. Within 20 days
after delivery of a Claim Notice, the Escrow Committee shall provide to the
Indemnified Person, with a copy to the Escrow Agent, a written response (the
"Response Notice") in which the Escrow Committee shall: (i) agree that Escrow
Property having a Fair Market Value (as computed pursuant to Section 7 below)
equal to the full Claimed Amount may be released from the Escrow Account to
the Indemnified Person, (ii) agree that Escrow Property having a Fair Market
Value equal to part, but not all, of the Claimed Amount (the "Agreed Amount")
may be released from the Escrow Account to the Indemnified Person, or (iii)
contest that any of the Escrow Property may be released from the Escrow
Account to the Indemnified Person. The Escrow Committee may contest the
release of Escrow Property having a Fair Market Value equal to all or a
portion of the Claimed Amount only based upon a good faith belief that all or
such portion of the Claimed Amount does not constitute Damages for which the
Indemnified Person is entitled to indemnification under Article VII of the
Merger Agreement. If no Response Notice is delivered by, and received by the
Escrow Agent from, the Escrow Committee within such 20-day period, the Escrow
Committee shall be deemed to have agreed that Escrow Property having a Fair
Market Value equal to all of the Claimed Amount may be released to the
Indemnified Person from the Escrow Account.
(c) If the Escrow Committee in the Response Notice
agrees (or is deemed to have agreed) that Escrow Property having a Fair Market
Value equal to all of the Claimed Amount may be released from the Escrow
Account to the Indemnified Person, the Escrow Agent shall, promptly following
the earlier of the required delivery date for the
3
Response Notice or the delivery of the Response Notice, transfer, deliver and
assign to the Indemnified Person the Escrow Property having a Fair Market
Value equal to the Claimed Amount (or such lesser amount of Escrow Property as
is then held in the Escrow Account).
(d) If the Escrow Committee in the Response Notice
agrees that Escrow Property having a Fair Market Value equal to part, but not
all, of the Claimed Amount may be released from the Escrow Account to the
Indemnified Person, the Escrow Agent shall promptly following the delivery of
the Response Notice transfer, deliver and assign to the Indemnified Person
Escrow Property having a Fair Market Value equal to the Agreed Amount (or such
lesser amount of Escrow Property as is then held in the Escrow Account).
(e) If the Escrow Committee in the Response Notice
contests the release of Escrow Property having a Fair Market Value equal to
all or part of the Claimed Amount (the "Contested Amount"), the Escrow
Committee and the Indemnified Person shall attempt promptly and in good faith
to agree upon the rights of the parties with respect to the Contested Amount.
If the Escrow Committee and the Indemnified Person should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and delivered to the Escrow Agent and, if such agreement provides that
all or a portion of the Contested Amount is to be paid to the Indemnified
Person, the Escrow Agent shall transfer, assign and deliver to the Indemnified
Person from the Escrow Account an amount of Escrow Property having a Fair
Market Value equal to the amount so agreed. If no such agreement can be
reached after good faith negotiation over a period of 15 days (or such longer
period as the Indemnified Person and the Escrow Committee may mutually agree),
the matter shall be settled by binding arbitration in New York. All claims
shall be settled by a single arbitrator mutually agreeable to the Indemnified
Person and the Escrow Committee, or if they cannot agree on a single
arbitrator in 15 days, by three arbitrators, in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA Rules"), as follows: If a single arbitrator has not been mutually agreed
upon, the Escrow Committee and the Indemnified Person shall each designate one
arbitrator within 45 days of the delivery of the Escrow Committee's Response
Notice contesting the Claimed Amount. The Escrow Committee and the Indemnified
Person shall cause such designated arbitrators mutually to agree upon and
designate a third arbitrator; provided, however, that (i) failing such
agreement within 75 days of delivery of the Escrow Committee's Response
Notice, the third arbitrator shall be appointed in accordance with the AAA
Rules, and (ii) if either the Escrow Committee or the Indemnified Person fail
to timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. The Escrow Committee on the one hand, and the
Indemnified Person, on the other hand, shall pay the fees and expenses of
their respectively designated arbitrators and shall bear equally the fees and
expenses of the third arbitrator (or of the sole arbitrator, in the event a
single arbitrator decides the matter). The Escrow Committee and the
Indemnified Person shall cause the arbitrators to decide the matter to be
arbitrated pursuant hereto within 60 days after the appointment of the last
arbitrator. The arbitrators' decision shall relate solely to whether the
4
Indemnified Person is entitled to receive the Contested Amount (or a portion
thereof) pursuant to the applicable terms of the Merger Agreement and this
Agreement. The final decision of the arbitrator, or a majority of the
arbitrators in the case of three arbitrators, shall be furnished to the Escrow
Committee and the Indemnified Person in writing and shall constitute a
conclusive determination of the issue in question, binding upon the Principal
MODE Stockholders and the Indemnified Person, and shall not be contested by
any of them. Such decision may be used in a court of law only for the purpose
of seeking enforcement of the arbitrators' award. The Escrow Committee and the
Indemnified Person shall deliver a memorandum to the Escrow Agent setting
forth such arbitrators decision in accordance with the second sentence of this
paragraph.
(f) After delivery of a Response Notice that the
Claimed Amount is contested by the Escrow Committee, the Escrow Agent shall
continue to hold in the Escrow Account an amount of Escrow Property having a
Fair Market Value sufficient to cover the Contested Amount (up to the amount
of Escrow Property then available in the Escrow Account), notwithstanding the
occurrence of the Release Date (as defined in Section 6(a) below), until (i)
delivery of a copy of a settlement agreement executed by the Indemnified
Person and the Escrow Committee setting forth instructions to the Escrow Agent
as to the release of Escrow Property, if any, that shall be made with respect
to the Contested Amount or (ii) delivery of a copy of the final award of the
arbitrator, or a majority of the arbitrators in the case of three arbitrators,
and the memo referenced in the last sentence of the preceding paragraph
setting forth instructions to the Escrow Agent as to the release of Escrow
Property, if any, that shall be made with respect to the Contested Amount. The
Escrow Agent shall thereupon release Escrow Property from the Escrow Account
(up the amount of Escrow Property then available in the Escrow Account) in
accordance with such agreement or instructions.
(g) If, as a result of any third party claim or
legal proceeding subject to the indemnification procedures set forth in the
Merger Agreement, any settlement has been entered into, or any judgment
entered in favor of any third party (which is not subject to further appeal),
the Indemnified Person may give notice of the resulting Damages to the Escrow
Agent, together with a copy of the settlement or judgement and the Escrow
Agent shall, promptly following the receipt of such notice, transfer, deliver
and assign to the Indemnified Person an amount of Escrow Property having a
Fair Market Value equal to such Damages (up to the amount of Escrow Property
then available in the Escrow Account).
6. Release of Escrow Property.
(a) Promptly after receipt of a notice, jointly
executed by the Escrow Committee and Emcore, that the indemnification
obligations of the Principal MODE Stockholders pursuant to Article VII of the
Merger Agreement have terminated (the "Release Date"), the Escrow Agent shall
deliver and/or submit for transfer, delivery and assignment to
5
Principal MODE Stockholders the balance of the Escrow Property then held in
escrow (the "Escrow Balance").
(b) Notwithstanding the foregoing, if on the
Release Date an Indemnified Person has previously given any Claim Notices that
have not then been resolved in accordance with Section 5 above, the Escrow
Agent shall retain in the Escrow Account an amount of the Escrow Balance
having a Fair Market Value equal to the aggregate Claimed Amount covered by
all such Claim Notices that have not then been resolved. Any Escrow Property
retained in escrow pursuant to this Section 6(b) shall be disbursed in
accordance with the terms of the resolution of the claims relating to any of
the Escrow Property retained hereunder and the balance of such Escrow Property
shall be distributed to the Principal MODE Stockholders promptly following the
resolution of all such claims.
7. Valuation of Escrow Property. For purposes of this
Agreement, the Fair Market Value of the Escrow Shares shall be $19.39 per
share (regardless of the actual trading prices for Emcore Common Stock), with
appropriate adjustment to take into account any stock split, reverse stock
split, stock dividend, recapitalization or other similar capital adjustments
with respect to Escrow Shares. The Fair Market Value of all other Escrow
Property, if any, shall be determined by the mutual agreement of Emcore and
the Escrow Committee. In the event that the Escrow Committee and Emcore can
not in good faith agree upon the Fair Market Value of such other Escrow
Property, the matter shall be settled by binding arbitration in New York
pursuant to the procedures set forth in Section 6(e) above.
8. Fees and Expenses of the Escrow Agent. Emcore hereby
agrees to pay to the Escrow Agent its reasonable fees and expenses, including
attorneys fees, travel expenses, postal and delivery charges, and all other
out-of-pocket expenses, in accepting and performing its appointment as escrow
agent hereunder.
9. General Terms and Standards Regarding the Escrow Agent.
Notwithstanding any terms of this Agreement to the contrary,
each term of this Agreement, including without limitation each of the stated
duties and responsibilities of the Escrow Agent set forth herein, shall be
subject to the following terms and conditions:
(a) The duties, responsibilities and obligations of
the Escrow Agent shall be limited to those expressly set forth in this
Agreement (and the duty to exercise reasonable care in the physical
safekeeping of any property held in escrow hereunder), and no implied duties,
responsibilities or obligations shall be read into this Agreement against the
Escrow Agent. Without limiting the generality of the foregoing, the Escrow
Agent shall have no duty to take action to preserve or exercise rights in any
property held by it hereunder (including, without limitation, against prior
parties or otherwise).
6
(b) The Escrow Agent shall not be subject to, bound
by, charged with notice of or be required to comply with or interpret any
agreement or document (including without limitation the Merger Agreement)
between or among the Interested Parties (whether or not reference to any such
other agreement or documents expressed herein) other than this Agreement.
(c) The Escrow Agent shall in no instance be under
any duty to give any property held by it hereunder any greater degree of care
than it gives its own similar property. The Escrow Agent shall not be required
to invest any funds held hereunder, and shall not be obligated to pay interest
on uninvested funds. All amounts received by the Escrow Agent (and any credits
to the Escrow Account) shall be conditional upon collection (and actual
receipt by the Escrow Agent of final payment). In no event shall the Escrow
Agent have any obligation to advance funds.
(d) The Escrow Agent may rely upon, and shall be
protected in acting or refraining from acting upon, any written notice,
instruction, statement, request; waiver, order, judgment, certification,
consent, receipt or other paper or document furnished to it (not only as to
genuineness, but also as to its due execution and validity, the genuineness of
signatures appearing thereon and as to the truth and accuracy of any
information therein contained), which it in good faith believes to be genuine
and signed or presented by the proper person.
(e) Neither the Escrow Agent nor any of its
directors, officers or employees shall be liable to anyone for any error of
judgment, or for any act done or step taken or omitted to be taken by it or
any of its directors, officers or employees, or for any mistake of fact or
law, or for anything which it, or any of its directors, officers or employees,
may do or refrain from doing in connection with or in the administration of
this Agreement, unless and except to the extent the same constitutes gross
negligence, bad faith or wilful misconduct on the part of the Escrow Agent. In
no event shall the Escrow Agent be liable for any indirect, punitive, special
or consequential damages, or any amount in excess of the value of the Escrow
Property (as of the date of the action or omission giving rise to liability).
(f) The Escrow Agent may consult with, and obtain
advice from, legal counsel (including, without limitation, in-house counsel)
with respect to any question as to any of the provisions hereof or its duties
hereunder, or any matter relating hereto, and the opinion of such counsel
shall be full and complete authorization and protection in respect of any
action reasonably taken, suffered or omitted by the Escrow Agent in good faith
in accordance with the opinion and directions of such counsel. Emcore shall
promptly pay, upon demand, the reasonable fees and expenses of such counsel.
(g) The Escrow Agent shall not be deemed to have
notice of any fact, claim or demand with respect hereto unless actually known
by an officer charged with
7
responsibility for administering this Agreement or unless in writing received
by the Escrow Agent and making specific reference to this Agreement.
(h) No provision of this Agreement shall require
the Escrow Agent to expend or risk its own funds, or to take any legal or
other action hereunder which might in its judgment involve it in, or require
it to incur in connection with the performance of its duties hereunder, any
expense or any financial liability unless it shall be furnished with
indemnification acceptable to it.
(i) Any permissive right of the Escrow Agent to
take any action hereunder shall not be construed as duty.
(j) All indemnifications contained in this
Agreement shall survive the resignation or removal of the Escrow Agent, and
shall survive the termination of this Agreement.
(k) The Escrow Agent is not responsible for the
recitals appearing in this Agreement. The recitals shall be deemed to be
statements of the Interested Parties to this Agreement.
(l) The Escrow Agent has no responsibility for the
sufficiency of this Agreement for any purpose. Without limiting the foregoing,
if any security interest is referred to herein, the Escrow Agent shall have no
responsibility for, and makes no representation or warranty as to, the
creation, attachment or perfection of any such security interest or the
sufficiency of this Agreement therefor.
(m) Nothing in this Agreement shall obligate the
Escrow Agent to qualify to do business or act in any jurisdiction in which it
is not presently qualified to do business, or be deemed to impose upon the
Escrow Agent the duties of a trustee. The duties of the Escrow Agent under
this Agreement are strictly ministerial in nature.
(n) In no event shall the Escrow Agent have any
liability for any failure or inability of any of the Interested Parties to
perform or observe his or its duties under the Agreement, or by reason of a
breach of this Agreement by either of the Interested Parties. In no event
shall the Escrow Agent be obligated to take any action against any of the
Interested Parties to compel performance hereunder.
(o) The Escrow Agent shall in no instance be
obligated to commence, prosecute or defend any legal proceedings in connection
herewith. The Escrow Agent shall be authorized and entitled, however, in any
instance to commence, prosecute or defend any legal proceedings in connection
herewith, including without limitation any proceeding it may deem necessary to
resolve any matter or dispute, to obtain a necessary
8
declaration of rights, or to appoint a successor upon resignation (and after
failure by the Interested Parties to appoint a successor, as provided in
Section 13).
(p) Whenever the terms hereof call for any notice,
payment or other action on a day which is not a business day, such payment or
action may be taken, or such notice given, as the case may be, on the next
succeeding business day. As used herein, "business day" shall mean any day
other than a Saturday or Sunday, or any other day on which the Escrow Agent is
closed for business.
(q) In the event of any ambiguity or uncertainty
under this Agreement, or in any notice, instruction, or other communication
received by the Escrow Agent hereunder, the Escrow Agent may, in its
reasonable discretion, refrain from taking action, and may retain the Escrow
Property, until and unless it receives written instruction signed by all
Interested Parties, or a decision by a court of competent jurisdiction which
eliminates such uncertainty or ambiguity.
(r) If at any time Escrow Agent is served with any
judicial or administrative order, judgement, decree, writ or other form of
judicial administrative process which in any way relates to or affects the
Escrow Property (including but not limited to orders of attachment or
garnishment or other forms of levies or injunctions or stays relating to the
Escrow Property), Escrow Agent is authorized to comply therewith in any manner
as it or its legal counsel reasonably deems appropriate; and if the Escrow
Agent complies with any such judicial or administrative order, judgement,
decree, writ or other form of judicial or administrative process, Escrow Agent
shall not be liable to any of the parties hereto or to any other person or
entity notwithstanding that though such order, judgment, decree, writ or
process may be subsequently modified, annulled, set aside, vacated, found to
have been without proper jurisdiction, or otherwise determined to have been
without legal force or effect.
(s) The Escrow Agent shall have no liability for
the actions or omissions of any transfer agent, book-entry depository,
nominee, correspondent, subagent or subcustodian, except to the extent that
such action or omission of any transfer agent, book-entry depository, nominee,
correspondent, subagent or subcustodian was caused by the Escrow Agent's own
gross negligence, bad faith or willful misconduct.
10. Indemnification.
(a) General. Each of Emcore and the Principal MODE
Stockholders, jointly and severally, hereby covenants and agrees to indemnify
the Escrow Agent for, and to defend and hold harmless the Escrow Agent from
and against, any and every loss, liability, damage, claim, cost and expense of
any nature incurred or suffered by the Escrow Agent and arising out of or in
connection with this Agreement or the administration of this Agreement or the
performance or observance by the Escrow Agent of
9
its responsibilities or services under this Agreement (including but not
limited to reasonable attorneys fees and other costs and expenses of defending
or preparing to defend against any claim or liability), unless and except to
the extent such loss, liability, damage, cost or expense shall be caused by
the Escrow Agent's own willful misconduct, bad faith or gross negligence.
(b) Tax-Related Matters. Each of Emcore and the
Principal MODE Stockholders, jointly and severally, agree to assume any and
all obligations imposed now or hereafter by any applicable tax law with
respect to the payment of Escrow Property under this Agreement, and, without
limiting the generality of Section 9(a) above, hereby agree to indemnify and
hold the Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Agreement.
Emcore and the Principal MODE Stockholders undertake to instruct the Escrow
Agent in writing with respect to the Escrow Agent's responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Agreement. Each of Emcore and the Mode Stockholders,
jointly and severally, agrees to indemnify and hold the Escrow Agent harmless
from any liability on account of taxes, assessments or other governmental
charges, including without limitation the withholding or deduction or the
failure to withhold or deduct same, and any liability for failure to obtain
proper certifications or to properly report to governmental authorities, to
which the Escrow Agent may be or become subject in connection with or which
arises out of this Agreement, including costs and expenses (including
reasonable legal fees), interest and penalties. The Interested Parties shall
each promptly provide to Escrow Agent with appropriate IRS Forms W-9 for
taxpayer identification number certifications, or Forms W-8 for nonresident
alien certifications in connection with any payments to be made to them.
11. Termination. This Agreement shall terminate upon the
later of the Release Date or the distribution by the Escrow Agent of all of
the Escrow Account in accordance with this Agreement; provided that the
provisions of Sections 8 and 9 above shall survive such termination.
12. Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly delivered
three business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, or one business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
10
If to Emcore: Copy to:
Emcore Corporation Brobeck, Phleger & Harrison LLP
394 Elizabeth Avenue 1633 Broadway
Somerset, NJ 08873 47th Floor
Attn: Reuben F. Richards, Jr. New York, NY 10019
Attn: Ellen B. Corenswet, Esq.
Babak Yaghmaie, Esq.
If to the Principal MODE
Stockholders: Copy to:
Robert Bryan Vinson & Elkins L.L.P.
Co-President and Founder 1001 Fannin Street
Suite 2300
Thomas Brennan Houston, TX 77002-6760
Co-President and Founder Attn: Keith R. Fullenweider, Esq.
If to the Escrow Agent:
First Union National Bank
765 Broad Street
Newark, New Jersey
Attn: Corporate Trust Administrator
Any party may give any notice, request, demand, claim or
other Communication hereunder by personal delivery or telecopy, but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the party for whom
it is intended. Any party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth. Copies of any
notice, request, demand, claim or other communication hereunder by personal
delivery or telecopy given to the Escrow Agent by either party, shall be
delivered to the other party as soon thereafter as practicable.
13. Successor Escrow Agent. In the event the Escrow Agent
becomes unavailable or unwilling to continue in its capacity herewith, the
Escrow Agent may resign and be discharged from its duties or obligations
hereunder by delivering a resignation to the parties to this Agreement, not
less than 60 days prior to the date when such resignation shall take effect.
Emcore may appoint a successor Escrow Agent without the consent of the
Principal MODE Stockholders so long as such successor is a bank with assets of
at least
11
$100 million, and may appoint any other successor Escrow Agent with the
consent of the Principal MODE Stockholders, which shall not be unreasonably
withheld. If, within such notice period, Emcore provides to the Escrow Agent
written instructions with respect to the appointment of a successor Escrow
Agent and directions for the transfer of any Escrow Property then held by the
Escrow Agent to such successor, the Escrow Agent shall act in accordance with
such instructions and promptly transfer such Escrow Property to such
designated successor. If no successor is so appointed, the Escrow Agent may
apply to a court of competent jurisdiction for such appointment.
14. General.
(a) Governing Law, Assigns. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York without regard to conflict-of-law principles and shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
(b) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(c) Entire Agreement. This Agreement constitutes
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement and Supersedes all prior agreements or
understandings, written or oral, between the parties with respect to the
subject matter hereof.
(d) Waivers. No waiver by any party hereto of any
condition or of any breach of any provision of this Escrow Agreement shall be
effective unless in writing. No waiver by any party of any such condition or
breach, in any one instance, shall be deemed to be a further or continuing
waiver of any such condition or breach or a waiver of any other condition or
breach of any other provision contained herein.
(e) Amendment. This Agreement may be amended only
with the written consent of Emcore, the Escrow Agent and the Escrow Committee.
[SIGNATURES ARE ON THE FOLLOWING PAGE]
12
IN WITNESS WHEREOF, the parties have duly executed this
Escrow Agreement as of the day and year first above written.
EMCORE CORPORATION
By:/s/ Reuben F. Richards, Jr.
------------------------------------
Reuben F. Richards, Jr., President
PRINCIPAL MODE STOCKHOLDERS:
/s/ Principal Mode Stockholders
---------------------------------------
FIRST UNION NATIONAL BANK,
AS ESCROW AGENT:
/s/ First Union National Bank
-------------------------------
13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into
as of December 5, 1997 by and between EMCORE CORPORATION, a New Jersey
corporation ("Emcore"), and Robert P. Bryan (the "Executive") Emcore and the
Executive shall hereinafter collectively be referred to as the "Parties".
W I T N E S S E T H
WHEREAS, Emcore and the Executive, along with MicroOptical
Devices, Inc., a Delaware corporation ("MODE"), and certain other stockholders
of MODE, have entered into that certain Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"), pursuant to which, for good and
valuable mutual consideration, MODE will merge with and into Emcore;
WHEREAS, pursuant to the Merger Agreement, the Executive will
receive 225,987 shares of common stock of Emcore in consideration for shares of
common stock, $0.001 par value per share, of MODE currently held by the
Executive;
WHEREAS, a condition to the consummation of the transactions
contemplated by the Merger Agreement, is the execution and delivery by the
Executive of this Agreement;
WHEREAS, Emcore desires to employ Executive on the terms and
conditions herein contained; and
WHEREAS, Executive is willing to enter into this Agreement
for employment with the duties outlined herein on a full-time basis;
WHEREAS, an important part of the Executive's duties will be
to develop goodwill for Emcore through personal contact with clients, employees
and others having business relations with Emcore, and there is a danger that
this goodwill, a proprietary asset of Emcore, may follow Executive when his
employment relationship with Emcore terminates.
NOW, THEREFORE, in consideration of the employment of
Executive by Emcore, Emcore and Executive agree as follows:
1. Term of the Agreement. Emcore shall employ Executive and
Executive shall accept employment with Emcore for the three (3) year period
commencing on
the date hereof (the "Commencement Date") and ending December 4, 2000 (the
"Employment Period"), subject, however, to prior termination as hereinafter
provided in Section 5. Thereafter, unless either Party provides the other
Party, no later than ninety (90) days prior to the end of the Employment
Period, with notice of its or his intention not to extend the Agreement and the
Employment Period as hereinafter set forth, this Agreement and the Employment
Period shall automatically be extended for subsequent one (1) year periods and
the provisions hereof shall remain applicable for each such subsequent period.
2. Executive's Title, Duties and Obligations. Executive shall
serve as Vice President-MODE Division of Emcore. Executive shall at all times
report to the President and Chief Executive Officer of Emcore, and shall be
subject to the policies established by the President and Chief Executive
Officer, and the Board of Directors, of Emcore and shall discharge his
responsibilities in a competent and faithful manner, consistent with sound
business practices.
3. Devotion of Time to Emcore's Business.
a. Full-Time Efforts. During his employment with
Emcore, Executive shall devote all of his business time, attention and efforts
to the business of Emcore and MODE.
b. No Other Employment. During his employment with
Emcore, Executive shall not, whether directly or indirectly, render any
services of a commercial or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of Emcore, which shall not be unreasonably withheld, but shall be
subject to the provisions of 3(c) below.
c. Non-Competition. During his employment with
Emcore and for a period of one (1) year thereafter, Executive shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, joint venturer, stockholder, corporate officer, director,
or in any other individual or representative capacity, (i) engage in any
business, activity or product design or development competitive with the
business of MODE, in the United States of America or any other country in which
Emcore or MODE conducted its business prior to the termination of the
Executive's employment with Emcore, or (ii) solicit, divert or take away, or
attempt to divert or to take away, the business or patronage of any of the
clients, customers or accounts which were contacted, solicited or served by
Executive while employed by Emcore or MODE. Notwithstanding anything to the
contrary set forth in this Agreement, Executive's obligations under this
Section 3.c. shall cease immediately upon (i) effective date of the termination
of this Agreement by the Employee for Good Reason (as defined in Section 5
below), (ii) the issuance of a final judgment by a court of competent
jurisdiction that Executive's employment hereunder was terminated without Good
Cause (as defined in Section 5 below) in the event that (a) the Parties are in
disagreement as to whether the Employee was terminated with or without Good
-2-
Cause and (b) Mr. Reuben F. Richards was serving as the President and Chief
Executive officer of Emcore at the time of such termination, (iii) effective
date of the termination in the event that (a) the Parties are in disagreement
as to whether the Employee was terminated with or without Good Cause and (b)
Mr. Reuben F. Richards was not serving as the President and Chief Executive
Officer of Emcore at the time of such termination or (iv) effective date of the
termination of this Agreement in the event that the Parties mutually agree that
the Employee was terminated without Good Cause.
d. Non-Solicitation of Employees. During his
employment with Emcore and for a period of one (1) year thereafter, Executive
shall not directly or indirectly, as a stockholder, investor, partner,
director, officer, employee or otherwise, (a) encourage, solicit or attempt to
induce any person employed by Emcore or MODE to terminate his or her employment
with Emcore or MODE or (b) hire or attempt to hire any person employed by
Emcore or MODE; provided, however, that this obligation shall not affect any
responsibility he may have as an employee of Emcore or MODE with respect to the
bona fide hiring and firing of Emcore personnel in the ordinary course of
business.
e. Exceptions. Notwithstanding the provisions of
this Section 3, nothing herein shall prohibit Executive from holding less than
five percent (5%) of the publicly-traded securities of any corporation.
f. Interpretation. The Parties agree that the
duration, range of activities and geographic scope of the non-competition
provision set forth in Section 3.c. are reasonable. In the event that any court
of competent jurisdiction determines that any of the duration, range of
activities or geographic scope, is unreasonable and that such provision is to
that extent unenforceable, the Parties agree that the provision shall remain in
full force and effect for the greatest time period, for the greatest number of
activities and in the greatest area that would not render it unenforceable. The
Parties intend that this non-competition provision shall be deemed to be a
series of separate covenants, one for each and every county of each and every
state of the United States of America and each and every political subdivision
of each and every country outside the United States of America where this
provision is intended to be effective.
g. Equitable Remedies. The restrictions contained in
this Section 3 are necessary for the protection of the business and goodwill of
Emcore and MODE and are considered by Executive to be reasonable for such
purpose. Executive agrees that any breach of Sections 3.b., 3.c. or 3.d. of
this Agreement is likely to cause Emcore and MODE substantial and irrevocable
damage and therefore, in the event of any such breach, Executive agrees that
Emcore, in addition to any other remedies which may be available, shall be
entitled to specific performance and other injunctive relief.
4. Compensation and Benefits.
-3-
a. Base Compensation. During the term of this
Agreement, Emcore shall pay to Executive a base annual compensation of One
Hundred Twenty-Five Thousand Dollars ($125,000), less all required withholdings
(the "Base Salary") payable in accordance with Emcore's payroll policies.
Executive shall receive annual merit reviews and shall be considered for annual
raises based thereon. Parties will negotiate, in good faith, prior to end of
the Employment Period an increase to Executive's base salary effective as of
the first day of the first renewal period.
b. Performance Bonuses. Executive shall be entitled
to receive annual bonuses, payable no later than ninety (90) days after the end
of the applicable [calendar] [fiscal] year, up to an amount equal to fifty
percent (50%) of the Executive's Base Salary based upon the achievement of
certain performance objectives, as agreed upon in good faith by Emcore and the
Executive (the "Performance Bonus").
c. Benefits. During his employment with Emcore,
Executive will be entitled to receive all such health, medical, dental, life
insurance, disability insurance, stock grants, stock options and all other
benefits, as are provided to other executive officers of Emcore. Emcore
reserves the right to modify, amend or terminate any benefits listed above at
any time for any reason (provided such modification, amendment or termination
is applicable to all executives receiving such benefits) but shall, in any
case, provide reasonable health and disability benefits to Executive while
Executive is a full-time employee of Emcore. Further, Executive will have the
rights to participate in any vacation and savings plans implemented by Emcore
which are provided to other executive officers of Emcore.
d. Expense Reimbursement. Executive shall be
entitled to reimbursement from Emcore for all customary, ordinary and necessary
business expenses incurred by him in the performance of his duties hereunder,
provided that Executive shall furnish Emcore with reasonable and customary
vouchers, receipts and other details of such expenses within thirty (30) days
after they are incurred.
5. Termination of Employment.
a. Termination for Good Cause. Emcore may terminate
Executive's employment at any time for Good Cause as determined by the
President of Emcore, acting in good faith. For the purposes of this Agreement,
"Good Cause" shall mean gross misconduct, gross neglect of duties, acts
involving moral turpitude, material breach by Executive of Sections 3, 6, 7 or
8 of this Agreement, material breach by Executive of the terms of this
Agreement, any act or omission involving fraud, embezzlement, breach of
fiduciary duty, or misappropriation of any property or proprietary information
of Emcore or MODE by Executive. If Executive's employment is terminated by
Emcore with Good Cause, Executive shall be entitled to receive any unpaid
compensation accrued, and business expenses incurred (as set forth in to
Section 4.d.), through the last day of Executive's employment.
-4-
b. Termination without Good Cause. If Executive's
employment is terminated by Emcore without Good Cause, Executive shall be
entitled to receive (i) any unpaid compensation accrued, and business expenses
incurred (as set forth in Section 4.d.), through the last day of Executive's
employment, (ii) severance payments equal to his base compensation, payable on
Emcore's normal payroll dates, during the Employment Period, (iii) continuation
of medical, health, life insurance and disability insurance during the
Employment Period and (iv) acceleration of such number of options that would
have become vested and exercisable during the Employment Period (the "Severance
Payment").
c. Termination by Executive. Executive may terminate
this Agreement at any time, upon ninety (90) days' written notice to Emcore. If
Executive terminates this Agreement under this Section 5.c. with Good Reason,
Executive shall be entitled to receive the Severance Payments in accordance
with Section 5.b. above. If Executive terminates this Agreement under this
Section 5.c. without Good Reason, Executive shall only be entitled to any
unpaid compensation accrued, and business expenses incurred (as set forth in
Section 4.d.), through the last day of Executive's employment. For purposes of
this Agreement, "Good Reason" shall mean (a) material breach by Emcore or its
successor of the terms of the this Agreement, (b) material diminution in
Executive's duties and/or responsibilities hereunder, (c) termination of this
Agreement under Section 5.d. due to Executive becoming mentally or physically
Disabled (as defined in Section 5.d), or (d) requiring Executive to relocate
more than fifty (50) miles from Albuquerque, New Mexico.
d. Death or Disability. This Agreement shall
terminate if Executive dies or is mentally or physically Disabled. For the
purposes of this Agreement, "Disabled" shall mean a mental or physical
condition that renders Executive incapable of performing his duties and
obligations under this Agreement for three (3) or more consecutive months or
for a total of six (6) months during any twelve (12) consecutive months,
certified in writing by a physician mutually acceptable to the Parties. If this
Agreement is terminated under this Section 5.d., Executive or his estate shall
be entitled to any unpaid compensation accrued through the last day of
Executive's employment.
6. Nondisclosure and Nonuse of Confidential Information.
(a) Executive will not disclose or use at any time, either
during his or her employment with Emcore or for the next ten years thereafter,
any Confidential Information of which Executive is or becomes aware, whether or
not such information is developed by him or her, except to the extent that such
disclosure or use is directly related to and required by Executive's
performance of duties assigned to Executive by Emcore. Executive will take all
appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, copying, loss and theft.
(b) As used in this Agreement, the term "Confidential
Information" shall mean information that is not generally known to the public
and that is used, developed or
-5-
obtained by Emcore and/or MODE in connection with their respective businesses,
including but not limited to (i) products or services, (ii) fees, costs and
pricing structures, (iii) designs, (iv) analysis, (v) drawings, photographs and
reports, (vi) computer software, including operating systems, applications and
program listings, (vii) flow charts, manuals and documentation, (viii) data
bases, (ix) accounting and business methods, (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (xi) customers and clients and customer or
client lists, (xii) other copyrightable works, (xiii) all technology and trade
secrets and (xiv) all similar and related information in whatever form.
Notwithstanding the following, Confidential Information will not include (i)
any information that has been published in a form generally available to the
public prior to the date Executive proposes to disclose or use such information
or (ii) information that is widely known within Emcore's and/or MODE's
industry, as applicable, although not generally known to the public.
Information will not be deemed to have been published merely because individual
portions of the information have been separately published, but only if all
material features comprising such information have been published in
combination.
7. Emcore's Ownership of Intellectual Property.
(a) In the event that Executive as part of his activities on
behalf of Emcore generates, authors or contributes to any invention, design,
new development, device, product, method or process (whether or not patentable
or reduced to practice or comprising Confidential Information), any
copyrightable work (whether or not comprising Confidential Information) or any
other form of Confidential Information relating directly or indirectly to
Emcore's business as now or hereinafter conducted (collectively, "Intellectual
Property"), Executive acknowledges that such Intellectual Property is the
exclusive property of Emcore and hereby assigns all right, title and interest
in and to such Intellectual Property to Emcore or its designees. Any
copyrightable work prepared in whole or in part by Executive will be deemed "a
work made for hire" under Section 201(b) of the 1976 Copyright Act, and Emcore
or its designees will own all of the rights comprised in the copyright therein.
Executive will promptly and fully disclose all Intellectual Property to Emcore
and will cooperate with Emcore to protect Emcore's interests in and rights to
such Intellectual Property (including, without limitation, providing reasonable
assistance in securing patent protection and copyright and trademark
registrations, in the defense in any judicial opposition or other proceeding in
respect of such registrations, and executing all documents as reasonably
requested by Emcore, whether such requests occur prior to or after termination
of Executive's employment with Emcore). In the event Emcore is unable, after
reasonable effort, to secure Executive's signature on any application for
letters patent, copyright or trademark registration or other documents
regarding any legal protection relating to Intellectual Property, whether
because of Executive's physical or mental incapacity or for any other reason
whatsoever, Executive hereby irrevocably designate and appoint Emcore and its
duly authorized officers and agents as his agent and attorney-in-fact, to act
for and in Executive's behalf and stead to execute and file any such
application or applications or other
-6-
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal force
and effect as if executed by Executive.
(b) Section 7(a) of this Agreement regarding Emcore's
ownership of Intellectual Property shall not apply to any invention for which
no equipment, supplies, facilities or trade secret information of Emcore was
used and which was developed entirely on Executive's own time, unless (i) the
invention relates to the business of Emcore or to Emcore's actual or
demonstrably anticipated research or development or (ii) the invention results
from any work performed by Executive for Emcore.
(c) Executive has attached hereto a complete list of
inventions which have been made or conceived or first reduced to practice by
Executive alone or jointly with others prior to Executive's employment with
Emcore which Executive desires to remove from the operation of this Agreement.
If no such list is attached to this Agreement, Executive represents that
Executive has not made, conceived or reduced to practice any such inventions
and improvements at the time of signing this Agreement.
8. Delivery of Materials Upon Termination of Employment. As
requested by Emcore from time to time and upon the termination of Executive's
employment with Emcore for any reason, Executive will promptly deliver to
Emcore upon request all copies and embodiments, in whatever form, of all
Confidential Information or Intellectual Property in Executive's possession or
within his or her control (including, but not limited to, written records,
notes, photographs, manuals, notebooks, documentation, program listings, flow
charts, magnetic media disks, diskettes, tapes and all other materials
containing any Confidential Information or Intellectual Property) irrespective
of the location or form of such material and, if requested by Emcore, will
provide Emcore with written confirmation that all such materials have been
delivered to Emcore.
9. Miscellaneous.
a. Representations and Agreements of Executive.
Executive represents and warrants that he is free to enter into this Agreement
and to perform the duties required hereunder, and that there are no employment
contracts or understandings, restrictive covenants or other restrictions,
whether written or oral, preventing the performance of his duties hereunder.
Executive further represents and warrants that he does not possess any
proprietary information with respect to any former employer which is subject to
an agreement or understanding, whether written or oral, between Executive and
such former employer which restricts Executive's use or disclosure of such
proprietary information.
b. Governing Law. This Agreement shall be
interpreted, construed, governed and enforced according to the laws of the
State of New Mexico.
-7-
c. Amendments. No amendment or modification of the
terms or conditions of this Agreement shall be valid unless in writing and
signed by the parties hereto.
d. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be construed, if possible, so as to be enforceable under applicable law,
else, such provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
e. Successors and Assigns. The rights and
obligations of Emcore under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of Emcore. Executive shall not
be entitled to assign any of his rights or obligations under this Agreement.
f. Non-Waiver. The waiver of any term or condition
of this Agreement shall not be deemed to constitute a waiver of any other term
or condition.
g. Notices. All notices required or permitted under
this Agreement shall be in writing and shall be deemed effective upon personal
delivery or two days after deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address shown below such party's signature, or at such other address or
addresses as either party shall designate to the other in accordance with this
Section 5.h.
h. Entire Agreement. This Agreement, including the
exhibits attached hereto, constitutes the entire agreement between the parties
with respect to the matters contained herein and shall supercede all prior
agreements by and between Executive and MODE relating to the matters contained
herein.
i. Headings. The Section headings appearing in this
Agreement are for purposes of easy reference and shall not be considered a part
of this Agreement or in any way modify, amend, or affect its provisions.
j. Expenses. Emcore shall reimburse Executive for
all reasonable legal fees and related out-of-pocket expenses incurred by
Executive in enforcing his rights hereunder.
-8-
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the date set forth above.
EMCORE CORPORATION
/s/ Reuben F. Richards, Jr.
-----------------------------------------
By:
Title:
Address:
EXECUTIVE:
/s/ Robert P. Bryan
-----------------------------------------
Robert P. Bryan
Address:
-9-
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into
as of December 5, 1997 by and between EMCORE CORPORATION, a New Jersey
corporation ("Emcore"), and Thomas Brennan (the "Executive") Emcore and the
Executive shall hereinafter collectively be referred to as the "Parties".
W I T N E S S E T H
WHEREAS, Emcore and the Executive, along with MicroOptical
Devices, Inc., a Delaware corporation ("MODE"), and certain other stockholders
of MODE, have entered into that certain Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"), pursuant to which, for good and
valuable mutual consideration, MODE will merge with and into Emcore;
WHEREAS, pursuant to the Merger Agreement, the Executive will
receive 225,987 shares of common stock of Emcore in consideration for shares of
common stock, $0.001 par value per share, of MODE currently held by the
Executive;
WHEREAS, a condition to the consummation of the transactions
contemplated by the Merger Agreement, is the execution and delivery by the
Executive of this Agreement;
WHEREAS, Emcore desires to employ Executive on the terms and
conditions herein contained; and
WHEREAS, Executive is willing to enter into this Agreement
for employment with the duties outlined herein on a full-time basis;
WHEREAS, an important part of the Executive's duties will be
to develop goodwill for Emcore through personal contact with clients, employees
and others having business relations with Emcore, and there is a danger that
this goodwill, a proprietary asset of Emcore, may follow Executive when his
employment relationship with Emcore terminates.
NOW, THEREFORE, in consideration of the employment of
Executive by Emcore, Emcore and Executive agree as follows:
1. Term of the Agreement. Emcore shall employ Executive and
Executive shall accept employment with Emcore for the three (3) year period
commencing on
the date hereof (the "Commencement Date") and ending December 4, 2000 (the
"Employment Period"), subject, however, to prior termination as hereinafter
provided in Section 5. Thereafter, unless either Party provides the other
Party, no later than ninety (90) days prior to the end of the Employment
Period, with notice of its or his intention not to extend the Agreement and the
Employment Period as hereinafter set forth, this Agreement and the Employment
Period shall automatically be extended for subsequent one (1) year periods and
the provisions hereof shall remain applicable for each such subsequent period.
2. Executive's Title, Duties and Obligations. Executive shall
serve as Vice President Emcore West. Executive shall at all times report to the
President and Chief Executive Officer of Emcore, and shall be subject to the
policies established by the President and Chief Executive Officer, and the
Board of Directors, of Emcore and shall discharge his responsibilities in a
competent and faithful manner, consistent with sound business practices.
3. Devotion of Time to Emcore's Business.
a. Full-Time Efforts. During his employment with
Emcore, Executive shall devote all of his business time, attention and efforts
to the business of Emcore and MODE.
b. No Other Employment. During his employment with
Emcore, Executive shall not, whether directly or indirectly, render any
services of a commercial or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of Emcore, which shall not be unreasonably withheld, but shall be
subject to the provisions of 3(c) below.
c. Non-Competition. During his employment with
Emcore and for a period of one (1) year thereafter, Executive shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
principal, partner, joint venturer, stockholder, corporate officer, director,
or in any other individual or representative capacity, (i) engage in any
business, activity or product design or development competitive with the
business of MODE, in the United States of America or any other country in which
Emcore or MODE conducted its business prior to the termination of the
Executive's employment with Emcore, or (ii) solicit, divert or take away, or
attempt to divert or to take away, the business or patronage of any of the
clients, customers or accounts which were contacted, solicited or served by
Executive while employed by Emcore or MODE. Notwithstanding anything to the
contrary set forth in this Agreement, Executive's obligations under this
Section 3.c. shall cease immediately upon (i) effective date of the termination
of this Agreement by the Employee for Good Reason (as defined in Section 5
below), (ii) the issuance of a final judgment by a court of competent
jurisdiction that Executive's employment hereunder was terminated without Good
Cause (as defined in Section 5 below) in the event that (a) the Parties are in
disagreement as to whether the Employee was terminated with or without Good
Cause and (b) Mr. Reuben F. Richards was serving as the President and Chief
Executive
-2-
officer of Emcore at the time of such termination, (iii) effective date of the
termination in the event that (a) the Parties are in disagreement as to whether
the Employee was terminated with or without Good Cause and (b) Mr. Reuben F.
Richards was not serving as the President and Chief Executive Officer of Emcore
at the time of such termination or (iv) effective date of the termination of
this Agreement in the event that the Parties mutually agree that the Employee
was terminated without Good Cause.
d. Non-Solicitation of Employees. During his
employment with Emcore and for a period of one (1) year thereafter, Executive
shall not directly or indirectly, as a stockholder, investor, partner,
director, officer, employee or otherwise, (a) encourage, solicit or attempt to
induce any person employed by Emcore or MODE to terminate his or her employment
with Emcore or MODE or (b) hire or attempt to hire any person employed by
Emcore or MODE; provided, however, that this obligation shall not affect any
responsibility he may have as an employee of Emcore or MODE with respect to the
bona fide hiring and firing of Emcore personnel in the ordinary course of
business.
e. Exceptions. Notwithstanding the provisions of
this Section 3, nothing herein shall prohibit Executive from holding less than
five percent (5%) of the publicly-traded securities of any corporation.
f. Interpretation. The Parties agree that the
duration, range of activities and geographic scope of the non-competition
provision set forth in Section 3.c. are reasonable. In the event that any court
of competent jurisdiction determines that any of the duration, range of
activities or geographic scope, is unreasonable and that such provision is to
that extent unenforceable, the Parties agree that the provision shall remain in
full force and effect for the greatest time period, for the greatest number of
activities and in the greatest area that would not render it unenforceable. The
Parties intend that this non-competition provision shall be deemed to be a
series of separate covenants, one for each and every county of each and every
state of the United States of America and each and every political subdivision
of each and every country outside the United States of America where this
provision is intended to be effective.
g. Equitable Remedies. The restrictions contained in
this Section 3 are necessary for the protection of the business and goodwill of
Emcore and MODE and are considered by Executive to be reasonable for such
purpose. Executive agrees that any breach of Sections 3.b., 3.c. or 3.d. of
this Agreement is likely to cause Emcore and MODE substantial and irrevocable
damage and therefore, in the event of any such breach, Executive agrees that
Emcore, in addition to any other remedies which may be available, shall be
entitled to specific performance and other injunctive relief.
-3-
4. Compensation and Benefits.
a. Base Compensation. During the term of this
Agreement, Emcore shall pay to Executive a base annual compensation of One
Hundred Twenty-Five Thousand Dollars ($125,000), less all required withholdings
(the "Base Salary") payable in accordance with Emcore's payroll policies.
Executive shall receive annual merit reviews and shall be considered for annual
raises based thereon. Parties will negotiate, in good faith, prior to end of
the Employment Period an increase to Executive's base salary effective as of
the first day of the first renewal period.
b. Performance Bonuses. Executive shall be entitled
to receive annual bonuses, payable no later than ninety (90) days after the end
of the applicable [calendar] [fiscal] year, up to an amount equal to fifty
percent (50%) of the Executive's Base Salary based upon the achievement of
certain performance objectives, as agreed upon in good faith by Emcore and the
Executive (the "Performance Bonus").
c. Benefits. During his employment with Emcore,
Executive will be entitled to receive all such health, medical, dental, life
insurance, disability insurance, stock grants, stock options and all other
benefits, as are provided to other executive officers of Emcore. Emcore
reserves the right to modify, amend or terminate any benefits listed above at
any time for any reason (provided such modification, amendment or termination
is applicable to all executives receiving such benefits) but shall, in any
case, provide reasonable health and disability benefits to Executive while
Executive is a full-time employee of Emcore. Further, Executive will have the
rights to participate in any vacation and savings plans implemented by Emcore
which are provided to other executive officers of Emcore.
d. Expense Reimbursement. Executive shall be
entitled to reimbursement from Emcore for all customary, ordinary and necessary
business expenses incurred by him in the performance of his duties hereunder,
provided that Executive shall furnish Emcore with reasonable and customary
vouchers, receipts and other details of such expenses within thirty (30) days
after they are incurred.
5. Termination of Employment.
a. Termination for Good Cause. Emcore may terminate
Executive's employment at any time for Good Cause as determined by the
President of Emcore, acting in good faith. For the purposes of this Agreement,
"Good Cause" shall mean gross misconduct, gross neglect of duties, acts
involving moral turpitude, material breach by Executive of Sections 3, 6, 7 or
8 of this Agreement, material breach by Executive of the terms of this
Agreement, any act or omission involving fraud, embezzlement, breach of
fiduciary duty, or misappropriation of any property or proprietary information
of Emcore or MODE by Executive. If Executive's employment is terminated by
Emcore with Good Cause, Executive shall be entitled to receive any unpaid
compensation accrued, and business
-4-
expenses incurred (as set forth in to Section 4.d.), through the last day of
Executive's employment.
b. Termination without Good Cause. If Executive's
employment is terminated by Emcore without Good Cause, Executive shall be
entitled to receive (i) any unpaid compensation accrued, and business expenses
incurred (as set forth in Section 4.d.), through the last day of Executive's
employment, (ii) severance payments equal to his base compensation, payable on
Emcore's normal payroll dates, during the Employment Period, (iii) continuation
of medical, health, life insurance and disability insurance during the
Employment Period and (iv) acceleration of such number of options that would
have become vested and exercisable during the Employment Period (the "Severance
Payments").
c. Termination by Executive. Executive may terminate
this Agreement at any time, upon ninety (90) days' written notice to Emcore. If
Executive terminates this Agreement under this Section 5.c. with Good Reason,
Executive shall be entitled to receive the Severance Payments in accordance
with Section 5.b. above. If Executive terminates this Agreement under this
Section 5.c. without Good Reason, Executive shall only be entitled to any
unpaid compensation accrued, and business expenses incurred (as set forth in
Section 4.d.), through the last day of Executive's employment. For purposes of
this Agreement, "Good Reason" shall mean (a) material breach by Emcore or its
successor of the terms of the this Agreement, (b) material diminution in
Executive's duties and/or responsibilities hereunder, (c) termination of this
Agreement under Section 5.d. due to Executive becoming mentally or physically
Disabled (as defined in Section 5.d), or (d) requiring Executive to relocate
more than fifty (50) miles from Albuquerque, New Mexico.
d. Death or Disability. This Agreement shall
terminate if Executive dies or is mentally or physically Disabled. For the
purposes of this Agreement, "Disabled" shall mean a mental or physical
condition that renders Executive incapable of performing his duties and
obligations under this Agreement for three (3) or more consecutive months or
for a total of six (6) months during any twelve (12) consecutive months,
certified in writing by a physician mutually acceptable to the Parties. If this
Agreement is terminated under this Section 5.d., Executive or his estate shall
be entitled to any unpaid compensation accrued through the last day of
Executive's employment.
6. Nondisclosure and Nonuse of Confidential Information.
(a) Executive will not disclose or use at any time, either
during his or her employment with Emcore or for the next ten years thereafter,
any Confidential Information of which Executive is or becomes aware, whether or
not such information is developed by him or her, except to the extent that such
disclosure or use is directly related to and required by Executive's
performance of duties assigned to Executive by Emcore. Executive will take all
appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, copying, loss and theft.
-5-
(b) As used in this Agreement, the term "Confidential
Information" shall mean information that is not generally known to the public
and that is used, developed or obtained by Emcore and/or MODE in connection
with their respective businesses, including but not limited to (i) products or
services, (ii) fees, costs and pricing structures, (iii) designs, (iv)
analysis, (v) drawings, photographs and reports, (vi) computer software,
including operating systems, applications and program listings, (vii) flow
charts, manuals and documentation, (viii) data bases, (ix) accounting and
business methods, (x) inventions, devices, new developments, methods and
processes, whether patentable or unpatentable and whether or not reduced to
practice, (xi) customers and clients and customer or client lists, (xii) other
copyrightable works, (xiii) all technology and trade secrets and (xiv) all
similar and related information in whatever form. Notwithstanding the
following, Confidential Information will not include (i) any information that
has been published in a form generally available to the public prior to the
date Executive proposes to disclose or use such information or (ii) information
that is widely known within Emcore's and/or MODE's industry, as applicable,
although not generally known to the public. Information will not be deemed to
have been published merely because individual portions of the information have
been separately published, but only if all material features comprising such
information have been published in combination.
7. Emcore's Ownership of Intellectual Property.
(a) In the event that Executive as part of his activities on
behalf of Emcore generates, authors or contributes to any invention, design,
new development, device, product, method or process (whether or not patentable
or reduced to practice or comprising Confidential Information), any
copyrightable work (whether or not comprising Confidential Information) or any
other form of Confidential Information relating directly or indirectly to
Emcore's business as now or hereinafter conducted (collectively, "Intellectual
Property"), Executive acknowledges that such Intellectual Property is the
exclusive property of Emcore and hereby assigns all right, title and interest
in and to such Intellectual Property to Emcore or its designees. Any
copyrightable work prepared in whole or in part by Executive will be deemed "a
work made for hire" under Section 201(b) of the 1976 Copyright Act, and Emcore
or its designees will own all of the rights comprised in the copyright therein.
Executive will promptly and fully disclose all Intellectual Property to Emcore
and will cooperate with Emcore to protect Emcore's interests in and rights to
such Intellectual Property (including, without limitation, providing reasonable
assistance in securing patent protection and copyright and trademark
registrations, in the defense in any judicial opposition or other proceeding in
respect of such registrations, and executing all documents as reasonably
requested by Emcore, whether such requests occur prior to or after termination
of Executive's employment with Emcore). In the event Emcore is unable, after
reasonable effort, to secure Executive's signature on any application for
letters patent, copyright or trademark registration or other documents
regarding any legal protection relating to Intellectual Property, whether
because of Executive's physical or mental incapacity or for any other reason
whatsoever, Executive hereby irrevocably designate and appoint Emcore
-6-
and its duly authorized officers and agents as his agent and attorney-in-fact,
to act for and in Executive's behalf and stead to execute and file any such
application or applications or other documents and to do all other lawfully
permitted acts to further the prosecution and issuance of letters patent,
copyright or trademark registrations or any other legal protection thereon with
the same legal force and effect as if executed by Executive.
(b) Section 7(a) of this Agreement regarding Emcore's
ownership of Intellectual Property shall not apply to any invention for which
no equipment, supplies, facilities or trade secret information of Emcore was
used and which was developed entirely on Executive's own time, unless (i) the
invention relates to the business of Emcore or to Emcore's actual or
demonstrably anticipated research or development or (ii) the invention results
from any work performed by Executive for Emcore.
(c) Executive has attached hereto a complete list of
inventions which have been made or conceived or first reduced to practice by
Executive alone or jointly with others prior to Executive's employment with
Emcore which Executive desires to remove from the operation of this Agreement.
If no such list is attached to this Agreement, Executive represents that
Executive has not made, conceived or reduced to practice any such inventions
and improvements at the time of signing this Agreement.
8. Delivery of Materials Upon Termination of Employment. As
requested by Emcore from time to time and upon the termination of Executive's
employment with Emcore for any reason, Executive will promptly deliver to
Emcore upon request all copies and embodiments, in whatever form, of all
Confidential Information or Intellectual Property in Executive's possession or
within his or her control (including, but not limited to, written records,
notes, photographs, manuals, notebooks, documentation, program listings, flow
charts, magnetic media disks, diskettes, tapes and all other materials
containing any Confidential Information or Intellectual Property) irrespective
of the location or form of such material and, if requested by Emcore, will
provide Emcore with written confirmation that all such materials have been
delivered to Emcore.
9. Miscellaneous.
a. Representations and Agreements of Executive.
Executive represents and warrants that he is free to enter into this Agreement
and to perform the duties required hereunder, and that there are no employment
contracts or understandings, restrictive covenants or other restrictions,
whether written or oral, preventing the performance of his duties hereunder.
Executive further represents and warrants that he does not possess any
proprietary information with respect to any former employer which is subject to
an agreement or understanding, whether written or oral, between Executive and
such former employer which restricts Executive's use or disclosure of such
proprietary information.
-7-
b. Governing Law. This Agreement shall be
interpreted, construed, governed and enforced according to the laws of the
State of New Mexico.
c. Amendments. No amendment or modification of the
terms or conditions of this Agreement shall be valid unless in writing and
signed by the parties hereto.
d. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be construed, if possible, so as to be enforceable under applicable law,
else, such provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
e. Successors and Assigns. The rights and
obligations of Emcore under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of Emcore. Executive shall not
be entitled to assign any of his rights or obligations under this Agreement.
f. Non-Waiver. The waiver of any term or condition
of this Agreement shall not be deemed to constitute a waiver of any other term
or condition.
g. Notices. All notices required or permitted under
this Agreement shall be in writing and shall be deemed effective upon personal
delivery or two days after deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the other party at
the address shown below such party's signature, or at such other address or
addresses as either party shall designate to the other in accordance with this
Section 5.h.
h. Entire Agreement. This Agreement, including the
exhibits attached hereto, constitutes the entire agreement between the parties
with respect to the matters contained herein and shall supercede all prior
agreements by and between Executive and MODE relating to the matters contained
herein.
i. Headings. The Section headings appearing in this
Agreement are for purposes of easy reference and shall not be considered a part
of this Agreement or in any way modify, amend, or affect its provisions.
j. Expenses. Emcore shall reimburse Executive for
all reasonable legal fees and related out-of-pocket expenses incurred by
Executive in enforcing his rights hereunder.
-8-
IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the date set forth above.
EMCORE CORPORATION
/s/ Reuben F. Richards, Jr.
-----------------------------------------
By:
Title:
Address:
EXECUTIVE:
/s/ Thomas Brennan
-----------------------------------------
Thomas Brennan
Address:
-1-
FRIDAY DECEMBER 5, 12:32 PM EASTERN TIME
COMPANY PRESS RELEASE
EMCORE CORPORATION CLOSES ACQUISITION OF MICROOPTICAL DEVICES INC.
COMBINED ENTITY WILL LEAD DEVELOPMENT AND PRODUCTION OF VCSEL TECHNOLOGY INTO
NEXT-GENERATION PRODUCT LINES
SOMERSET, N.J.--(BUSINESS WIRE)--Dec. 5, 1997-- EMCORE Corporation (Nasdaq:
EMKR - news), a leading provider of integrated compound semiconductor
solutions, today announced the purchase of privately-held MicroOptical Devices,
Inc. (MODE). MODE is a market leader in the design and development of
high-quality optical components and subsystems based on vertical cavity
surface-emitting laser (VCSEL) technology, which offers superior performance
and higher efficiency over conventional compound semiconductor technologies.
"By joining forces, EMCORE and MODE are in a strong position to shape both the
future of VCSEL technology and the optical communications markets," said Reuben
Richards, President and Chief Executive Officer of EMCORE.
MODE's microlasers and optical subsystems provide design, performance and
significant cost advantages over their technical predecessors such as
edge-emitting solid state lasers. Through the integration of VCSELs with
leading OEM systems design, VCSELs provide enhanced performance benefits to
market applications such as Internet access, onboard photonics, gigabit
ethernet, local area networks, microarea networks such as chip-to-chip and
board-to-board applications, DVD and fiberoptic switching. MODE's Gigalase(TM)
and Gigarray(TM) product lines are currently being used by a variety of
domestic and international OEM customers including AMP, IBM, Samsung, Fuji
Xerox, Boeing and Northrop Grumman in the areas of data communications,
telecommunications, optical storage and sensing.
Mr. Richards further commented, "MODE is a recognized leader in the development
of VCSEL technology. We believe VCSEL technology will solve a number of
technical bandwidth challenges applicable to the high-speed computing and
communications markets, allowing optoelectronic applications to perform their
functions at higher speeds with lower costs over traditional optoelectronic
systems. We believe that with the acquisition of MODE, EMCORE will establish
itself at the forefront of the next-generation development of the
optoelectronic laser market which is estimated to grow to one billion dollars
by 2000."
Under the terms of the agreement, EMCORE Corporation will issue 1.547 million
shares of common stock in exchange for 100% of the outstanding capital stock of
MODE. The transaction is valued at approximately $30 million based on EMCORE's
recent stock price. The acquisition will be accounted for as a purchase. In
connection with the closing of the transaction, a significant portion of the
purchase price will be taken as a one- time charge by EMCORE related to the
write-off of in-process research and development costs. The proposed
transaction is expected to be accretive within the first twelve months. Upon
the completion of the transaction, MODE is expected to operate as a separate
subsidiary of EMCORE. Its operations will continue to be led by the current
MODE management team, headed by Thomas M. Brennan and Robert P. Bryan, who will
report to Mr. Richards.
Dr. Thomas J. Russell, Chairman of the Board of EMCORE, stated that, "The
acquisition of MODE represents a pivotal step in the Company's strategic growth
plan. In addition to having complementary technologies and a shared vision of
compound semiconductor materials and devices, EMCORE and MODE are technology
driven companies focused on the rapidly growing markets for high speed compound
semiconductors. By combining our technologies with those of MODE, EMCORE will
be better able to offer complete vertically integrated VCSEL solutions by
offering material, component and sub-assembly solutions to our customers."
Dr. Robert Bryan, Co-President and Co-Founder of MODE, stated, "The combination
of MODE's VCSEL expertise and EMCORE's technological leadership in compound
semiconductor solutions will provide significant new growth opportunities for
the combined entity. We are all very pleased to become a permanent part of the
EMCORE team, and to build further upon the strong relationship we have enjoyed
over the past few years."
Tom Brennan, Co-President and Co-Founder of MODE, added, "We look forward to
strengthening our current customer relationships and achieving technological
breakthroughs in new and related market applications through this merger."
MODE is located in Albuquerque, New Mexico, near Sandia National Laboratories
and the University of New Mexico, where the founders, and many of the current
MODE staff, co-developed VCSEL technology. MODE's principal scientists are
uniquely accomplished in their respective fields and are a formidable addition
to EMCORE's existing materials science expertise. In addition to its leadership
in VCSEL development, MODE holds an exclusive license from Sandia National
Laboratories for VCSEL applications in data communications and bar code
scanning and has mechanisms in place to continue to generate and acquire
forward-looking intellectual property.
This release contains forward-looking statements relating to future events that
involve risks and uncertainties, including, without limitation, statements
about future financial performance of EMCORE and MODE and the effects of the
proposed acquisition on EMCORE's business, financial performance, and results
of operations. Among the factors which could cause actual results to differ
materially from those in the forward-looking statements are failure of the
proposed acquisition to achieve the desired synergies and efficiencies; risks
associated with the reaction to the proposed acquisition by the market, as well
as employees, customers, distributors and others who affect the businesses of
EMCORE and/or MODE; the variability of future operating results of EMCORE, MODE
or the combined companies following the proposed acquisition; cancellations,
rescheduling or delays in product shipments; manufacturing capacity constraint;
lengthy sales and qualification cycles; difficulties in the production process;
the future financial performance of the combined entity; delays in developing
and commercializing new products; increased competition; changes in the
compound semiconductor industry, including overall growth of the industry and
the continued acceptance of the Company's MOCVD technologies, as well as the
newly acquired VCSEL technologies; and other factors detailed in the Company's
filings with the Securities and Exchange Commission, including the registration
statement on Form S-1 filed on March 4, 1997.
EMCORE Corporation (Nasdaq: EMKR - news) is a leading provider of integrated
compound semiconductor solutions. Leading manufacturers throughout the world
use EMCORE's production systems, epitaxial materials, package ready die, and
process technology to produce compound semiconductor devices for a variety of
advanced electronic and photonic applications. For further information on
EMCORE, visit: http://www.emcore.com
CONTACT
EMCORE Corporation
Reuben F. Richards Jr.
President and CEO
732-271-9090
Tom Werthan
VP, Finance and Administration
732-271-9090
or
Morgen-Walke Associates, Inc.
Michele Katz/Jessica Davis/Michael Mahony
Press: Lee Foley/Ann Travers
212-850-5600
