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EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND AMONG
AVANEX CORPORATION,
ASPEN ACQUISITION CORPORATION,
AND
HOLOGRAPHIX INC.
DATED AS OF MAY 22, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS...........................................................2
1.1 Certain Definitions..............................................2
ARTICLE II PURCHASE AND SALE OF ASSETS..........................................5
2.1 Purchase and Sale of Assets......................................5
2.2 Assumption of Liabilities........................................7
2.3 Consideration for Purchased Assets...............................9
2.4 Sales and Use Taxes.............................................10
2.5 Bulk Transfer Laws..............................................10
2.6 Closing.........................................................10
2.7 Nontransferable Assets..........................................11
2.8 Taking of Necessary Action; Further Action......................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...........................12
3.1 Organization, Qualification, and Corporate Power................12
3.2 Authorization...................................................13
3.3 Capitalization..................................................13
3.4 Subsidiaries....................................................14
3.5 No Conflicts....................................................14
3.6 Consents........................................................14
3.7 Financial Statements............................................15
3.8 Undisclosed Liabilities.........................................15
3.9 Events Subsequent to Most Recent Fiscal Period End..............15
3.10 Legal Compliance................................................17
3.11 Tax Matters.....................................................17
3.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment..........................................20
3.13 Intellectual Property...........................................20
3.14 Contracts.......................................................24
3.15 Notes and Accounts Receivable...................................27
3.16 Power of Attorney...............................................27
3.17 Insurance.......................................................27
3.18 Litigation......................................................27
3.19 Restrictions on Business Activities.............................27
3.20 Product Warranty................................................27
3.21 Guaranties; Indemnities.........................................28
3.22 Employees.......................................................28
3.23 Employee Matters and Benefit Plans..............................28
3.24 Environment, Health, and Safety.................................32
3.25 Certain Business Relationships With Seller......................34
3.26 No Adverse Developments.........................................34
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TABLE OF CONTENTS
(CONTINUED)
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3.27 Bankruptcy Order................................................34
3.28 Fees............................................................34
3.29 Complete Copies of Materials....................................34
3.30 Board Approval..................................................34
3.31 Export Control Laws.............................................35
3.32 Preferences; Solvency...........................................35
3.33 Full Disclosure.................................................36
3.34 Information Supplied............................................36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..................36
4.1 Organization, Qualification, and Corporate Power................36
4.2 Authorization...................................................37
4.3 Capitalization..................................................37
4.4 No Conflicts....................................................38
4.5 Consents........................................................38
4.6 SEC Filings.....................................................38
4.7 Brokers' Fees...................................................39
4.8 Information Supplied............................................39
ARTICLE V PRE-CLOSING COVENANTS................................................39
5.1 Operation of Business...........................................39
5.2 Access to Information...........................................42
5.3 Notice of Developments..........................................42
5.4 Stockholder Approval............................................42
5.5 No Solicitation.................................................42
5.6 Regulatory Filings..............................................43
5.7 Affiliate Agreements............................................43
5.8 Proxy Materials; Permit Application.............................44
5.9 Reasonable Efforts..............................................44
5.10 Notices and Consents............................................45
ARTICLE VI OTHER AGREEMENTS AND COVENANTS......................................45
6.1 Confidentiality.................................................45
6.2 Additional Documents and Further Assurances.....................45
6.3 Treatment as Reorganization.....................................45
6.4 Employee Plans and Benefit Arrangements.........................45
6.5 Seller Options and Warrants.....................................46
6.6 Retention Options...............................................46
6.7 Form S-8........................................................46
6.8 New Consultants.................................................46
6.9 Retained Employees..............................................47
6.10 Listing of Additional Shares....................................47
6.11 Liquidation of Seller...........................................47
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TABLE OF CONTENTS
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6.12 Reasonable Cooperation of Buyer.................................47
ARTICLE VII CONDITIONS TO THE CLOSING..........................................48
7.1 Conditions to Parent's and Buyer's Obligation to Close..........48
7.2 Conditions to Seller's Obligations..............................50
ARTICLE VIII INDEMNIFICATION; ESCROW...........................................52
8.1 Survival of Representations and Warranties......................52
8.2 Indemnification by Seller.......................................52
8.3 Indemnification by Buyer........................................59
ARTICLE IX TERMINATION.........................................................59
9.1 Termination of the Agreement....................................59
9.2 Effect of Termination...........................................60
ARTICLE X MISCELLANEOUS........................................................61
10.1 Press Releases and Public Announcements.........................61
10.2 No Third-Party Beneficiaries....................................61
10.3 Entire Agreement and Modification...............................61
10.4 Amendment.......................................................61
10.5 Waivers.........................................................61
10.6 Successors and Assigns..........................................62
10.7 Counterparts....................................................62
10.8 Headings........................................................62
10.9 Notices.........................................................62
10.10 Governing Law...................................................63
10.11 Forum Selection; Consent to Jurisdiction........................63
10.12 Severability....................................................64
10.13 Expenses........................................................64
10.14 Construction....................................................64
10.15 Seller Disclosure Letter........................................64
10.16 Attorneys' Fees.................................................64
10.17 Further Assurances..............................................65
10.18 Time of Essence.................................................65
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EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B-1 List of Persons signing Non-Competition Agreements
Exhibit B-2 Form of Non-Competition Agreement
Exhibit C-1 List of Persons signing Employment Agreements
Exhibit C-2 Form of Employment Agreement
Exhibit D Form of Affiliate Agreement
Exhibit E Form of Holographix Inc. Liquidating Trust Agreement and
Declaration of Trust
Exhibit F Form of Employment Confidential Information, Invention
Assignment and Arbitration Agreement
Exhibit G Assumed Indebtedness of the Seller to be Paid at Closing
SCHEDULES
Schedule 2.1(c)(viii) Additional Excluded Assets
Schedule 2.2(b) Additional Assumed Liabilities
Schedule 2.2(c)(i) Excluded Agreements
Schedule 7.1(f) Necessary Consents
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of May 22, 2000, by and among by and among Avanex Corporation, a
Delaware corporation ("PARENT"), Aspen Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent ("BUYER"), and Holographix
Inc., a Delaware corporation ( "SELLER"). Parent, Buyer and Seller are sometimes
referred to herein individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
A. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, on the terms and subject to the conditions set forth herein, the assets
of Seller described herein, and Seller desires Buyer to assume certain of
Seller's liabilities, which Buyer would agree to assume on the terms and subject
to the conditions set forth herein.
B. The Board of Directors of each of Parent, Buyer and Seller believes
it is in the best interests of its respective corporation and stockholders that
the transactions contemplated hereby be consummated and, in furtherance thereof,
has approved this Agreement and the transactions contemplated hereby.
C. Parent, Buyer and Seller desire to make certain representations,
warranties, covenants and other agreements in connection with the transactions
contemplated hereby.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE"), and to cause the transactions contemplated hereby
to qualify as a "reorganization" under the provisions of Section 368(a)(1)(C) of
the Code.
E. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Buyer to enter into this Agreement, certain
stockholders of Seller are entering into voting agreements in the form of
EXHIBIT A hereto (the "VOTING AGREEMENTS").
F. As a further inducement to Parent and Buyer to enter into this
Agreement, prior to Closing, certain employees of Seller will enter into
non-competition agreements in the form of EXHIBIT B-2 hereto (the
"NON-COMPETITION AGREEMENTS") and employment agreements in the form of EXHIBIT
C-2 hereto (the "EMPLOYMENT AGREEMENTS"), and all affiliates of Seller will
enter INTO affiliate agreements in the form of EXHIBIT D hereto with Parent (the
"AFFILIATE AGREEMENTS").
G. A portion of the Parent Common Stock otherwise issuable by Parent in
connection with the transactions contemplated by this Agreement shall be placed
in escrow by Parent, the release of which amount shall be contingent upon
certain events and conditions.
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NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.
(a) "AFFILIATE" of a Person means any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with such Person.
(b) "ASAHI AGREEMENT" shall mean the Agreement, dated July 22,
1993, by and between Asahi Optical Co., Ltd. and Seller, as amended to date.
(c) "BANKRUPTCY CASE" means the proceeding under Chapter 11 of
Title 11 of the United States Code, originally filed on June 14, 1990.
(d) "BARCO AGREEMENt" shall mean the Development Contract, dated
March 24, 1994, by and between Barco Graphics NV and Seller, as amended to date.
(e) "ESCROW SHARES" shall mean that number of shares of Parent
Common Stock determined by dividing $7,500,000 by the Trading Price.
(f) "EXCHANGE RATIO" shall mean the quotient obtained by dividing
(A) the Fully-Diluted Consideration by (B) the difference of (i) the sum of (x)
the total number of shares of Seller Capital Stock that are issued and
outstanding immediately prior to Closing and (y) the total number of shares of
Seller Capital Stock issuable upon conversion or exercise in full of all
convertible securities or options (vested and unvested), warrants or other
rights to acquire Seller Capital Stock that are outstanding immediately prior to
Closing, minus (ii) the total number of shares of Seller Capital Stock issuable
upon exercise in full of all Retention Options.
(g) "FULLY-DILUTED CONSIDERATION" shall mean the number of shares
of Parent Common Stock determined by dividing $74,850,000 by the Trading Price.
(h) "GOVERNMENTAL BODY" means any:
(i) nation, province, state, county, city, town,
village, district, or other jurisdiction of any nature;
(ii) federal, provincial, state, local, municipal,
foreign, or other government;
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(iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
(i) "HIRED EMPLOYEE" shall mean any former employee of Seller who
accepted Buyer's offer of employment and becomes an employee of Buyer upon the
Closing.
(j) "INTELLECTUAL PROPERTY RIGHTS" any or all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, re-examinations, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, and equivalent or similar
rights anywhere in the world in inventions and discoveries including without
limitation invention disclosures ("PATENTS"); (ii) all trade secrets and other
rights in know-how and confidential or proprietary information; (iii) all
copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world ("COPYRIGHTS"); (iv) all mask
works, mask work registrations and applications therefor, and any equivalent or
similar rights in semiconductor masks, layouts, architectures or topology
("MASKWORKS"); (v) all industrial designs and any registrations and applications
therefor throughout the world; (vi) all rights in World Wide Web addresses and
domain names and applications and registrations therefor; (vii) all trade names,
logos, common law trademarks and service marks, trademark and service mark
registrations and applications therefor and all goodwill associated therewith
throughout the world ("TRADEMARKS"); and (viii) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world, including,
without limitation, moral rights.
(k) "LIEN" means any mortgage, pledge, lien, charge, claim,
security interest, adverse claims of ownership or use, restrictions on transfer,
defect of title or other encumbrance of any sort, other than (a) mechanic's,
materialmen's, and similar liens with respect to any amounts not yet due and
payable, and (b) liens for taxes not yet due and payable.
(l) "MATERIAL ADVERSE EFFECT" shall mean any adverse change in
the business, operations, assets (including intangible assets), liabilities
(contingent or otherwise), results of operations or financial performance, or
condition (financial or otherwise) of Parent or any of its subsidiaries or
Seller or any of its subsidiaries, as the case may be, which is material to
Parent and its subsidiaries, taken as a whole, or Seller and its subsidiaries,
taken as a whole, as the case may be.
(m) "PARENT COMMON STOCK" means Common Stock of Parent, $0.001
par value.
(n) "PARENT OPTION SHARES" means the product of (i) the Exchange
Ratio times (ii) the difference of (A) the Seller Options minus (B) the
Retention Options
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(o) "PARENT SEC REPORTS" has the meaning set forth in Section
5.6.
(p) "PARENT SHARE CONSIDERATION" shall mean the number of shares
of Parent Common Stock equal to the difference of (i) the Fully-Diluted
Consideration, minus (ii) the Parent Option Shares.
(q) "PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
Governmental Body or other entity.
(r) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) Copyrights registrations and applications to register
Copyrights; (iv) Mask Work registrations and applications to register Mask
Works; and (v) any other Technology that is the subject of an application,
certificate, filing, registration or other document issued by, filed with, or
recorded by, any state, government or other public or private legal authority at
any time.
(s) "REPRESENTATIVES" means, with respect to a Person, that
Person's officers, directors, employees, accountants, counsel, investment
bankers, financial advisors, agents and other representatives.
(t) "RETENTION OPTIONS" shall mean options to purchase Seller
Common Stock to be granted to persons identified by Parent and Seller, which (i)
shall be granted under Seller's 2000 Stock Option Plan, (ii) shall have an
exercise price as designated by Seller with the approval of Parent, and (iii)
shall be subject to option agreements, in each case, in form and substance
satisfactory to Parent.
(u) "SAMSUNG AGREEMENT" shall mean the Development and License
Agreement, dated January 23, 1998, by and between Samsung Electronics Co., Ltd.
and Seller, as amended to date.
(v) "SEC" means the United States Securities and Exchange
Commission.
(w) "SELLER CAPITAL STOCK" means Seller Common Stock or Seller
Preferred Stock.
(x) "SELLER COMMON STOCK" means Common Stock of Seller, $0.01 par
value per share.
(y) "SELLER OPTIONS" shall have the meaning ascribed to such term
in Section 6.5.
(z) "SELLER PREFERRED STOCK" means Series A Preferred Stock of
Seller, $0.01 par value per share.
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(aa) "SELLER INTELLECTUAL PROPERTY" means any and all Technology
and any and all Intellectual Property Rights, including Seller Registered
Intellectual Property Rights (as defined below), that is or are owned (in whole
or in part) by or exclusively licensed to Seller.
(bb) "SELLER STOCKHOLDERS" shall mean the stockholders of record
of Seller immediately prior to the Closing.
(cc) "TECHNOLOGY" shall mean any or all of the following: (i)
works of authorship including, without limitation, computer programs, source
code and executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all instantiations of
the foregoing in any form and embodied in any media.
(dd) "TRADING PRICE" shall mean the average closing price of
Parent's Common Stock as reported by the Nasdaq National Market for each of the
ten (10) business days ending two (2) business days prior to the date hereof.
(ee) "TARGET AGREEMENt" shall mean the License Agreement, dated
February 22, 1996, by and between Target Systems, Inc. and Seller, as amended to
date.
(ff) "WWG PURCHASE ORDERS" shall mean the purchase order/proposal
from Wandell & Golterman, dated August 27, 1999, as amended to date, and the
purchase orders from Wavetek Wandell Golterman, dated January 14, 2000 and March
30, 2000, as amended to date.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets.
(a) Purchase and Sale. Upon the terms and subject to the
conditions set forth herein, at the Closing (as defined in Section 2.6(a)
hereof), Buyer shall purchase from Seller, and Seller shall irrevocably sell,
convey, transfer, assign and deliver to Buyer, the Purchased Assets (as defined
in Section 2.1(b) hereof), free and clear of all Liens.
(b) Definition of Purchased Assets. For all purposes of and under
this Agreement, the term "PURCHASED ASSETS" shall mean, refer to and include all
of Seller's right, title and interest in and to all tangible and intangible
assets, properties and rights which are owned, used or
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held for use by Seller, including, without limitation, the following to the
extent owned, used or held for use by Seller as of the Closing (but specifically
excluding the Excluded Assets (as defined in Section 2.1(c) hereof)):
(i) all real property, and any leaseholds and
sub-leaseholds therein, buildings, structures, improvements, fixtures,
furnishings and other fittings thereon, and easements, rights-of-way, and other
appurtenances thereto;
(ii) all tangible personal property (whether or not
located on Seller's premises), including, without limitation, all machinery,
equipment and tools, furniture and furnishings, computers and computer supplies,
office materials and supplies, inventories of any kind or nature, raw materials
and supplies, manufactured and purchased goods, and all goods in process and
finished goods;
(iii) all cash and cash equivalents in excess of
$150,000;
(iv) all accounts, notes and other receivables, all
prepaid assets and expenses;
(v) all books, records (other than records relating to
Taxes), ledgers, files, documents, correspondence, customer, supplier,
advertiser, circulation and other lists (including subscribers), invoices and
sales data, creative, advertising and other promotional materials, studies,
reports, and other printed or written materials or data;
(vi) all Seller Intellectual Property, goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, rights thereunder, remedies against infringements thereof, and rights
to protection of interests therein under the applicable laws of all
jurisdictions;
(vii) all rights under any contracts, indentures,
mortgages, instruments, Liens, guaranties or other agreements of Seller, other
than the Excluded Agreements;
(viii) all rights under all permits, authorizations,
orders, registrations, certificates, variances, approvals, consents and
franchises or any pending applications of Seller, including without limitation
all Permits (as defined in Section 3.10) to the extent such rights are
transferable;
(ix) all claims, actions, deposits, prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment of any kind or character;
(x) all insurance policies, and refunds paid or
payable in connection with the cancellation or discontinuance of any such
insurance policies following the Closing; and
(xi) the goodwill associated with the business of
Seller.
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(c) Definition of Excluded Assets. Notwithstanding anything to
the contrary set forth in this Section 2.1 or elsewhere in this Agreement, the
term "PURCHASED ASSETS" shall not mean, refer to or include the following
(collectively, the "EXCLUDED ASSETS") to the extent owned, used or held for use
by Seller as of the Closing:
(i) the corporate charter and bylaws, qualifications
to transact business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock certificates,
and other documents relating to the organization, maintenance, and existence of
Seller as a corporation;
(ii) up to $150,000 in cash;
(iii) all refunds of Taxes;
(iv) all claims, actions, deposits, prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment of any kind or nature (including any such item
relating to Taxes) relating to the Excluded Agreements, Excluded Assets or the
Excluded Liabilities;
(v) all directors' and officers' insurance policies,
and refunds paid or payable in connection with the cancellation or
discontinuance of any such insurance policies following the Closing;
(vi) all rights of Seller under this Agreement, any
agreement, certificate, instrument or other document executed and delivered by
Seller or Buyer in connection with the transactions contemplated hereby, or any
side agreement between Seller and Buyer entered into on or after the date
hereof;
(vii) all books and records of Seller which relate to
the Taxes, Excluded Agreements or Excluded Assets; provided, however, Seller
agrees that it shall provide Buyer with copies of, or reasonable access to, such
books and records to the extent that any such books and records relate to any of
the Purchased Assets or Assumed Liabilities; and
(viii) all assets set forth on Schedule 2.1(c)(vii)
hereto.
2.2 Assumption of Liabilities.
(a) Assumption. Upon the terms and subject to the conditions set
forth herein, at the Closing, Buyer shall assume from Seller, and Seller shall
irrevocably convey, transfer and assign to Buyer, all of the Assumed Liabilities
(as defined in Section 2.2(b) hereof). Buyer shall not assume any Liabilities
(as defined in Section 2.2(b) hereof) of Seller pursuant hereto, other than the
Assumed Liabilities.
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(b) Definition of Assumed Liabilities. For all purposes of and
under this Agreement, the term "ASSUMED LIABILITIES" shall mean, refer to and
include the following liabilities of Seller (but specifically excluding the
Excluded Liabilities (as defined in Section 2.2(c) hereof)):
(i) all liabilities reflected in the Most Recent
Balance Sheet (as defined in Section 3.7 hereof);
(ii) all liabilities incurred by Seller in the
ordinary course of business from the date of the Most Recent Balance Sheet
through the Closing Date through no violation of Section 5.1 hereof;
(iii) all liabilities under any contracts, indentures,
mortgages, instruments, Liens, guaranties or other agreements of Seller, other
than the Excluded Agreements arising after the Closing Date (including
commitments by Seller to purchase goods in the ordinary course of business which
are unfulfilled as of the Closing Date), except to the extent arising from any
breach or default occurring prior to the Closing Date;
(iv) all liabilities under Permits arising after the
Closing Date;
(v) all liabilities and obligations set forth in
Schedule 2.2(b) under an express statement (that the Buyer has initialed) to the
effect that the definition of Assumed Liabilities will include the liabilities
and obligations so disclosed;
(vi) all liabilities related to the Purchased Assets
to the extent arising from or related to any facts or circumstances occurring
after the Closing Date;
(vii) all liabilities related to the Hired Employees
arising from or related to any facts or circumstances occurring after the
Closing Date, except as otherwise expressly provided herein.
(viii) all liabilities for Seller Expenses (as defined
in Section 10.13) up to $2,000,000;
(ix) all liabilities related to Seller Options, as set
forth in Section 6.5 or 6.6; and
(x) all liabilities of Seller arising out of or in
connection with any claims, action, deposits, prepayments, refunds, causes of
action or choses in action pending against Seller as of the Closing.
(c) Definition of Excluded Liabilities. Notwithstanding anything
to the contrary set forth in this Section 2.2 or elsewhere in this Agreement,
the term "ASSUMED LIABILITIES" shall not mean, refer to or include the following
(collectively, "EXCLUDED LIABILITIES"):
(i) all liabilities relating to agreements as set
forth on Schedule 2.2(c)(i) (the "EXCLUDED AGREEMENTS");
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(ii) all liabilities for Taxes of Seller or Taxes
attributable to the ownership or operation of the Purchased Assets for any
taxable period (or portion of any period) ending on or prior to the Closing Date
and, including, without limitation, all Liabilities for Taxes attributable to
the transactions contemplated by this Agreement resulting from a determination
by any Tax authority that the transactions contemplated hereby do not qualify as
a "reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(iii) all liabilities for Seller Expenses in excess of
$2,000,000 in the aggregate;
(iv) all liabilities relating to options, warrants and
other rights to purchase or otherwise acquire shares of capital stock of Seller,
other than Seller Options assumed by Buyer pursuant hereto;
(v) all liabilities to stockholders of Seller in their
capacity as such;
(vi) all liabilities of Seller under this Agreement or
any other certificate, instrument or other agreement entered into in connection
with the transactions contemplated hereby;
(vii) all liabilities of Seller or any successor
thereto for any breach of this Agreement by Seller, or any representation or
warranty of Seller contained herein; and
(viii) all liabilities other than Assumed Liabilities.
2.3 Consideration for Purchased Assets.
(a) Consideration. On the terms and subject to the conditions set
forth in this Agreement, as full payment for the transfer of the Purchased
Assets by Seller to Buyer, at the Closing, (i) Buyer shall deliver to Seller the
Parent Share Consideration and (ii) Buyer shall assume all of the Assumed
Liabilities pursuant to Section 2.2 hereof (collectively, the "PURCHASE PRICE").
(b) Adjustments to Parent Common Stock. The number of shares of
Parent Common Stock issuable in Section 2.3(a) shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock or Seller Capital Stock), reorganization, recapitalization or other
like change with respect to Parent Common Stock occurring after the date hereof
and prior to the Closing.
(c) Escrow Deposit. Notwithstanding the terms of Section 2.3(a)
hereof, subject to and in accordance with the provisions of Article VIII hereof,
at the Closing, Buyer shall cause to be delivered to the Escrow Agent (as
defined in Section 8.2 hereof) a certificate or certificates representing the
Escrow Shares, which shall be registered in the name of the Escrow Agent as
nominee for Seller. The Escrow Shares shall be available to compensate Parent,
Buyer or any other Buyer Indemnified Person (as defined in Section 8.2(a)
hereof) for any Losses (as defined in Section 8.2(a) hereof) for which Parent,
Buyer or any other Buyer Indemnified Person is entitled to indemnification from
Seller or any successor thereto pursuant to Article VIII hereof. To the extent
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not used for such purposes, such Escrow Shares shall be released pursuant to and
in accordance with the terms of Article VIII hereof.
2.4 Sales and Use Taxes. Buyer shall bear and pay any and all sales, use
and transfer taxes arising out of the transfer of the Purchased Assets to Buyer
pursuant hereto (the "TRANSFER Taxes"). To the extent permitted by applicable
law, Parent and Buyer shall cooperate fully with Seller in minimizing such
Transfer Taxes. To the extent any Tax authority provides notice to Parent or
Buyer of an audit of the Transfer Taxes, Buyer shall promptly assume
responsibility for such audit and shall bear and pay when due any additional
Transfer Taxes (plus interest and penalties determined to be due thereon).
2.5 Bulk Transfer Laws. Parent, Buyer and Seller shall waive, to the
fullest extent permitted by applicable law, any and all bulk transfer or similar
laws that may apply to the transactions contemplated by this Agreement.
2.6 Closing.
(a) Closing Place, Time and Date. Unless this Agreement is
earlier terminated pursuant to Section 9.1 hereof, the closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held at the
offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, One
Market Street, Spear Tower, Suite 3300, San Francisco, CA 94105, at 10:00 a.m.
on the date which is two (2) business days following the satisfaction or, if
permitted pursuant to the terms of Article VII hereof, waiver of the conditions
to Closing set forth in Article VII hereof, or at such other place and such
other time and/or date as the parties hereto shall mutually agree (the actual
date on which the Closing shall occur being referred to herein as the "CLOSING
DATE").
(b) Closing Deliveries.
(i) At the Closing, Buyer shall deliver, or cause to
be delivered, to Seller or the Escrow Agent, as applicable, the following, dated
as of the Closing Date and executed for and on behalf of Parent or Buyer (as
applicable) by a duly authorized officer thereof:
(1) a certificate representing the Parent Share
Consideration, less the Escrow Shares, registered in the name of Seller;
(2) a certificate representing the Escrow Shares,
registered in the name of the Escrow Agent as nominee for Seller;
(3) one or more instruments of assignment and
assumption, in customary form and substance reasonably satisfactory to Buyer and
Seller and their respective counsel;
(4) any and all other instruments, certificates and
agreements contemplated by Article VII hereof or as Seller may reasonably
request in order to effectively make Buyer responsible for all Assumed
Liabilities pursuant hereto to the fullest extent permitted by applicable law.
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(ii) At the Closing, Seller shall deliver, or cause to
be delivered, to Buyer the following, dated as of the Closing Date and executed
for and on behalf of Seller by a duly authorized officer thereof:
(1) a bill of sale, in customary form and substance
reasonably satisfactory to Buyer and Seller and their respective counsel;
(2) one or more instruments and assumption, in
customary form and substance reasonably satisfactory to Buyer and Seller and
their respective counsel;
(3) an instrument of assignment of patents, in
customary form and substance reasonably satisfactory to Buyer and Seller and
their respective counsel;
(4) an instrument of assignment of copyrights, in
customary form and substance reasonably satisfactory to Buyer and Seller and
their respective counsel;
(5) an instrument of assignment of trademarks, in
customary form and substance reasonably satisfactory to Buyer and Seller and
their respective counsel; and
(6) any and all other instruments, certificates and
agreements contemplated by Article VII hereof or as Buyer may reasonably request
in order to effectively transfer to Buyer all of the Purchased Assets pursuant
hereto to the fullest extent permitted by applicable law.
(c) Closing. The effective date of the transfer of the Purchased
Assets from Seller to Buyer pursuant hereto shall be 12:01 a.m. of the Closing
Date (the "CLOSING"). From and after the Closing, the business of Seller shall
be conducted and the Purchased Assets shall by held for the account and benefit,
and at the risk, of Buyer.
2.7 Nontransferable Assets. To the extent that any Purchased Asset or
Assumed Liability to be sold, conveyed, assigned, transferred, delivered or
assumed to or by Buyer pursuant hereto, or any claim, right or benefit arising
thereunder or resulting therefrom, is not capable of being sold, conveyed,
assigned, transferred or delivered without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third person (including a
government or governmental unit), or if such sale, conveyance, assignment,
transfer or delivery or attempted sale, conveyance, assignment, transfer or
delivery would constitute a breach or termination right thereof or a violation
of any law, decree, order, regulation or other governmental edict, except as
expressly otherwise provided herein, this Agreement shall not constitute a sale,
conveyance, assignment, transfer or delivery thereof, or an attempted sale,
conveyance, assignment, transfer or delivery thereof absent such approvals,
consents or waivers. If any such approval, consent or waiver shall not be
obtained, or if an attempted assignment of any such Purchased Asset or the
assumption of any Assumed Liability by Buyer would be ineffective so that Buyer
would not in fact receive all such Purchased Assets or assume all such Assumed
Liabilities pursuant hereto, Seller, Buyer and Parent shall cooperate in a
mutually agreeable arrangement under which Buyer would obtain the benefits and
assume the obligations of such Purchased Assets and Assumed Liabilities in
accordance with this
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Agreement, including subcontracting, sub-licensing, or sub-leasing to Buyer, or
under which Seller, at Buyer's expense, would enforce for the benefit of Buyer,
with Buyer assuming all of Seller's obligations thereunder, any and all rights
of Seller against a third party thereto. From and after the Closing, Seller
shall promptly pay to Buyer when received all monies received by Seller under
any Purchased Asset or any claim or right or any benefit arising thereunder,
except to the extent the same represents an Excluded Asset hereunder, and Buyer
shall promptly pay, perform and discharge when due all Assumed Liabilities. The
failure of Seller to obtain any third party consent hereunder shall not affect
the Purchase Price if the Closing shall occur.
2.8 Taking of Necessary Action; Further Action. From time to time after
the Closing Date, at the request of either Party hereto and at the expense of
such Party, the Parties hereto shall execute and deliver such other instruments
of sale, transfer, conveyance, assignment and confirmation and take such action
as Buyer may reasonably determine is necessary to transfer, convey and assign to
Buyer, and to confirm Buyer's title to or interest in the Purchased Assets, to
put Buyer in actual possession and operating control thereof and to assist Buyer
in exercising all rights with respect thereto. The Seller hereby constitutes and
appoints Buyer and its successors and assigns as its true and lawful attorney in
fact in connection with the transactions contemplated by this instrument, with
full power of substitution, in the name and stead of the Seller but on behalf of
and for the benefit of the Buyer and its successors and assigns, to demand and
receive any and all of the assets, properties, rights and business hereby
conveyed, assigned, and transferred or intended so to be, and to give receipt
and releases for and in respect of the same and any part thereof, and from time
to time to institute and prosecute, in the name of the Seller or otherwise, for
the benefit of the Buyer or its successors and assigns, proceedings at law, in
equity, or otherwise, which the Buyer or its successors or assigns reasonably
deem proper in order to collect or reduce to possession or endorse any of the
Purchased Assets and to do all acts and things in relation to the Purchased
Assets which the Buyer or its successors or assigns reasonably deem desirable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate section numbers) supplied by
Seller to Parent and Buyer (the "SELLER DISCLOSURE LETTER"), Seller hereby
represents and warrants to Parent and Buyer that the statements contained in
this Article III are true and correct as of the date of this Agreement and will
be true and correct as of the Closing (as though made at the Closing );
provided, that the representations and warranties made as of a specified date
will be true and correct as of such date.
3.1 Organization, Qualification, and Corporate Power. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Seller is duly authorized to conduct business and
is in good standing under the laws of each other jurisdiction where such
qualification is required and in which the failure to so qualify is reasonably
likely to
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have a Material Adverse Effect on Seller. There is no state other than
Massachusetts in which Seller owns any property or in which it has any
employees, offices or operations. Seller has full 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. Section 3.1 of Seller Disclosure Letter lists
the directors and officers of Seller. The operations now being conducted by
Seller have not been conducted under any other name since its inception. The
copies of Seller's Certificate of Incorporation, Bylaws, minute books, stock
transfer ledger, stock option ledger and warrant ledger which have been
delivered to Parent are true, correct and complete as of the date hereof and
shall be as of the Closing.
3.2 Authorization. Seller has full power and authority to execute and
deliver this Agreement and all agreements and instruments delivered pursuant
hereto (the "ANCILLARY AGREEMENTS") to which it is a party, and, subject to
receipt of the requisite approval of its stockholders, to consummate the
transactions contemplated hereunder and to perform its obligations hereunder and
no other proceedings on the part of Seller are necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which Seller is a party. This Agreement and the Ancillary
Agreements to which Seller is a party and the transactions contemplated hereby
and thereby have been approved by the unanimous vote of Seller's Board of
Directors. This Agreement and the Ancillary Agreements to which Seller is a
party constitute the valid and legally binding obligations of Seller,
enforceable against Seller in accordance with their respective terms and
conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.3 Capitalization.
(a) Capital Stock. The entire authorized capital stock of Seller
consists of 5,000,000 shares of Common Stock, 282,589 of which are issued and
outstanding, and 3,000,000 shares of Series A Preferred Stock, 633,334 of which
are issued and outstanding. All of the issued and outstanding shares of capital
stock have been duly authorized, are validly issued, fully paid, non-assessable
and were not issued in violation of any preemptive rights, rights of first
refusal, or any similar rights and are held of record by the respective
stockholders with the domicile addresses as set forth in Section 3.3(a) of
Seller Disclosure Letter. None of the issued and outstanding shares of capital
stock are subject to any preemptive rights, rights of first refusal, or any
similar rights. All of the outstanding shares of capital stock have been
offered, issued and sold by Seller in compliance with applicable federal and
state securities laws. All shares of Preferred Stock of Seller are convertible
into shares of Seller Common Stock at a one-for-one conversion ratio. There are
no declared or accrued but unpaid dividends with respect to any shares of
capital stock of Seller.
(b) Options, Rights or Other Agreements. Except for Seller Plans,
(i) since the closing of the Bankruptcy Case, Seller has not adopted or
maintained and (ii) Seller is not obligated under, any stock option plan or
other plan providing for equity compensation of any person. Other than the
Retention Options, Seller has reserved 1,483,333 shares of Seller Common Stock
for issuance to employees, contract workers and directors of, and consultants
to, Seller upon the exercise
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of options granted under the Plans, of which 1,122,350 shares are issuable, as
of the date hereof, upon the exercise of outstanding, unexercised options
granted under the Plan. Other than the Retention Options, Section 3.3(b) of
Seller Disclosure Letter sets forth for each outstanding Seller Option, the name
of the holder of such option, the domicile address of such holder, the number of
shares of Seller Common Stock issuable upon the exercise of such option, the
exercise price of such option, the vesting schedule for such option, including
the extent vested to date and whether the vesting of such option will be
accelerated by the transactions contemplated by this Agreement, and whether such
option is intended to qualify as an incentive stock option as defined in Section
422 of the Code. Except for Seller Options, there are no options, warrants,
calls, rights, commitments or agreements of any character, written or oral, to
which Seller is a party or by which it is bound obligating Seller to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Seller or obligating
Seller to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to Seller.
Except as contemplated hereby, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting stock of Seller.
3.4 Subsidiaries. Seller does not have, and never has had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any shares
in the capital of or any interest in, or control, directly or indirectly, any
other corporation, partnership, association, joint venture or other business
entity. In addition, there are no corporations, partnerships, associations,
joint ventures or other business entities controlled by, directly or indirectly,
any party that may be deemed to control Seller.
3.5 No Conflicts. Neither the execution and the delivery of this
Agreement by Seller nor the consummation of the transactions contemplated hereby
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject, (B) violate or
conflict with any provision of its Certificate of Incorporation or bylaws, or
(C) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under, any agreement,
contract, lease, license, instrument, franchise, permit, mortgage, indenture or
other arrangement to which Seller is a party or by which it is bound or to which
any of its assets are subject (or result in the imposition of any Lien upon any
of their respective assets).
3.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Body or any third
party, including a party to any agreement with Seller, is required by or with
respect to Seller in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and (ii) any applicable filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT").
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3.7 Financial Statements. Section 3.7 of Seller Disclosure Letter
contains the following financial statements (collectively the "Financial
Statements"): (i) audited balance sheets and statements of income and cash flows
as of and for the fiscal years ended December 31, 1999, 1998 and 1997 for
Seller; and (ii) an unaudited balance sheet (the "MOST RECENT BALANCE SHEET")
and statements of income and cash flows (the "MOST RECENT FINANCIAL STATEMENTS")
as of and for the four month period ended April 30, 2000 (the "MOST RECENT
FISCAL PERIOD END") for Seller. The Financial Statements, (including the notes
thereto) have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
thereby and present fairly in all material respects the financial condition of
Seller as of such dates and the results of operations of Seller for such
periods; provided, however, that the Most Recent Financial Statements lack
footnotes and certain other presentation items and are subject to normal year
end adjustments which will not be material individually or in the aggregate. The
books of account of Seller reflect, in all material respects, as of the dates
shown thereon all items of income and expenses, and all assets, liabilities and
accruals of Seller required to be reflected therein.
3.8 Undisclosed Liabilities. Seller has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes), except for that which individually or
in the aggregate (i) is reflected on the Most Recent Balance Sheet or (ii) has
arisen after the Most Recent Fiscal Period End in the ordinary course of
business.
3.9 Events Subsequent to Most Recent Fiscal Period End. Since the Most
Recent Fiscal Period End, there has not been any material adverse change in the
business, operations, assets (including intangible assets), liabilities
(contingent or otherwise), results of operations or financial performance, or
condition (financial or otherwise) of Seller. Without limiting the generality of
the foregoing, since that date:
(a) Seller has not sold, leased, transferred, or assigned any
assets or properties, tangible or intangible, outside the ordinary course of
business;
(b) Seller has not entered into, assumed or become bound under or
obligated by any agreement, contract, lease or commitment (collectively a
"Contract") or extended or modified the terms of any Contract which (i) involves
the payment of greater than $10,000 per annum or which extends for more than one
(1) year, (ii) involves any payment or obligation to any Affiliate of Seller
other than in the ordinary course of business, (iii) involves the sale of any
material assets, or (iv) involves any license of any Seller Intellectual
Property;
(c) no party (including Seller) has accelerated, terminated, made
modifications to, or canceled any agreement, contract, lease, or license to
which Seller is a party or by which it is bound and Seller has not modified,
canceled or waived or settled any debts or claims held by it, outside the
ordinary course of business, or waived or settled any rights or claims of a
substantial value, whether or not in the ordinary course of business;
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(d) none of the assets of Seller, tangible or intangible, has
become subject to any Lien;
(e) Seller has not made any capital expenditures except in the
ordinary course of business and not exceeding $10,000 in the aggregate of all
such capital expenditures;
(f) Seller has not made any capital investment in, or any loan
to, any other Person;
(g) Seller has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness;
(h) Seller has not granted any license or sublicense of any
rights under or with respect to any Seller Intellectual Property;
(i) there has been no change made or authorized in the
Certificate of Incorporation or bylaws of Seller, except as contemplated by this
Agreement;
(j) other than the grant of the Retention Options hereunder or
the issuance of Seller Common Stock pursuant to the exercise of employee stock
options granted under the Plans outstanding as of the date hereof, there has not
been (i) any change in Seller's authorized or issued capital stock, (ii) any
grant of any stock option or right to purchase shares of capital stock of
Seller, (iii) the issuance of any security convertible into such capital stock,
(iv) the grant of any registration rights, (v) any purchase, redemption,
retirement, or other acquisition by Seller of any shares of any such capital
stock or (vi) any declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(k) Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property in excess of $10,000 in
the aggregate of all such damage, destruction and losses;
(l) Seller has not suffered any repeated, recurring or prolonged
shortage, cessation or interruption of communications, customer access, supplies
or utility services;
(m) Seller has not made any loan to, or entered into any other
transaction with, or paid any bonuses in excess of an aggregate of $10,000 to,
any of its Affiliates, directors, officers, or employees or their Affiliates,
and, in any event, any such transaction was on fair and reasonable terms no less
favorable to Seller than would be obtained in a comparable arm's length
transaction with a Person which is not such a director, officer or employee or
Affiliate thereof;
(n) Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(o) Seller has not granted any increase in the base compensation
of any of its directors or officers, or, except in the ordinary course of
business, any of its employees;
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(p) other than the amendments to Seller's 2000 Stock Plan which
were or will be made with the approval of Parent, Seller has not adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, or employees (or taken any such action with respect to any
other Employee Benefit Plan);
(q) Seller has not made any other change in employment terms for
any of its directors or officers, and Seller has not made any other change in
employment terms for any other employees outside the ordinary course of
business;
(r) Seller has not suffered any significant adverse change or any
threat of any significant adverse change in its relations with, or any loss or
threat of loss of, any of its major customers, distributors or partners;
(s) Seller has not suffered any adverse change or any threat of
any adverse change in its relations with, or any loss or threat of loss of, any
of its major suppliers;
(t) Seller has not received notice and does not have knowledge of
any actual or threatened labor trouble or strike, or any other occurrence, event
or condition of a similar character;
(u) Seller has not changed any of the accounting principles
followed by it or the method of applying such principles;
(v) Seller has not made a change in any of its banking or safe
deposit arrangements;
(w) Seller has not entered into any transaction other than in the
ordinary course of business; and
(x) Seller has not become obligated to do any of the foregoing.
3.10 Legal Compliance. Seller is in compliance in all material respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof). No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, notice or inquiry is pending, or to the knowledge of Seller, is
threatened against Seller by any governmental body alleging any failure to so
comply. Seller has all licenses, permits, approvals, registrations,
qualifications, certificates and other governmental authorizations that are
necessary for the operations of Seller as they are presently conducted.
3.11 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" or, collectively,
"Taxes", means (i) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding,
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payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts; (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of being or ceasing to be a member of an affiliated, consolidated,
combined or unitary group for any period (including, without limitation, any
liability under Treas. Reg. Section 1.1502-6 or any comparable provision of
foreign, state or local law); and (iii) any liability for the payment of any
amounts of the type described in clause (i) or (ii) as a result of any express
or implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Since the closing of the Bankruptcy Case, Seller has timely
filed all reports and returns with respect to any Taxes ("TAX RETURNS") that it
was required to file. All such Tax Returns were correct and complete in all
material respects so as to avoid any additional assessments and have been
completed in accordance with applicable law and were prepared in accordance with
the applicable statutes, rules and regulations. All Taxes owed by Seller
(whether or not shown on any Tax Return) were paid in full when due or are being
contested in good faith and are supported by adequate reserves on the Most
Recent Financial Statements.
(c) Seller has provided adequate reserves on its Financial
Statements for the payment of any Taxes accrued but not yet due and payable.
(d) Seller has withheld with respect to its employees all federal
and state income Taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA"), and other
Taxes required to be withheld.
(e) Except as set forth in Section 3.11(e) of Seller Disclosure
Letter, Seller is not currently the beneficiary of any extension of time within
which to file any Tax Return, and Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency.
(f) There is no dispute, claim or proposed adjustment concerning
any Tax liability of Seller either (A) claimed or raised by any authority in
writing or (B) based upon personal contact with any agent of such authority.
Seller is not a party to nor has it been notified that it is the subject of any
pending, proposed or threatened action, investigation, proceeding, audit, claim
or assessment by or before the Internal Revenue Service or any other
governmental authority and no claim for assessment, deficiency or collection of
Taxes, or proposed assessment, deficiency or collection from the Internal
Revenue Service or any other governmental authority which has not been
satisfied, nor does Seller have any reason to believe that any such notice will
be received in the future.
(g) No Tax Returns are currently the subject of audit or
examination nor has Seller been notified of any request for an audit or
examination.
(h) No power of attorney has been granted by Seller or any of its
Affiliates with respect to any matter relating to Taxes of Seller.
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(i) There are no Liens upon any property or assets of Seller
relating to or attributable to Taxes, except for Liens for taxes not yet due and
payable.
(j) Seller has no knowledge of any basis for the assertion of any
claim relating or attributable to Taxes which, if adversely determined, would
result in any Lien upon any property or assets of Seller.
(k) Seller has not filed a consent under Sec. 341(f) of the Code
or agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by
Seller.
(l) Other than the grant of Retention Options, Seller has not
made any payments, is not obligated to make any payments, and is not a party to
any agreement that under any circumstances could obligate it to make any
payments as a result of the consummation of the transactions contemplated by
this Agreement that will not be deductible under Section 280G or 162 of the
Code.
(m) Seller 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)(1)(A)(ii) of the Code.
(n) Seller is not a party to any tax allocation or sharing
agreement nor does Seller owe any amount under any such agreement.
(o) Seller (A) has not been a member of any affiliated group
within the meaning of Section 1504 of the Code or any similar group defined
under a similar provision of state, local, or foreign law (an "Affiliated
Group") filing a consolidated federal Income Tax Return (other than a group the
common parent of which was Seller) and (B) has no liability for the taxes of any
Person (other than any of Seller) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(p) Seller has not requested or received a ruling from any taxing
authority or signed a closing agreement with any taxing authority. No claim has
ever been made by a taxing authority in a jurisdiction where Seller does not
file Tax Returns that Seller is or may be subject to taxation by such
jurisdiction.
(q) The unpaid Taxes of Seller (A) did not, as of the Most Recent
Fiscal Period End, exceed by any amount the reserve for Tax liability (other
than any reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (B) will not exceed that reserve as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Seller in filing its Tax Returns.
(r) Seller has provided to Parent copies of all federal and state
income and all state sales and use Tax Returns for all periods since the closing
of the Bankruptcy Case.
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(s) None of the assets of Seller are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(t) Seller has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement.
3.12 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) Seller owns no real property, nor has it ever owned any real
property. All current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) on the part of
Seller and, to the knowledge of Seller, on the part of any other party thereto.
(b) Seller has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except (i) as reflected in the Most
Recent Balance Sheet, and (ii) such imperfections of title and encumbrances, if
any, which do not detract from the value in any material respect or interfere
with the present use of the property subject thereto or affected thereby.
(c) Section 3.12(c) of Seller Disclosure Letter lists each
material item of equipment with a value of $5,000 or more (the "EQUIPMENT")
owned or leased by Seller, and such Equipment is (i) adequate for the conduct of
the business of Seller as currently conducted, and (ii) in good operating
condition, regularly and properly maintained, subject to normal wear and tear.
(d) Seller owns, free and clear of any Liens, all customer lists,
customer contact information, customer correspondence and customer licensing and
purchasing histories relating to its current and former customers (the "CUSTOMER
INFORMATION"). Other than Seller and the customers to which such Customer
Information relates, no person possesses any claims or rights with respect to
use of the Customer Information.
3.13 Intellectual Property.
(a) Section 3.13 (a) of Seller Disclosure Letter lists all rights
to Seller Intellectual Property, including but not limited to, Registered
Intellectual Property Rights owned by, filed in the name of, or applied for, by
Seller (the "SELLER REGISTERED INTELLECTUAL PROPERTY RIGHTS") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of Seller Registered Intellectual Property Rights or
Seller Intellectual Property.
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(b) Each item of Seller Registered Intellectual Property Rights
is valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Seller Registered Intellectual Property Rights have
been paid and all necessary documents and certificates in connection with such
Seller Registered Intellectual Property Rights have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property Rights. Except as set forth on Section 3.13(b)
of Seller Disclosure Letter, there are no actions that must be taken by Seller
within one hundred twenty (120) days of the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any responses
to PTO office actions, documents, applications or certificates for the purposes
of obtaining, maintaining, perfecting or preserving or renewing any Registered
Intellectual Property Rights. In each case in which Seller has acquired any
Technology or Intellectual Property Right from any person, Seller or such
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Technology and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to Seller. To the maximum extent provided for by,
and in accordance with, applicable laws and regulations, Seller has recorded
each such assignment of a Registered Intellectual Property Right assigned to
Seller with the relevant Governmental Body, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be. Except as set forth on Section 3.13(b) of
Seller Disclosure Letter, Seller has not claimed a particular status, including
"Small Business Status," in the application for any Intellectual Property
Rights, which claim of status was not at the time made, or which has since
become, inaccurate or false or that will no longer be true and accurate as a
result of the Closing.
(c) Seller has no knowledge of any facts or circumstances that
would render any Seller Intellectual Property invalid or unenforceable. Without
limiting the foregoing, Seller knows of no information, materials, facts, or
circumstances, including any information or fact that would constitute prior
art, that would render any of Seller Registered Intellectual Property Rights
invalid or unenforceable, or would adversely effect any pending application for
any Seller Registered Intellectual Property Right and Seller has not
misrepresented, or failed to disclose, and has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Seller Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Seller Registered
Intellectual Property Right.
(d) Each item of Seller Intellectual Property is free and clear
of any Liens (i) except as set forth in Section 3.13(d) of Seller Disclosure
Letter and (2) except for non-exclusive licenses granted to end-user customers
in the ordinary course of business. Except as set forth in Section 3.13(d) of
Seller Disclosure Letter, Seller is the exclusive owner or exclusive licensee of
all Seller Intellectual Property. Without limiting the foregoing: (i) Seller is
the exclusive owner of all Trademarks used in connection with the operation or
conduct of the business of Seller, including the sale, licensing, distribution
or provision of any products or services by Seller; (ii) Seller owns
exclusively, and has good title to, all Copyrighted Works that are products of
Seller or which Seller
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otherwise purports to own; and (iii) to the extent that any Patents would
otherwise be infringed by any product or services of Seller, such Patents
constitute Seller Intellectual Property.
(e) Except as set forth in Section 3.13(e) of Seller Disclosure
Letter, all Seller Intellectual Property will be fully transferable, alienable
or licensable by Buyer and/or Parent without restriction and without payment of
any kind to any third party.
(f) Except as set forth in Section 3.13(f) of Seller Disclosure
Letter, to the extent that any Seller Technology has been developed or created
by a third party for Seller, Seller has a written agreement with such third
party with respect thereto and Seller thereby either (i) has obtained ownership
of, and is the exclusive owner of, or (ii) has obtained a license (sufficient
for the conduct of its business as currently conducted and as proposed to be
conducted) to all such third party's Intellectual Property Rights in such
Technology by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(g) Except as set forth on Section 3.13(g) of Seller Disclosure
Letter and with exception of "shrink-wrap" or similar widely-available
commercial end-user licenses, all Technology used in or necessary to the conduct
of Seller's business as presently conducted or currently contemplated to be
conducted by Seller was written and created solely by either (i) employees of
Seller acting within the scope of their employment or (ii) by third parties who
have validly and irrevocably assigned all of their rights, including
Intellectual Property Rights therein, to Seller, and no third party owns or has
any rights to any of Seller Intellectual Property.
(h) Except as set forth in Section 3.13(h) of Seller Disclosure
Letter, all employees and consultants of Seller have entered into a valid and
binding written agreement with Seller sufficient to vest title in Seller of all
Technology, including all accompanying Intellectual Property Rights, created by
such employee or consultant in the scope of his or her services or employment
for Seller.
(i) Seller has taken all steps that are reasonably required to
protect Seller's rights in confidential information and trade secrets of Seller
or provided by any other person to Seller. Without limiting the foregoing,
Seller has, and enforces, a policy requiring each employee, consultant and
contractor to execute a proprietary information, confidentiality and assignment
agreement, substantially in the form attached hereto as Section 3.13(i) of
Seller Disclosure Letter, and all current and former employees, consultants and
contractors of Seller have executed such an agreement.
(j) Except as set forth on Section 3.13(j) of Seller Disclosure
Letter, no person who has licensed Technology or Intellectual Property Rights to
Seller has ownership rights or license rights to improvements made by Seller in
such Technology or Intellectual Property Rights.
(k) Except as set forth in Section 3.13(k) of Seller Disclosure
Letter, Seller has not transferred ownership of, or granted any exclusive
license of or right to use, or authorized the retention of any exclusive rights
to use or joint ownership of, any Technology or Intellectual Property Right that
is or was Seller Intellectual Property, to any other person.
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(l) Other than inbound "shrink-wrap" and similar publicly
available commercial binary code end-user licenses and outbound "shrink-wrap"
licenses in the form set forth on Section 3.13(l)(A) of Seller Disclosure
Letter, the contracts, licenses and agreements listed in Section 3.13(l)(A) of
Seller Disclosure Letter lists all contracts, licenses and agreements to which
Seller is a party with respect to any Technology or Intellectual Property
Rights. Except as set forth in Section 3.13(l)(B) of Seller Disclosure Letter,
Seller is not in breach of nor has Seller failed to perform under, any of the
foregoing contracts, licenses or agreements and, to Seller's knowledge, no other
party to any such contract, license or agreement is in breach thereof or has
failed to perform thereunder.
(m) Section 3.13(m) of Seller Disclosure Letter lists all
material contracts, licenses and agreements between Seller and any other person
wherein or whereby Seller has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by Seller or such other person of the
Intellectual Property Rights of any person other than Seller.
(n) Except as set forth in Section 3.13(n) of Seller Disclosure
Letter, to the knowledge of Seller, there are no contracts, licenses or
agreements between Seller and any other person with respect to Seller
Intellectual Property under which there is any dispute regarding the scope of
such agreement, or performance under such agreement, including with respect to
any payments to be made or received by Seller thereunder.
(o) The operation of the business of Seller as it currently is
conducted or is contemplated to be conducted by Seller, including but not
limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of Seller does not and will not and will not when conducted by
Parent and/or Buyer in substantially the same manner following the Closing,
infringe or misappropriate any Intellectual Property Right of any person,
violate any right of any person (including any right to privacy or publicity) or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and Seller has not received notice from any person claiming that
such operation or any act, product, technology or service (including products,
technology or services currently under development) of Seller infringes or
misappropriates any Intellectual Property Right of any person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor
does Seller have knowledge of any basis therefor).
(p) To Seller's knowledge, no person is infringing or
misappropriating any Seller Intellectual Property Right.
(q) No Seller Intellectual Property or service of Seller is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by Seller or may affect the validity, use or enforceability of
such Seller Intellectual Property.
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(r) No (i) product, technology, service or publication of Seller,
(ii) material published or distributed by Seller, or (iii) conduct or statement
of Seller constitutes obscene material, a defamatory statement or material,
false advertising or otherwise violates in any material respect any law or
regulation.
(s) Except as set forth on Section 3.13(s) of Seller Disclosure
Letter, Seller Intellectual Property constitutes all the Technology and
Intellectual Property Rights used in and/or necessary to the conduct of the
business of Seller as it currently is conducted, and, to the knowledge of
Seller, as it is currently planned or contemplated to be conducted by Seller,
including, without limitation, the design, development, manufacture, use, import
and sale of products, technology and performance of services (including
products, technology or services currently under development).
(t) Neither this Agreement nor the transactions contemplated by
this Agreement, including the assignment to Buyer, by operation of law or
otherwise, of any contracts or agreements to which Seller is a party, will
result in (i) either Parent's or the Buyer's granting to any third party any
right to or with respect to any Technology or Intellectual Property Right owned
by, or licensed to, either of them, (ii) either the Parent's or the Buyer's
being bound by, or subject to, any non-compete or other restriction on the
operation or scope of their respective businesses, or (iii) either the Parent's
or the Buyer's being obligated to pay any royalties or other amounts to any
third party in excess of those payable by Parent or Buyer, respectively, prior
to the Closing.
(u) Except as set forth in Section 3.13(u) of Seller Disclosure
Letter, there are no royalties, fees, honoraria or other payments payable by
Seller to any person or entity by reason of the ownership, development, use,
license, sale or disposition of Seller Intellectual Property, other than
salaries and sales commissions paid to employees and sales agents in the
ordinary course of business.
3.14 Contracts. Section 3.14 of Seller Disclosure Letter lists the
following written or oral contracts, agreements, commitments and other
arrangements under which Seller is obligated or by which Seller or any of its
assets is bound:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person that involves aggregate annual
payments of more than $20,000;
(b) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on Seller;
(c) any agreement (or group of related agreements) for the
purchase or sale of commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which will
extend over a period of more than one year or involve consideration in excess of
$20,000;
(d) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors that involves aggregate annual payments of more than $10,000;
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(e) any agreement concerning a partnership or joint venture;
(f) any agreement (or group of related agreements) under which
Seller has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or any capitalized lease obligation in excess of $20,000 or under
which a Lien has been imposed on any of Seller's assets, tangible or intangible;
(g) any agreement to which Seller is a party and which contains
covenants of Seller not to compete or engage in any line of business, in any
geographic area or with any person or covenants of any other person not to
compete with Seller or engage in any line of business of Seller;
(h) other than the Retention Options, any agreement with any
Seller Stockholder or any of such stockholder's Affiliates (other than Seller)
or with any Affiliate of Seller;
(i) other than the Retention Options and the amendments to the
Seller's 2000 Stock Plan which were or will be made with the approval of Parent,
any profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its
current or former directors, officers or employees;
(j) any collective bargaining agreement;
(k) any agreement for the employment (other than employment
agreements that are terminable at will by Seller without payment of any penalty
or severance benefit) of any individual on a full-time, part-time, consulting,
or other basis;
(l) any executory agreement under which Seller has advanced or
loaned any amount to any of its directors, officers, and employees;
(m) any advertising services, e-commerce or other agreement
involving the promotion of products and services of third parties by Seller;
(n) any executory agreement pursuant to which Seller is obligated
to provide maintenance, support or training for its services or products;
(o) any revenue or profit participation agreement which involves
aggregate annual payments of more than $20,000;
(p) any license, agreement or other permission which Seller or
any Affiliate of Seller has granted to any third party with respect to any of
the Intellectual Property used in Seller's business;
(q) any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contains an escalation clause
or that obligates Seller to purchase all or substantially all of its
requirements of a particular product or service from a supplier or to make
periodic minimum purchases of a particular product or service from a supplier,
which is not terminable on not more than 30 days notice (without penalty or
premium);
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(r) any agreement of surety, guarantee or indemnification, other
than agreements in the ordinary course of business with respect to obligations
in an aggregate amount not in excess of $20,000;
(s) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(t) any agreement obligating Seller to deliver maintenance
services or future product enhancements or containing a "most favored nation"
pricing clause;
(u) any agreement obligating Seller to provide source code to any
third party for any Seller Intellectual Property;
(v) any agreement granting an exclusive license to any Seller
Intellectual Property or granting any exclusive distribution rights;
(w) any agreement relating to the acquisition by Seller of any
operating business or the capital stock of any other person;
(x) any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee (other than
arrangements to pay commissions or fees to employees in the ordinary course of
business); and
(y) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $20,000 or which is
expected to continue for more than one (1) year from the date hereof.
Seller has delivered to Parent a correct and complete copy of each
written agreement (as amended to date) listed in Section 3.14 of Seller
Disclosure Letter and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 3.14 of Seller Disclosure Letter.
With respect to each such agreement: (A) the agreement, with respect to Seller
and, to Seller's knowledge, all other parties thereto, is legal, valid, binding,
enforceable, and in full force and effect in all respects; (B) neither Seller
nor, to Seller's knowledge, 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
agreement; and (C) Seller has not received notice that any party has repudiated
any provision of the agreement. Except as set forth on Section 3.5 of the Seller
Disclosure Letter, Seller has obtained or will obtain prior to the Closing Date,
all necessary consents, waivers and approvals of parties to any such agreement
as are required thereunder in connection with the transactions contemplated by
this Agreement or to remain in effect without modification after the Closing.
Except as set forth on Section 3.5 of the Seller Disclosure Letter, following
the Closing, Buyer will be permitted to exercise all of Seller's rights under
such agreements to the same extent Seller would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Seller would otherwise be required to pay.
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3.15 Notes and Accounts Receivable. All notes and accounts receivable
of Seller, all of which are reflected properly on the books and records of
Seller, are valid receivables subject to no setoffs, defenses or counterclaims
known to Seller, are current and, to Seller's knowledge, collectible subject in
each case only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Seller.
3.16 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of Seller.
3.17 Insurance. Seller has delivered to Parent copies of each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) with respect to which
Seller is a party. With respect to each such insurance policy: (A) the policy is
legal, valid, binding, enforceable, and in full force and effect (and there has
been no notice of cancellation or nonrenewal of the policy received); (B) Seller
is not in breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default by Seller, or permit
termination, modification, or acceleration, under the policy; (C) Seller has not
received notice that any party to the policy has repudiated any provision
thereof; and (D) there has been no failure by Seller to give any notice or
present any claim under the policy in due and timely fashion. Section 3.17 of
Seller Disclosure Letter describes any self-insurance arrangements presently
maintained by Seller.
3.18 Litigation. Section 3.18 of Seller Disclosure Letter sets forth
each instance in which Seller (or any of its assets) (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is or
has been since January 14, 1991, or, to the knowledge of Seller, is threatened
to be made a party, to any action, suit, proceeding, hearing, arbitration, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. To the knowledge of Seller, there are no facts or circumstances that
would form the reasonable basis of any claim against Seller.
3.19 Restrictions on Business Activities. Except as set forth in
Section 3.19 of the Disclosure Letter, there is no agreement (not to compete or
otherwise), commitment, judgment, injunction, order or decree to which Seller is
a party or which is otherwise binding upon Seller which has the effect of
prohibiting or restricting any business or any acquisition of property (tangible
or intangible) by Seller. Without limiting the foregoing, Seller has not entered
into any agreement under which Seller is restricted from selling, licensing or
otherwise distributing any of its technology (including any Seller Intellectual
Property) or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, or in any segment
of the market.
3.20 Product Warranty. The technologies or products licensed, sold,
leased, and delivered and all services provided by Seller have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and Seller has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
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or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or modification thereof or other damages in connection
therewith, other than in the ordinary course of business in an aggregate amount
not exceeding $20,000.
3.21 Guaranties; Indemnities. Seller is not a guarantor or indemnitor
or is not otherwise responsible for any liability or obligation (including
indebtedness) of any other Person.
3.22 Employees. No executive, key employee, or significant group of
employees has advised any executive officer of Seller that he, she or they plan
to terminate employment with Seller during the next 12 months. Seller is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strike or grievance, claim of unfair labor practices, or other collective
bargaining dispute. To Seller's knowledge, there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Seller.
3.23 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 3.23(a)(i) below (which definition shall apply
only to this Section 3.23), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with Seller within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "SELLER EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by Seller or any Affiliate for
the benefit of any Employee, or with respect to which Seller or any Affiliate
has or may have any liability or obligation;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current or former or
retired employee, consultant or director of Seller or any Affiliate;
(vi) "EMPLOYMENT AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between Seller
or any Affiliate and any Employee;
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(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Seller Employee Plan that has been adopted or maintained by Seller or any
Affiliate, whether informally or formally, or with respect to which Seller or
any Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA;
(xii) "PENSION PLAN" shall mean each Seller Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 3.23(b) contains an accurate and complete
list of each Seller Employee Plan, International Employee Plan, and each
Employment Agreement. Seller does not have any plan or commitment to establish,
adopt or enter into any Seller Employee Plan, International Employee Plan, or
Employment Agreement, to modify any Seller Employee Plan or Employment Agreement
(except to the extent required by law or to conform any such Seller Employee
Plan or Employment Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement).
(c) Documents. Seller has provided to Parent correct and complete
copies of: (i) all documents embodying each Seller Employee Plan and each
Employment Agreement including (without limitation) all amendments thereto and
all related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Seller Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Seller Employee Plan; (iv) if Seller
Employee Plan is funded, the most recent annual and periodic accounting of
Seller Employee Plan assets; (v) the most recent summary plan description
together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Seller Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all written communications material to any Employee
or Employees relating to any Seller Employee Plan and any proposed Seller
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to Seller; (viii) all correspondence to or from any governmental agency relating
to any Seller Employee Plan; (ix) all
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COBRA forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years discrimination tests
for each Seller Employee Plan; and (xi) all registration statements, annual
reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Seller Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
3.23(d), (i) Seller has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Seller
Employee Plan, and each Seller Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Seller Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination,
opinion, notification or advisory letter from the IRS with respect to each such
Seller Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Seller Employee Plan; (iii) no "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or Section 408 of ERISA
(or any administrative class exemption issued thereunder), has occurred with
respect to any Seller Employee Plan; (iv) there are no actions, suits or claims
pending, or, to the knowledge of Seller, threatened or reasonably anticipated
(other than routine claims for benefits) against any Seller Employee Plan or
against the assets of any Seller Employee Plan; (v) each Seller Employee Plan
(other than any stock option plan) can be amended, terminated or otherwise
discontinued after the Closing, without material liability to Parent, Buyer or
any of their Affiliates (other than ordinary administration expenses); (vi)
there are no audits, inquiries or proceedings pending or, to the knowledge of
Seller or any Affiliates, threatened by the IRS or DOL with respect to any
Seller Employee Plan; and (vii) neither Seller nor any Affiliate is subject to
any penalty or tax with respect to any Seller Employee Plan under Section 502(i)
of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither Seller nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Collectively Bargained, Multiemployer and Multiple Employer
Plans. At no time has Seller or any Affiliate contributed to or been obligated
to contribute to any Multiemployer Plan. Neither Seller, nor any Affiliate has
at any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 3.23(g), no Seller Employee Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason, except as
may be required by COBRA or other applicable statute, and Seller
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has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree
health, except to the extent required by statute.
(h) Health Care Compliance. Neither Seller nor any Affiliate has,
prior to the Closing and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Health Insurance Portability and Accountability Act of 1996,
the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 3.23(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Seller Employee
Plan, Employment Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth on Schedule 3.23(i) and other
than the Retention Options, no payment or benefit which will or may be made by
Seller or its Affiliates with respect to any Employee will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Seller: (i) is in compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending, threatened or reasonably anticipated
claims or actions against Seller under any worker's compensation policy or
long-term disability policy.
(k) Labor. No work stoppage or labor strike against Seller is
pending, threatened or reasonably anticipated. Seller does not know of any
activities or proceedings of any labor union to organize any Employees. Except
as set forth in Schedule 3.23(k), there are no actions, suits, claims, labor
disputes or grievances pending, or, to the knowledge of Seller, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any material liability to
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Seller. Neither Seller nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. Except
as set forth in Schedule 3.23(k), Seller is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by Seller.
(l) International Employee Plan. Seller does not now, nor has it
ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
3.24 Environment, Health, and Safety. For purposes of this Agreement,
the following terms shall have the meanings ascribed to them below:
(a) Definitions:
(i) "HAZARDOUS MATERIAL" is any material or substance
that is prohibited or regulated by any Environmental Law or that has been
designated by any Governmental Authority to be radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment.
(ii) "GOVERNMENTAL AUTHORITY" is any local, state,
provincial, federal, or international governmental authority or agency which has
had or now has jurisdiction over any portion of the subject matter of this
Agreement, any Business Facility or Seller.
(iii) "BUSINESS FACILITY" is any property including the
land, the improvements thereon, the groundwater thereunder and the surface water
thereon, that is or at any time has been owned, operated, occupied, controlled
or leased by Seller in connection with the operation of its business.
(iv) "DISPOSAL SITE" is a landfill, disposal agent,
waste hauler or recycler of Hazardous Materials.
(v) "ENVIRONMENTAL LAWS" are all applicable laws,
rules, regulations, orders, treaties, statutes, and codes promulgated by any
Governmental Authority which prohibit, regulate or control any Hazardous
Material or any Hazardous Material Activity, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the
Clean Water Act, comparable laws, rules, regulations, ordinances, orders,
treaties, statutes, and codes of other Governmental Authorities, the regulations
promulgated pursuant to any of the foregoing, and all amendments and
modifications of any of the foregoing, all as amended to date.
(vi) "HAZARDOUS MATERIALS ACTIVITY" is the
transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of
any Hazardous Material or any product containing a Hazardous Material.
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(vii) "ENVIRONMENTAL PERMIT" is any approval, permit,
license, clearance or consent required to be obtained from any private person or
any Governmental Authority with respect to a Hazardous Materials Activity which
is or was conducted by Seller. Except as set forth in Seller Disclosure Letter,
Seller hereby represents and warrants that:
(b) Condition of Property. As of the Closing, except in
compliance with Environmental Laws in a manner that could not reasonably be
expected to subject Seller to liability, to the knowledge of Seller, no
Hazardous Materials are present on any Business Facility currently owned,
operated, occupied, controlled or leased by Seller or were present on any other
Business Facility at the time it ceased to be owned, operated, occupied,
controlled or leased by Seller. Except as set forth in Section 3.24(a) of Seller
Disclosure Letter, there are no underground storage tanks, asbestos which is
friable or likely to become friable or PCBs present on any Business Facility
currently owned, operated, occupied, controlled or leased by Seller or as a
consequence of the acts of Seller or its agents.
(c) Hazardous Materials Activities. Seller has conducted all
Hazardous Material Activities relating to its business in compliance in all
material respects with all applicable Environmental Laws. Except as set forth in
Section 3.24(c) of Seller Disclosure Letter, the Hazardous Materials Activities
of Seller prior to the Closing have not resulted in the exposure of any person
to a Hazardous Material in a manner which has caused or could reasonably be
expected to cause an adverse health effect to any such person.
(d) Permits. Section 3.24(d) of Seller Disclosure Letter
accurately describes all of the Environmental Permits currently held by Seller
and relating to its business and the listed Environmental Permits are all of the
Environmental Permits necessary for the continued conduct of any Hazardous
Material Activity of Seller relating to its business as such activities are
currently being conducted. All such Environmental Permits are valid and in full
force and effect. Seller has complied in all material respects with all
covenants and conditions of any Environmental Permit which is or has been in
force with respect to its Hazardous Materials Activities. To Seller's knowledge,
no circumstances exist which could cause any Environmental Permit to be revoked,
modified, or rendered non-renewable upon payment of the permit fee. All
Environmental Permits and all other consent and clearances required by any
Environmental Law or any agreement to which Seller is bound as a condition to
the performance and enforcement of this Agreement, have been obtained or will be
obtained prior to the Closing at no cost to Parent or Buyer.
(e) Environmental Litigation. Except as set forth in Section
3.24(e) of Seller Disclosure Letter, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best of Seller's knowledge, threatened, concerning or relating to any
Environmental Permit or any Hazardous Materials Activity of Seller relating to
its business, or any Business Facility.
(f) Offsite Hazardous Material Disposal. Seller has directly
transferred or released Hazardous Materials only to those Disposal Sites set
forth in Section 3.24(f) of Seller Disclosure Letter; and no action, proceeding,
liability or claim is pending or, to Seller's knowledge, is threatened against
any Disposal Site or against Seller with respect to any transfer or release of
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Hazardous Materials relating to the Business to a Disposal Site which could
reasonably be expected to subject Seller to liability.
(g) Environmental Liabilities. Seller is not aware of any fact or
circumstance, which could result in any environmental liability which could
reasonably be expected to result in a Material Adverse Effect on Seller.
(h) Reports and Records. Seller has delivered to Parent or made
available for inspection by Parent and its agents, representatives and employees
all records in Seller's possession concerning the Hazardous Materials Activities
of Seller relating to its business and all environmental audits and
environmental assessments of any Business Facility conducted at the request of,
or otherwise in the possession of Seller. Seller has complied with all
environmental disclosure obligations imposed by applicable law with respect to
this transaction.
3.25 Certain Business Relationships With Seller. To Seller's knowledge,
neither any Seller Stockholder nor any director or officer of Seller, nor any
member of their immediate families, nor any Affiliate of any of the foregoing,
owns, directly or indirectly, or has an ownership interest (excluding any direct
or indirect ownership by a Seller Stockholder of up to 1% of the outstanding
capital stock of a publicly traded entity) in (a) any business (corporate or
otherwise) which is a party to, or in any property which is the subject of, any
business arrangement or relationship of any kind with Seller, or (b) any
business (corporate or otherwise) which conducts the same business as, or a
business similar to, that conducted by Seller.
3.26 No Adverse Developments. There is no development (exclusive of
general economic factors affecting business or Seller's industry in general) or,
to Seller's knowledge, threatened development affecting Seller (or affecting
customers, suppliers, employees, and other Persons which have relationships with
Seller) that (i) is having or is reasonably likely to have a Material Adverse
Effect on Seller, or (ii) would prevent Buyer from conducting the business of
Seller following the Closing in the manner in which it was conducted by Seller
prior to the Closing.
3.27 Bankruptcy Order. Seller has provided to Parent a true and
complete copy of the order, dated January 14, 1991, together with all amendments
and modifications, confirming the plan of reorganization of Seller filed under
Chapter 11 of Title 11 of the United States Code, as amended, filed on November
5, 1990, as modified on November 15, 1990, together with all subsequent
amendments and modifications.
3.28 Fees. Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, agent or attorney, with respect to the
transactions contemplated by this Agreement.
3.29 Complete Copies of Materials. Seller has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by Parent or its counsel.
3.30 Board Approval. The Board of Directors of Seller has unanimously
(i) approved this Agreement and the transactions
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contemplated hereby, (ii) determined that the transactions contemplated hereby
are in the best interests of the stockholders of Seller and is on terms that are
fair to such stockholders, (iii) recommended that the stockholders of Seller
approve this Agreement and the transactions contemplated hereby, and (iv)
adopted a plan of liquidation for purposes of Delaware Law and the Code.
3.31 Export Control Laws. Except as set forth in Section 3.31 of the
Seller Disclosure Letter, Seller has conducted its export transactions in
accordance, in all material respects, with applicable provisions of United
States export control laws and regulations, including but not limited to the
Export Administration Act and implementing Export Administration Regulations.
Without limiting the foregoing, except as set forth in Section 3.31 of the
Seller Disclosure Letter, Seller represents and warrants that:
(a) Seller has obtained all material export licenses and other
approvals required for its exports of products, software and technologies from
the United States;
(b) Seller is in compliance with the terms of all applicable
export licenses or other approvals;
(c) there are no pending or, to the knowledge of Seller,
threatened claims against Seller with respect to such export licenses or other
approvals;
(d) to the knowledge of Seller, there are no actions, conditions
or circumstances pertaining to Seller's export transactions that may give rise
to any future claims; and
(e) no consents or approvals for the transfer of export licenses
to Buyer are required, or such consents and approvals can be obtained
expeditiously without material cost.
3.32 Preferences; Solvency. The following statements are, after giving
effect to the transactions contemplated hereby, and will be, upon each
distribution of any assets or property of Seller to the Trust (as defined in
Section 6.13 hereof) or the stockholders of Seller, true and correct:
(a) The aggregate value of all assets and properties of Seller or
the Trust, at their respective then present fair saleable values, exceeds the
amount of all the debts and Liabilities (including, without limitation,
contingent, subordinated, unmatured and unliquidated liabilities) of Seller or
the Trust. Seller understands that, in this context, "present fair saleable
value" means the amount which may be realized within a reasonable time through a
sale within such period by a capable and diligent businessperson from an
interested buyer who is willing to purchase under ordinary selling conditions.
In determining the present fair saleable value of Seller's contingent
liabilities (such as litigation, guarantees and pension plan liabilities),
Seller has considered such liabilities that could possibly become actual or
matured liabilities.
(b) Seller is not insolvent as such term is used in Section 548
of the Bankruptcy Code and the Uniform Fraudulent Transfers Act as adopted in
the States of Massachusetts, California or Delaware, and all other applicable
fraudulent transfer or fraudulent conveyance laws, statutes, rules or
regulations applicable to Seller.
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(c) The Purchase Price received by Seller in connection with the
transactions contemplated hereby constitutes reasonably equivalent consideration
for the Purchased Assets.
3.33 Full Disclosure. No representation or warranty in this Article III
or in any document delivered by Seller or its Representatives pursuant to the
transactions contemplated by this Agreement, and no statement, list, certificate
or instrument furnished to Parent pursuant hereto or in connection with this
Agreement, when taken as a whole, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statement herein
or therein, in light of the circumstances in which they were made, not
misleading. Seller has delivered to Parent true, correct and complete copies of
all documents, including all amendments, supplements and modifications thereof
or waivers currently in effect thereunder, described in Seller Disclosure
Letter.
3.34 Information Supplied. The information supplied by Seller
specifically for inclusion in the Permit Application (as defined in Section 5.8)
shall not at the time such Permit Application is filed with the Department of
Corporations (as defined in Section 5.8), as applicable, at any time such Permit
Application is amended or supplemented, and at the time such Permit Application
is approved by the Department of Corporations, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by Seller specifically for inclusion in the Proxy Materials
(as defined in Section 5.8) to be sent to the Seller Stockholders shall not, on
the date the Proxy Materials is first mailed to the Seller Stockholders and at
the time of the meeting of the Seller Stockholders held to vote on the approval
the transactions contemplated by this Agreement, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or consents for the
approval of the transactions contemplated by this Agreement which has become
false or misleading. Notwithstanding the foregoing, Seller makes no
representation or warranty with respect to any information supplied by Parent or
Buyer which is contained in any of the foregoing documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Subject to such exceptions as are specifically disclosed in the
disclosure letter (referencing the appropriate section and paragraph numbers)
supplied by the Parent to Seller (the "PARENT DISCLOSURE LETTER"), each of
Parent and Buyer, jointly and severally, hereby represents and warrants to
Seller that the statements contained in this Article IV are true and correct as
of the date of this Agreement and will be true and correct as of the Closing (as
though made at the Closing); provided, that the representations and warranties
made as of a specified date will be true and correct as of such date.
4.1 Organization, Qualification, and Corporate Power. Parent and Buyer
are corporations duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
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Parent and Buyer are duly authorized to conduct business and are in good
standing under the laws of each other jurisdiction where such qualification is
required and in which the failure to so qualify is reasonably likely to have a
Material Adverse Effect on Parent. Parent and Buyer have full corporate power
and authority, and have all necessary licenses and permits (other than licenses
or permits the failure of which to possess would not result in a Material
Adverse Effect on Parent), to carry on the businesses in which they are engaged
and to own and use the properties owned and used by them.
4.2 Authorization. Parent and Buyer have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are parties, and to consummate the transactions contemplated hereunder and to
perform their obligations hereunder, and no other proceedings on the part of
Parent or Buyer are necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which they are
parties. This Agreement and the Ancillary Agreements to which they are parties
and the transactions contemplated hereby and thereby have been approved by
Parent's Board of Directors. The consummation of the transactions contemplated
hereby does not require the approval or consent of the stockholders of Parent.
This Agreement and the Ancillary Agreements to which they are parties constitute
the valid and legally binding obligations of Parent and/or Buyer, enforceable
against Parent and/or Buyer in accordance with their respective terms and
conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
4.3 Capitalization.
(a) As of May 19, 2000, the authorized capital stock of Parent
consisted of (i) 10,000,000 shares of Preferred Stock, $0.001 par value, none of
which was issued or outstanding, and (ii) 300,000,000 shares of Common Stock,
$0.001 par value, of which 64,229,201 shares were issued and outstanding. All of
the outstanding shares of Parent's capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. As of the date hereof, the
authorized capital stock of Buyer consists of 1,000 shares of Common Stock,
$0.001 par value per share, of which 1,000 shares have been duly authorized and
validly issued, are fully paid and nonassessable, all of which are owned by
Parent.
(b) The shares of Parent Common Stock to be issued pursuant to
Section 2.3 of this Agreement will be duly authorized, validly issued, fully
paid, non-assessable. Parent shall issue the shares of Parent Common Stock
pursuant to Section 2.3(a) of this Agreement in a transaction exempt from
registration pursuant to Section 3(a)(10) of the Securities Act and such shares
shall not be legended except for such legends as may be required: (a) under an
Affiliate Agreement, (b) with respect to California, by the Department of
Corporations, or (c) with respect to other states, as required by state
securities laws. In the case of any transfer of shares of Parent Common Stock by
Seller to the Trust and/or to a Seller Stockholder, by the Trust to a Seller
Stockholder, or by a Seller Stockholder, Parent will (i) authorize the transfer
and direct its transfer agent to transfer and record the transfer of such shares
of Parent Common Stock and to deliver unlegended certificates to the transferee
and (ii) provide the transfer agent with all reasonable documentation and
representations required from Parent and necessary to effect such transfer,
provided, however, in the case of a
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person who executed an Affiliate Agreement and who is an Affiliate under Rule
145 of the Securities Act, such person has complied with such person's Affiliate
Agreement and provided Parent with customary assurances as to its compliance
with the volume limitations, brokers' transaction and manner of sale
requirements to the extent required by Rule 145.
(c) Parent will reserve the number of shares of Parent Common
Stock necessary for issuance pursuant to the assumed Seller Options. Upon
payment of the exercise price with respect to such assumed Seller Options, the
shares of Parent Common Stock to be issued pursuant to such assumed Seller
Options will be duly authorized, validly issued, fully paid, non-assessable.
4.4 No Conflicts. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Parent or Buyer is subject, (B) violate
or conflict with any provision of the charters or bylaws of Parent or Buyer, or
(C) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under, any agreement, contract, lease,
license, instrument, or other arrangement to which Parent or Buyer is a party or
by which either is bound or to which any of their assets is subject which has
been filed as an exhibit to the Parent SEC Reports, other than any of the
foregoing which would not in the aggregate have a Material Adverse Effect on
Parent or adversely affect the ability of Parent to consummate the transactions
contemplated hereby.
4.5 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Body or any third
party, including a party to any agreement with Parent, is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, (ii) any applicable filings required under
the HSR Act and (iii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings in which the failure of which to obtain
would not in the aggregate have a Material Adverse Effect on Parent or adversely
affect the ability of Parent to consummate the transactions contemplated hereby.
4.6 SEC Filings. Parent has filed all forms, reports and documents
required to be filed with the SEC since February 4, 2000, and has heretofore
made available to Seller, in the form filed with the SEC, its final Prospectus
dated February 4, 2000 for its initial public offering (collectively, the
"Parent SEC Reports"). The Parent SEC Reports (i) were prepared in accordance
with the requirements of the Securities Exchange Act of 1934, as amended, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
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.
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4.7 Brokers' Fees. Parent does not have 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 except for fees payable to Morgan
Stanley Dean Witter.
4.8 Information Supplied. The information supplied by Parent or Buyer
specifically for inclusion in the Permit Application (each as defined in Section
5.8) shall not at the time such Permit Application is filed with the Department
of Corporations (as defined in Section 5.8), as applicable, at any time such
Permit Application is amended or supplemented, and at the time such Permit
Application is approved by the Department of Corporations contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information supplied by Parent or Buyer specifically for
inclusion in the Proxy Materials (as defined in Section 5.8) to be sent to the
Seller Stockholders shall not, on the date the Proxy Materials is first mailed
to the Seller Stockholders and at the time of the meeting of the Seller
Stockholders held to vote on the approval the transactions contemplated by this
Agreement, contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies or consents for the approval of the transactions
contemplated by this Agreement which has become false or misleading.
Notwithstanding the foregoing, Parent and Buyer make no representations or
warranties with respect to any information supplied by Seller which is contained
in any of the foregoing documents.
ARTICLE V
PRE-CLOSING COVENANTS
With respect to the period between the execution of this Agreement and
the earlier of the termination of this Agreement and the Closing:
5.1 Operation of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Closing, Seller agrees (except to the extent that the other shall
otherwise consent in writing or this Agreement shall otherwise require), to
carry on the business of Seller in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay debts and Taxes
when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact the present business organization, keep
available the services of the present officers and key employees and, except as
or this Agreement shall otherwise require, preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired the its
goodwill and ongoing businesses at the Closing. Seller shall promptly notify
Parent of any event or occurrence or emergency not in the ordinary course of its
business, and any material event involving it. Except as expressly contemplated
by this Agreement, Seller shall not, without the prior written consent of
Parent:
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(a) Enter into any commitment or transaction not in the ordinary
course of business.
(b) (i) Sell or enter into any license agreement with respect to
Seller Intellectual Property with any person or entity or (ii) buy or enter into
any license agreement with respect to the Intellectual Property of any person or
entity;
(c) Transfer to any person or entity any rights to Seller
Intellectual Property (other than pursuant to end user licenses in the ordinary
course of business);
(d) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products or technology of Seller;
(e) Enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products or technology of Seller;
(f) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts set
forth or described in Seller Disclosure Letter;
(g) Commence any litigation;
(h) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Seller, or repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock (or
options, warrants or other rights exercisable therefor, other than the surrender
of presently outstanding Seller Options or warrants in connection with the
exercise thereof);
(i) Except for the issuance of shares of Seller Capital Stock
upon exercise or conversion of presently outstanding Seller Options or warrants,
issue, grant, deliver or sell or authorize or propose the issuance, grant,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;
(j) Cause or permit any amendments to its articles of
incorporation or bylaws or other organizational documents; provided, however,
that with respect to this Section 5.1(j), the prior written consent of Parent
shall not be unreasonably withheld;
(k) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise
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acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Seller;
(l) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(m) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of Seller or guarantee
any debt securities of others;
(n) Grant any loans to others or purchase debt securities of
others or amend the terms of any outstanding loan agreement except for advances
to employees for travel and business expenses in the ordinary course of
business, consistent with past practices;
(o) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments disclosed in Seller
Disclosure Letter;
(p) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;
(q) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(r) Take any action to accelerate or modify the vesting of any
options, warrants, restricted stock or other rights to acquire shares of the
capital stock of Seller or take any action that could jeopardize the tax-free
reorganization hereunder;
(s) Pay, discharge or satisfy, in an amount in excess of $10,000,
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in
the Financial Statements (or the notes thereto);
(t) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(u) Enter into any strategic alliance or joint marketing
arrangement or agreement;
(v) Hire or terminate employees or encourage employees to resign
other than in the ordinary course of business;
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (v) above, or any other action that
would prevent Seller from performing or cause Seller not to perform its
covenants hereunder.
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5.2 Access to Information. Each of Seller and Parent will permit the
other Party and its representatives to have access at all reasonable times, and
in a manner so as not to interfere with its normal business operations, to its
business and operations (subject, in the case of Parent, to compliance with
applicable securities laws). Neither such access, inspection and furnishing of
information to any Party and its representatives, nor any investigation by any
Party and its representatives, shall in any way diminish or otherwise affect
such Party's right to rely on any representation or warranty made by the other
Parties hereunder.
5.3 Notice of Developments. Seller shall give prompt notice to Parent
of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
Seller contained in this Agreement to be untrue or inaccurate at or prior to the
Closing and (ii) any failure of Seller to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.3
shall not limit or otherwise affect any remedies available to the Party
receiving such notice. No disclosure by Seller pursuant to this Section 5.3,
however, shall be deemed to amend or supplement Seller Disclosure Letter or
prevent or cure any misrepresentations, breach of warranty or breach of covenant
without the written consent of Parent.
5.4 Stockholder Approval. As promptly as practicable after the
execution of this Agreement, Seller shall submit this Agreement and the
transactions contemplated hereby to Seller Stockholders for approval and
adoption as provided by Delaware Law and its Certificate of Incorporation and
Bylaws. Seller shall use its best efforts to solicit and obtain the consent of
its stockholders sufficient to approve the transactions contemplated by this
Agreement and to enable the Closing to occur as promptly as practicable. The
Proxy Materials (as defined in Section 5.8) shall be subject to review and
approval by Parent and include information regarding Seller, the terms of the
transactions contemplated by this Agreement and the unanimous recommendation of
the Board of Directors of Seller regarding the transactions contemplated by this
Agreement. Seller shall deliver to Parent, concurrently with the execution of
this Agreement, executed Voting Agreements from holders with beneficial
ownership of (i) a majority of the outstanding shares of Seller Preferred Stock
and (ii) a majority of the outstanding shares of Seller Common Stock.
5.5 No Solicitation.
(a) From and after the date hereof and until the earlier of the
Closing or the termination of this Agreement, Seller shall not (nor shall it
permit its Representatives to) directly or indirectly take any of the following
actions with any Person other than Parent and its designees: (a) solicit,
initiate or encourage any proposals or offers from, or conduct discussions with
or engage in negotiations with, any Person relating to any possible Acquisition
Proposal with Seller or any of its subsidiaries (whether such subsidiaries are
in existence on the date hereof or are hereafter organized), (b) provide
information with respect to Seller to any Person, other than Parent, relating
to, or otherwise cooperate with, facilitate or encourage any effort or attempt
by any such Person with regard to, any possible Acquisition Proposal with Seller
or any subsidiary of Seller (whether such subsidiaries are in existence on the
date hereof or are hereafter organized), (c) enter into a contract or agreement
(whether oral or written) with any Person, other than Parent, providing for a
Acquisition Proposal with Seller or any subsidiary (whether such subsidiaries
are in existence on the date hereof
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or are hereafter organized), or (d) make or authorize any statement,
recommendation or solicitation in support of any possible Acquisition Proposal
with Seller or any subsidiary (whether such subsidiary is in existence on the
date hereof or are hereafter organized) other than by Parent. Seller shall, and
shall cause its Representatives to, immediately cease and cause to be terminated
any such contacts or negotiations with any Person relating to any Acquisition
Proposal. In addition to the foregoing, if Seller or any of its Representatives
receives, prior to the Closing or the termination of this Agreement, any offer
or proposal (formal or informal) relating to any of the above, Seller shall
immediately notify Parent thereof and provide Parent with the details thereof
including the identity of the Person or Persons making such offer or proposal,
and will keep Parent fully informed of the status and details of any such offer
of proposal. Each of Seller and Parent acknowledge that this Section 5.5 was a
significant inducement for Buyer and Parent to enter into this Agreement and the
absence of such provision would have resulted in either (i) a material reduction
in the Purchase Price to be paid to Seller or (ii) a failure to induce Buyer and
Parent to enter into this Agreement.
(b) As used in this Section 5.5, "Acquisition Proposal" shall
mean:
(i) a proposal or offer for a merger, consolidation or
other business combination involving an acquisition of Seller or any material
assets of Seller; or
(ii) any proposal to acquire in any manner any Seller
Capital Stock (other than (i) upon the exercise of options outstanding on the
date hereof as listed in Section 3.3(b) of Seller Disclosure Letter or (ii) the
conversion of Seller Preferred Stock to Seller Common Stock).
5.6 Regulatory Filings. As soon as may be reasonably practicable, Buyer
and Seller each shall file with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "DOJ") Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties. Buyer
and Seller each shall promptly (a) supply the other with any information which
may be required in order to effectuate such filings and (b) supply any
additional information which reasonably may be required by the FTC, the DOJ or
the competition or merger control authorities of any other jurisdiction and
which the parties may reasonably deem appropriate.
5.7 Affiliate Agreements. Section 5.7 of Seller Disclosure Letter sets
forth those Persons who, in Seller's reasonable judgment, are or may be
Affiliates of Seller. Seller shall provide Parent such information and documents
as Parent shall reasonably request for purposes of reviewing such list. Seller
shall deliver or cause to be delivered to Parent, concurrently with the
execution of this Agreement (and in any case prior to the Closing Date) from
each of the Affiliates of Seller, an executed Affiliate Agreement. Parent and
Buyer shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by such Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for Parent Common Stock, consistent with the terms of such
Affiliate Agreements.
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5.8 Proxy Materials; Permit Application. As promptly as practicable
after the execution of this Agreement, Seller shall prepare, with the
cooperation of Parent, a proxy statement and other materials to be submitted to
Seller Stockholders to obtain stockholder approval pursuant to Section 5.4
hereof (the "PROXY MATERIALS"), and Parent will prepare and file an application
for a fairness hearing and permit (the "PERMIT APPLICATION") filed with the
California Department of Corporations (the "DEPARTMENT OF CORPORATIONS"), in
which the Proxy Materials will be included as a prospectus or an exhibit, as
applicable. Each of Parent and Seller shall provide promptly to the other such
information concerning its business and financial statements and affairs as, in
the reasonable judgment of the providing party or its counsel, may be required
or appropriate for inclusion in the Proxy Materials and the Permit Application,
or in any amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the preparation
of the Proxy Materials and the Permit Application. At Buyer's request, Seller
shall include in the Proxy Materials for approval by the requisite vote of its
stockholders a proposal regarding any payments contemplated under this Agreement
or the transactions contemplated hereby that may be deemed to constitute
"parachute payments" pursuant to Section 280G of the Code such that all such
payments shall not be deemed to be "parachute payments" under Section 280G of
the Code or shall be exempt from such treatment under Section 280G of the Code.
Each of Seller and Parent shall use its respective reasonable best efforts to
respond to any comments of the Department of Corporations and have the Permit
Application approved and issued as promptly as practicable after such filing.
Seller will cause the Proxy Materials to be mailed to the Shareholders at the
earliest practicable time after the permit is issued by the Department of
Corporations. As promptly as practicable after the date of this Agreement,
Seller and Parent will prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Federal, foreign or Blue Sky laws
relating to the transactions contemplated by this Agreement (the "OTHER
FILINGS"). Each of Seller and Parent will notify the other promptly upon the
receipt of any comments from the Department of Corporations or its staff and of
any request by the Department of Corporations or its staff or any other
government officials for amendments or supplements to the Permit Application,
the Proxy Materials or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the Department of Corporations or its
staff or any other government officials, on the other hand, with respect to the
Permit Application, the Proxy Materials or any Other Filing. The Proxy
Materials, the Permit Application and the Other Filings will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Materials, the Permit
Application or any Other Filing, Seller or Parent, as the case may be, will
promptly inform the other of such occurrence and cooperate in filing with the
Department of Corporations or its staff or any other government officials,
and/or mailing to the Seller Stockholders, such amendment or supplement.
5.9 Reasonable Efforts. Each of the Parties will use their reasonable
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 8 below).
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5.10 Notices and Consents. Seller will give any notices to third
parties and will use its reasonable best efforts to obtain any third party
consents that are required in connection with the matters identified in Sections
3.5 and 3.6 of Seller Disclosure Letter or otherwise required in connection with
the transactions contemplated by this Agreement so as to preserve all material
rights of or benefits to Seller. Each of the Parties will give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters identified in Sections 3.5 and 3.6 of Seller
Disclosure Letter or as otherwise required in connection with the transactions
contemplated by this Agreement.
ARTICLE VI
OTHER AGREEMENTS AND COVENANTS
6.1 Confidentiality. Each of the Parties hereto hereby agrees to keep
such information or knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources, (e) is required to be disclosed by order of court or
government agency with subpoena powers or (f) which is disclosed in the course
of any litigation between any of the parties hereto. In this regard, Seller and
its employees and agents acknowledge that Parent's Common Stock is publicly
traded and that any information obtained during the course of its due diligence
could be considered to be material non-public information within the meaning of
federal and state securities laws. Accordingly, Seller and its employees and
agents, acknowledge and agree not to engage in any transactions in Parent's
Common Stock in violation of applicable insider trading laws.
6.2 Additional Documents and Further Assurances. Each Party hereto, at
the request of another Party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the transactions
contemplated hereby.
6.3 Treatment as Reorganization. It is intended by the parties hereto
that the transactions contemplated hereby shall qualify as a "reorganization"
within the meaning of Section 368(a)(1)(C) of the Code. In the event that either
Buyer or Seller (or any successor thereto) shall receive notice of any contrary
position by the United States Internal Revenue Service or other Tax authority,
Seller or any successor thereto may contest such position at its sole cost and
expenses, and Buyer shall cooperate in such defense as reasonably requested by
Seller or any successor thereto.
6.4 Employee Plans and Benefit Arrangements. Seller and its Affiliates,
as applicable, shall each terminate, effective as of the day immediately
preceding the Closing, any and all 401(k)
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plans. Parent shall receive from Seller evidence that Seller's and each
Affiliate's, as applicable, plan(s) and/or program(s) have been terminated
pursuant to resolutions of each such entity's Board of Directors (the form and
substance of such resolutions shall be subject to review and approval of
Parent), effective as of the day immediately preceding the Closing. In the event
that distribution of assets from the trust of a 401(k) plan which is terminated
is reasonably anticipated to trigger liquidation charges, surrender charges, or
other fees to be imposed upon the account of any participant or beneficiary of
such terminated plan or upon Seller, the plan, the plan sponsor or the trustee,
then Seller shall take such actions as are necessary to reasonably estimate the
amount of such charges and/or fees and provide such estimate in writing to
Parent prior to the Closing. Parent shall pay such fees with respect to which
Seller provides a reasonable estimate up to $2,500. Seller shall take any and
all actions necessary or appropriate to ensure that the 401(k) plan is timely
terminated, including without limitation: (1) distribution of all assets; (ii)
notices to all appropriate service providers, participants, and governmental
entities; (iii) all governmental filings, including - as appropriate - Form
5310, Form 5500S until all assets are distributed; and (iv) conduct any and all
discrimination testing for the period throughout the termination of the Plan.
6.5 Seller Options and Warrants. At the Closing, each of the then
outstanding options and warrants to purchase Seller Capital Stock whether vested
or unvested (collectively, the "Seller Options") (including all outstanding
options granted under Seller's 1991 Stock Plan, Seller's 1996 Stock Plan and
Seller's 2000 Stock Plan (collectively, the "Seller Plans"), and any individual
non-plan options) will by virtue of the Closing, and without any further action
on the part of any holder thereof, be assumed by Buyer and converted into an
option to purchase that whole number of shares of Parent Common Stock determined
by multiplying the number of shares of Seller Capital Stock subject to such
Seller Option at the Closing by the Exchange Ratio, at an exercise price per
share of Parent Common Stock equal to the exercise price per share of such
Seller Option immediately prior to the Closing divided by the Exchange Ratio,
rounded up to the nearest cent. If the foregoing calculation results in an
assumed Seller Option being exercisable for a fraction of a share of Parent
Common Stock, then the number of shares of Parent Common Stock subject to such
option will be rounded down to the nearest whole number of shares. The term,
exercisability, vesting schedule, vesting commencement date, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of Seller Options will otherwise be unchanged.
6.6 Retention Options. Upon the request of Parent, prior to the
Closing, Seller shall grant Retention Options to persons identified by Parent
and Seller in the amounts, at the exercise price, and on the terms and
conditions as determined by Parent and Seller. Upon the request of Parent,
Seller shall use its best efforts to solicit and obtain the consent of
stockholders sufficient to secure an exemption pursuant to Section 280G(5) of
the Code from the characterization of the grant of Retention Options as
"parachute payments," pursuant to Section 280G(2) of the Code.
6.7 Form S-8. Parent shall file a registration statement on Form S-8
for the issuance and re-sale of shares of Parent Common Stock issuable with
respect to the assumed Seller Options promptly after the Closing Date but in no
event later than thirty (30) days of the Closing.
6.8 New Consultants. Upon the request of Parent after the date hereof
and prior to the Closing, Seller shall retain certain individuals identified by
Parent and Seller as consultants of Seller
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("NEW CONSULTANTS") upon the terms and conditions determined by Parent and
Seller, including the grant of Retention Options in the amounts, at the exercise
price, and on the terms and conditions as determined by Parent and Seller. The
terms of each New Consultant's engagement shall also include that each such New
Consultant shall execute and deliver a Non-Disclosure and Termination at Will
Agreement with Seller in a form reasonably satisfactory to Parent and Seller.
Parent shall pay all costs and expenses incurred by Seller relating to the New
Consultants, and shall provide Seller with sufficient funds to pay the fees of
such consultants at least two (2) business days before such fees are due.
6.9 Retained Employees. Prior to the Closing, Buyer shall make an offer
of employment to each employee of Seller, which such employment shall commence
upon Closing.
6.10 Listing of Additional Shares. Prior to the Closing, Parent shall
file with the Nasdaq Stock Market a Notification Form for Listing of Additional
Shares with respect to the shares of Parent Common Stock issuable pursuant
hereto, and upon the exercise in full of the Seller Options outstanding under
the Seller Stock Plan assumed by Buyer pursuant hereto.
6.11 Liquidation of Seller.
(a) As soon as practicable following the Closing, Seller shall
(i) file a Certificate of Dissolution (the "CERTIFICATE OF DISSOLUTION") with
the Secretary of State of Delaware pursuant to Delaware Law, and (ii) enter into
the Agreement and Declaration of Trust, in substantially the form attached
hereto as Exhibit C hereto (the "TRUST AGREEMENT"), for the benefit of the
stockholders of Seller, designating one or more of Seller's directors as initial
trustees thereunder, and designating the other directors of Seller as initial
members of the advisory committee thereunder, and (iii) transfer to the trust
established under the Trust Agreement (the "TRUST") all of the assets and
liabilities of Seller (including, without limitation, the shares of Parent
Common Stock issued to Seller pursuant hereto and all of Seller's rights under
this Agreement and the Escrow Agreement). Following the filing of the
Certificate of Dissolution, Seller shall not carry on the business for which it
was established or any other business (including, without limitation, the
Business), except as may be necessary or incidental to the winding up of its
affairs.
(b) After filing the Certificate of Dissolution, Seller or the
Trust, as the case may be, shall (i) provide notice to claimants, and (ii) make
payments and distributions, pursuant to Sections 280 and 281(a) of the Delaware
General Corporation Law.
6.12 Reasonable Cooperation of Buyer.
(a) Parent and Buyer shall cooperate with Seller to the extent
reasonable with Seller's efforts to obtain any third party consents set forth on
Schedule 7.1(f) hereof; provided, however, that this Section 6.12(a) shall not
obligate Parent and Buyer (in the aggregate) to incur any additional expense or
liability.
(b) Parent and Buyer shall cooperate with Seller to the extent
reasonable with Seller's efforts to obtain a favorable termination and release
with respect to the Samsung Agreement;
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provided, however, that this Section 6.12(b) shall not obligate Parent and Buyer
(in the aggregate) to incur any additional expense or liability.
ARTICLE VII
CONDITIONS TO THE CLOSING
7.1 Conditions to Parent's and Buyer's Obligation to Close. The
obligations of Parent and Buyer hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Parent, but only in a writing signed by
Parent):
(a) Representations and Warranties. The representations and
warranties of Seller set forth in Article III that are qualified as to
materiality or Material Adverse Effect, or in Sections 3.1, 3.2 or 3.3 shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement, and as
of the Closing with the same force and effect as if made on and as of the
Closing (except to the extent expressly made as of a particular date, in which
case as of such date).
(b) Covenants. Seller shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by Seller on or prior to the Closing.
(c) No Actions. No action, suit, or proceeding shall be
threatened or pending before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would, if successful, (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) result in a Material Adverse
Effect to Seller or the Purchased Assets.
(d) No Material Adverse Effect. From the date of the Most Recent
Balance Sheet, there shall not have been any event or development which has
resulted in a Material Adverse Effect on Seller nor shall there have occurred
any event or development which could reasonably be likely to result in the
future in a Material Adverse Effect on Seller or the Purchased Assets.
(e) Certificates. The President of Seller shall have delivered to
Parent a certificate to the effect that each of the conditions specified above
in Section 7.1(a) to 7.1(d) (inclusive) is satisfied in all respects.
(f) Required Consents. Buyer or Parent shall have been furnished
with evidence satisfactory to it that Seller has obtained the consents,
approvals and waivers set forth in Schedule 7.1(f) attached hereto.
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(g) Governmental Authorizations. The Parties shall have received
all authorizations, consents and approvals of Governmental Bodies set forth in
Section 3.6 of the Seller Disclosure Letter.
(h) Termination of HSR Waiting Period. The waiting period(s)
under the HSR Act and all applicable material foreign merger laws, if any shall
have expired or been terminated.
(i) Non-Competition Agreements. The Persons listed on Exhibit B-1
shall each have executed and delivered to Buyer a Non-Competition Agreement in
substantially the form attached hereto as Exhibit B-2, and such Non-Competition
Agreements shall be in full force and effect.
(j) Employment Agreements. The Persons listed on Exhibit C-1
shall each have executed and delivered to Buyer an Employment Agreement in
substantially the form attached hereto as Exhibit C-2, and such Employment
Agreements shall be in full force and effect.
(k) Standard Employee Agreements. Each employee of Seller shall
have executed and delivered to Buyer the standard form of Employment
Confidential Information, Invention Assignment and Arbitration Agreement of
Buyer or Parent in substantially the form attached hereto as Exhibit F, and such
agreements shall be in full force and effect.
(l) Legal Opinion. Parent shall have received from Burns &
Levinson LLP, counsel to Seller, an opinion in form and substance reasonably
acceptable to Parent and its counsel, addressed to Parent, and dated as of the
Closing Date.
(m) Tax Opinion. Parent shall have received a written opinion
from Wilson Sonsini Goodrich & Rosati, Professional Corporation, in form and
substance reasonably satisfactory to Parent, to the effect that the transactions
contemplated by this Agreement will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn.
(n) Voting Agreements. The Voting Agreements executed and
delivered to Parent on the date hereof by each of David F. Millet and David M.
Rowe shall remain in full force and effect.
(o) Conversion of Preferred Stock. All preferred stock of Seller
shall have been converted to Seller Common Stock.
(p) Securities Exemptions. Parent shall be reasonably satisfied
that the issuance of its shares of Parent Common Stock and other securities
pursuant to Section 2.3(a) of this Agreement shall: (a) be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") by reason of the exemption(s) provided by Section 3(a)(10) of
the Securities Act promulgated under the Securities Act; and (b) be exempt from
the registration and/or qualification requirements of all applicable state "blue
sky" securities laws.
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(q) Releases. Each officer and director of Seller, and each
holder of more than five percent (5%) of Seller's capital stock, shall have
executed and delivered, in form and substance mutually agreed by the parties, a
release of claims against the Purchased Assets, Buyer and Parent which would be,
or could be construed as, Assumed Liabilities.
(r) Amendment of the Asahi Agreements. The Asahi Agreement shall
have been amended to the satisfaction of Parent.
(s) Barco and TSI Waivers. Seller shall have received waivers of
certain provisions of the Barco Agreement and the Target Agreement, to the
satisfaction of Parent.
(t) WWG Purchase Orders. The WWG Purchase Orders shall have been
terminated or amended to the satisfaction of Parent.
(u) 280G Agreements. The stockholders of Seller shall have
approved, by the requisite vote under applicable law, any payments of cash or
stock contemplated by this Agreement that may be deemed to constitute "parachute
payments" within the meaning of Section 280G of the Code, such that all such
payments resulting from the transactions contemplated hereby shall not qualify
as "excess parachute payments" within the meaning of Section 280G of the Code or
shall be exempt from such treatment under Section 280G of the Code.
(v) Trust Agreement. Buyer shall have received a copy of the
Trust Agreement, executed for and on behalf of Seller by a duly authorized
officer thereof.
(w) Hired Employees. At least ninety percent (90%) of the Hired
Employees shall have accepted employment with Buyer, effective as of the
Closing.
7.2 Conditions to Seller's Obligations. The obligations of Seller
hereunder are subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or more of which may be
waived by Seller, but only in a writing signed by Seller):
(a) Representations and Warranties. The representations and
warranties of Parent and Buyer set forth in Article IV that are qualified as to
materiality or Material Adverse Effect, or in Sections 4.1, 4.2 or 4.3 shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement, and as
of the Closing with the same force and effect as if made on and as of the
Closing (except to the extent expressly made as of a particular date, in which
case as of such date).
(b) Covenants. Parent and Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing.
(c) No Material Adverse Effect. Since February 4, 2000, there
shall not have been any event or development which has resulted in a Material
Adverse Effect on Parent nor shall there have occurred any event or development
which could reasonably be likely to result in the future in a Material Adverse
Effect on Parent; provided, however, that for the purposes of this
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Section 7.2 (c), the following shall not be considered a Material Adverse
Effect: (i) a change in the market price or trading volume of Parent Common
Stock between the date hereof and the Closing, in and of itself, and not
otherwise attributable to or resulting from any other effects, changes, events,
circumstances or conditions which by itself would constitute a Material Adverse
Effect or (ii) effects, changes, events, circumstances and conditions generally
affecting the industry in which Parent and its subsidiaries operate or from
changes in general business or economic conditions in the region, nation or
world.
(d) Certificate. The Vice President and General Counsel of Parent
shall have delivered to Seller a certificate to the effect that each of the
conditions specified above in Section 7.2(a), 7.2(b) and 7.3(c) is satisfied in
all respects.
(e) Termination of HSR Waiting Period. The waiting period(s)
under the HSR Act and all applicable material foreign merger laws, if any, shall
have expired or been terminated.
(f) Legal Opinion. Seller shall have received from Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to Parent, an opinion in
form and substance reasonably acceptable to Seller and its counsel, addressed to
Seller, and dated as of the Closing Date.
(g) Tax Opinions. Seller shall have received a written opinion
from Burns & Levinson LLP, in form and substance reasonably satisfactory to
Seller, to the effect that the transactions contemplated by this Agreement will
constitute a tax-free reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn; provided, however, that if
the counsel to Seller does not render such opinion, this condition shall
nonetheless be deemed to be satisfied if counsel to Parent renders such opinion
to Seller. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(h) Nasdaq Listing. The shares of Parent Common Stock issuable in
connection with the transactions contemplated by this Agreement shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(i) Payment of Certain Indebtedness of Seller. At the Closing,
Buyer shall pay the indebtedness of Seller set forth on Exhibit G.
(j) Securities Exemption. Seller shall be reasonably satisfied
that the issuance of shares of Parent Common Stock and other securities pursuant
to Section 2.3(a) of this Agreement shall be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT") by
reason of the exemption(s) provided by Section 3(a)(10) of the Securities Act
promulgated under the Securities Act
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ARTICLE VIII
INDEMNIFICATION; ESCROW
8.1 Survival of Representations and Warranties. All representations and
warranties set forth in this Agreement, the Seller Disclosure Letter, the Buyer
Disclosure Letter or in any certificate or instrument delivered pursuant to this
Agreement, shall survive the Closing for a period ending on the one (1) year
anniversary of the Closing. The covenants and other agreements set forth in this
Agreement shall terminate at the Closing, except for covenants and other
agreements which by their terms contemplate or require performance following the
Closing, each of which shall survive without limitation until complete
performance of the terms thereof. Except with respect to Losses related to the
Samsung Agreement or Taxes, the Escrow Fund shall be the sole recourse of
recovery for any and all indemnification claims of Buyer, Parent or the other
Buyer Indemnified Persons.
8.2 Indemnification by Seller.
(a) Indemnity; Escrow Fund.
(i) Seller agrees to indemnify and hold harmless
Buyer, Parent and its Representatives and Affiliates (collectively, the "Buyer
Indemnified Persons") from against all claims, losses, liabilities, damages,
deficiencies, costs, expenses (including reasonable attorneys' fees and expenses
of investigation) (hereinafter individually a "Loss" and collectively "Losses")
arising out of, or resulting from, or incurred with respect to, (A) any breach
or inaccuracy of a representation or warranty of Seller contained in this
Agreement, the Seller Disclosure Letter or any certificate or instrument
delivered pursuant to this Agreement (for the purposes of this Section 8.2, the
determination of any breach or inaccuracy of any representation or warranty
shall be made without regard to any qualifications as to knowledge, materiality
or Material Adverse Effect), (B) any failure by Seller to perform or comply with
any covenant contained in this Agreement, or (C) any Excluded Liabilities.
Except as to Excluded Liabilities, the Escrow Fund shall be the sole source
available to compensate the Buyer Indemnified Persons for such Losses. Buyer,
Parent and Seller each acknowledge that such Losses, if any, would relate to
unresolved contingencies existing at the Closing, which if resolved at the
Closing would have led to a reduction in the aggregate Purchase Price.
(ii) As soon as practicable after the Closing, the
Escrow Shares will be deposited with Union Bank of California, as Escrow Agent
(the "ESCROW AGENT"), without any act by Seller, such deposit to constitute an
escrow fund (the "ESCROW FUND") to be governed by the terms set forth herein.
(iii) Seller shall not have any liability or
obligation to indemnify any Buyer Indemnified Person for any Losses unless and
until Officer's Certificates (as hereinafter defined) shall have been delivered
with respect to Losses which equal or exceed $250,000 in the aggregate for all
Losses (the "BASKET AMOUNT"). At such time as Officer's Certificates with
respect to Losses which surpass the foregoing thresholds have been delivered,
Parent and Buyer shall be
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entitled to indemnification for all Losses, including the Basket Amount.
Notwithstanding the foregoing, Parent and Buyer shall be entitled to
indemnification without regard to the Basket Amount with respect to any Losses
with respect to Excluded Liabilities and such Losses shall not be included in
the calculation of the Basket Amount.
(iv) The Escrow Fund shall be available to
compensate the Buyer Indemnified Persons for Losses. Except with respect to
Losses related to Excluded Liabilities, the remedies provided in this Article
VIII shall be the exclusive remedies available to Buyer, Parent or the other
Buyer Indemnified Persons. Notwithstanding the foregoing, any Losses incurred
related to Excluded Liabilities during the Escrow Period (as defined below)
shall be first satisfied through the Escrow Fund. Furthermore, notwithstanding
the foregoing or anything to the contrary set forth herein, nothing in this
Agreement shall limit the liability (i) of Seller for any breach of any
representation, warranty or covenant contained herein if the Closing shall not
occur, to the extent that such breach (or breaches), individually or in the
aggregate, amount to a failure to fulfill a condition of closing pursuant to
Section 7.1 hereof, (ii) of Seller for any Losses arising out of fraud or
intentional misrepresentation by Seller, or (iii) of any stockholder of Seller
in connection with any breach by such stockholder of the Voting Agreement
between such stockholder and Buyer.
(b) Escrow Period; Distribution upon Termination of Escrow
Period. Subject to the following requirements, the Escrow Fund shall remain in
existence during the period following the Closing until the one year anniversary
of the Closing (the "ESCROW PERIOD"). At the expiration of the Escrow Period a
portion of the Escrow Fund shall be released from Escrow to Seller or any
successor thereto (including the Trust) in an amount equal to the Escrow Shares
less an amount equal to the sum of (i) all amounts theretofore distributed out
of the Escrow Fund to Buyer, Parent and the other Buyer Indemnified Persons
pursuant to this Article VIII and (ii) an amount equal to such portion of the
Escrow Fund which, in the reasonable judgment of Parent, subject to the
reasonable objection of the Seller or any successor thereto (including the
Trust) and the subsequent arbitration of the matter in the manner provided in
Section 8.2(f) hereof, is necessary to satisfy any unsatisfied claims specified
in any Office s Certificate theretofore delivered to the Escrow Agent prior to
the end of the Escrow Period, which amount shall remain in the Escrow Fund (and
the Escrow Fund shall remain in existence) until such claims have been resolved.
As soon as all such claims have been resolved (such resolution to be evidenced
by the written agreement of Parent and the Seller (or any successor thereto) or
the written decision of the arbitrators as described in Section 8.2(f)), the
Escrow Agent shall deliver to Seller or any successor thereto (including the
Trust) the remaining portion of the Escrow Fund not required to satisfy such
claims.
(c) Protection of Escrow Fund. The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Buyer or Parent and shall hold and dispose of the Escrow Fund only
in accordance with the terms hereof.
(d) Distributions; Voting.
(i) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split, stock dividend, recapitalization
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or other similar event) ("NEW SHARES") in respect of Parent Common Stock in the
Escrow Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to Seller or any
successor thereto (including the Trust). Cash dividends on Parent Common Stock
shall not be added to the Escrow Fund but shall be distributed to Seller or any
successor thereto (including the Trust).
(ii) Seller or its successor shall be shown as the
record owner of Parent Common Stock on Parent's books and records and shall have
voting rights with respect to the shares of Parent Common Stock held in the
Escrow Fund on behalf of Seller or any successor thereto (including the Trust)
(and on any voting securities added to the Escrow Fund in respect of such shares
of Parent Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Parent (an "Officer's Certificate"): (A) stating that Buyer, Parent or their
Affiliates has incurred and paid or properly accrued Losses equal to or
exceeding the Basket Amount in the aggregate, (B) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the date
on which each such item was incurred and paid or properly accrued, or the basis
for such anticipated liability, and the nature of the misrepresentation, breach
of warranty or claim to which such item is related, and (C) indicating the
number of shares of Parent Common Stock to be disbursed to Parent out of the
Escrow Fund, the Escrow Agent shall, subject to the provisions of Section 8.2(f)
hereof, deliver to Parent out of the Escrow Fund, as promptly as practicable,
such amounts held in the Escrow Fund equal to such Losses.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be disbursed to Parent out of the Escrow Fund,
the shares of Parent Common Stock shall be valued at the Trading Price.
(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Seller (or any successor thereto), and for a period of
thirty (30) days after such delivery the Escrow Agent shall make no delivery to
Parent of any Escrow Shares specified in such Officer's Certificate unless the
Escrow Agent shall have received written authorization from the Seller (or any
successor thereto) to make such delivery. After the expiration of such thirty
(30) day period, the Escrow Agent shall make delivery of an amount from the
Escrow Fund in accordance with such Officer's Certificate and Section 8.2(e)
hereof, provided that no such payment or delivery may be made if the Seller (or
any successor thereto) shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30) day period.
(g) Resolution of Conflicts; Arbitration.
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(i) In case the Seller (or any successor thereto) shall
so object in writing to any claim or claims made in any Officer's Certificate
within 30 days after delivery of such Officer's Certificate, the Seller (or any
successor thereto) and Parent shall attempt in good faith to agree upon the
rights of the respective Parties with respect to each of such claims. If the
Seller (or any successor thereto) and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both Parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and distribute amounts from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Seller (or any successor thereto) may
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both Parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by one arbitrator mutually agreeable to Parent and the Seller (or any
successor thereto). In the event that within forty-five (45) days after
submission of any dispute to arbitration, Parent and the Seller (or any
successor thereto) cannot mutually agree on one arbitrator, Parent and the
Seller (or any successor thereto) shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period not to exceed
forty-five (45) and establish procedures designed to limit the cost and time for
discovery while allowing the Parties an opportunity, adequate in the sole
judgement of the arbitrator or majority of the three arbitrators, as the case
may be, to discover relevant information from the opposing Parties about the
subject matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the same extent as a competent court of law or equity, should
the arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of the arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any claim in such Officer's Certificate
shall be binding and conclusive upon the Parties to this Agreement, and
notwithstanding anything in Section 8.2(f) to the hereof, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Funds in accordance therewith. Such decision shall be
written and shall be supported by written findings of fact and conclusions which
shall set forth the award, judgment, decree or order awarded by the
arbitrator(s). In the event that the Escrow Agent has not received evidence of
resolution under Section 8.2(g)(i) or this Section 8.2(g)(ii), the Escrow Agent
shall continue to hold the Escrow Funds in accordance herewith.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Alameda County, California, or Suffolk County,
Massachusetts, at the option of the claimant, under the rules then in effect of
the American Arbitration Association. Each Party to any arbitration pursuant to
this Section 8.2(g) shall pay its own expenses; the fees of each arbitrator and
the administrative fee of the American Arbitration Association shall be borne
equally by Parent, on the one hand and Seller, on the other.
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Neither the expenses that the Seller (or any successor thereto) incurs in the
course of any arbitration pursuant to this Section 8.2(g) nor the Seller's (or
any successor's) portion of the fees of the arbitrators or the administrative
fees for the American Arbitration Association shall be deducted from any amounts
held in the Escrow Fund.
(h) Seller's Agent. After the Closing, Seller (or any successor
thereto) may appoint an agent to act on its behalf with respect to this Section
8.2, with the prior written consent of Parent, which consent shall not be
unreasonably withheld.
(i) [INTENTIONALLY OMITTED]
(j) Third-Party Claims. In the event that Buyer or Parent becomes
aware of a third-party claim which Buyer or Parent believes may result in a
demand against the Escrow Fund, Parent shall notify the Seller (or any successor
thereto) of such claim, and the Seller (or any successor thereto) and Seller or
any successor thereto (including the Trust) shall be entitled, at their expense,
to participate in any defense of such claim. Parent shall have the right in its
sole discretion to settle any such claim which is (i) limited to payment of
money damages only, or (ii) affects only the Purchased Assets or Assumed
Liabilities; provided, however, that except with the consent of the Seller (or
any successor thereto), no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund. In the event that the Seller (or any successor thereto) has
consented to any such settlement, the Seller (or any successor thereto) shall
have no power or authority to object under any provision of this Article VIII to
the amount of any claim by Buyer or Parent against the Escrow Fund with respect
to such settlement to the extent that such amount is consistent with the terms
of such settlement.
(k) Escrow Agent's Duties.
(i) The Escrow Agent's duties are purely ministerial in
nature, and the Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth in this Agreement and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Parent and the
Seller (or any successor thereto), and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper Party or Parties. The
Escrow Agent shall not be liable for any action taken, suffered or omitted
hereunder as Escrow Agent absent gross negligence or willful misconduct, and the
Escrow Agent shall be fully protected and shall incur no liability for any
action taken, suffered or omitted pursuant to the advice of counsel.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the Parties hereto or by any
other Person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
Parties hereto or to any other Person by reason of such compliance,
notwithstanding any such order, judgment or
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decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the Parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any Party for damages, claims, liabilities,
losses, or expenses, except for gross negligence or willful misconduct on the
part of the Escrow Agent (which for all purposes of any section of this
Agreement as it pertains to the Escrow Agent shall be finally determined by a
court of competent jurisdiction). The Escrow Agent shall not incur any such
liability for (A) any action taken, suffered or omitted in good faith, or (B)
any action taken, suffered or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Agreement that the
Escrow Agent shall in good faith believe to be genuine, nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, the Escrow
Agent may consult with legal counsel in connection with Escrow Agent's duties
under this Agreement and shall be fully protected in any action taken, suffered,
or omitted by it in accordance with the advice of counsel. The Escrow Agent is
not responsible for determining and verifying the authority of any Person acting
or purporting to act on behalf of any Party to this Agreement. The Escrow Agent
shall have the right to perform any of its duties hereunder through agents,
custodians or nominees, and the Escrow Agent shall not be liable or responsible
for any misconduct or negligence on the part of any such agent, custodian or
nominee absent gross negligence, willful misconduct or bad faith on the part of
the Escrow Agent in the selection and continued employment thereof.
(vi) If any controversy arises between the Parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may be required, despite what may be
set forth elsewhere in this Agreement. In such event, the Escrow Agent will not
be liable for damages. Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the Parties to answer and litigate any claims
and rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and funds held in escrow, except all cost,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent
through such time and which the Parties jointly and severally agree to pay. Upon
initiating such action, the Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
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(vii) The Parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, costs, fines, settlement judgments,
penalties, demands, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on Escrow Agent or incurred by
Escrow Agent in connection with the execution of this Agreement or the
performance of its duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter other
than arising out of its negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the Parties; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: the Parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the Parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under this Agreement. Alternatively, if a
successor escrow agent is not appointed within the above time frames, then the
Escrow Agent may apply to a court of competent jurisdiction for appointment of a
successor escrow agent.
(ix) In no event shall the Escrow Agent be liable for
special, indirect, incidental, punitive or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits) even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(x) Any Person into which the Escrow Agent may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Escrow Agent
in its individual capacity shall be a party, or any Person to which
substantially all the business of the Escrow Agent may be transferred, shall be
the Escrow Agent under this Agreement without further act.
(l) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the schedule of the
Escrow Agent delivered to Parent at or prior to the execution of this Agreement.
Such fee schedule may be amended or modified upon mutual consent of Parent and
the Escrow Agent. It is understood that the fees and usual charges agreed upon
for services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Escrow Agent renders any
service not provided for in this Agreement, or if the Parties request a
substantial modification of its terms, or if any controversy arises, or if the
Escrow Agent is made a party to, or intervenes in, any litigation pertaining to
the Escrow Fund or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, including allocated costs of in-
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house counsel, and expenses occasioned by such default, delay, controversy or
litigation and the Escrow Agent shall not be obligated to take any such action
unless and until it is reasonably satisfied that it will receive such
compensation and reimbursement.
(m) Survival. The obligations of the Parties under Section 8.2(k)
and Section 8.2(j)(vii) hereof shall survive termination of this Agreement and
resignation or substitution of the Escrow Agent.
8.3 Indemnification by Buyer.
(a) Indemnity. Subject to the limitations set forth in this
Section 8.3, Parent and Buyer shall indemnify and hold harmless, jointly and
severally, Seller and any successors thereto (including the Trust) ("SELLER
INDEMNIFIED PERSONS") from and against any and all Losses arising out of, or
resulting from, or incurred with respect to, (i) any breach of any of the
representations, warranties, covenants and agreements given or made by Parent or
Buyer in this Agreement, the Seller Disclosure Letter or any certificate or
instrument delivered pursuant to this Agreement, (ii) the Retention Options
granted to New Consultants, (iii) the New Consultants, including without
limitation, compensation paid to such New Consultants, and (iv) any and all
Assumed Liabilities.
(b) Limitation on Indemnification by Buyer. Notwithstanding
anything to the contrary contained in this Agreement, no Seller Indemnified
Person shall be entitled to indemnification from Parent or Buyer hereunder, and
neither Parent nor Buyer shall be required to indemnify any Seller Indemnified
Person hereunder, for any Losses unless and until all such Losses exceeds
$250,000 in the aggregate (at which time, Seller Indemnified Persons shall be
entitled to indemnification for all Losses) or in excess of $7,500,000;
provided, however, that these limitations on liability shall not apply to the
indemnities set forth in Section 8.3(a)(ii), (iii) or (iv).
ARTICLE IX
TERMINATION
9.1 Termination of the Agreement. The Parties may terminate this
Agreement as provided below:
(a) Parent and Seller may terminate this Agreement as to all
Parties by mutual written consent at any time prior to the Closing;
(b) Parent or Seller may terminate this Agreement by written
notice if: (i) the Closing has not occurred by August 31, 2000; provided,
however, that the right to terminate this Agreement under this Section 9.1(b)(i)
shall not be available to any Party whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement; (ii) there shall be a final
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nonappealable order of a court of competent jurisdiction in effect preventing
consummation of the transactions contemplated by this Agreement or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement by any
Governmental Body that would make consummation of the transactions contemplated
by this Agreement illegal;
(c) Parent may terminate this Agreement by written notice if
there shall be any action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the transactions
contemplated by this Agreement by any Governmental Body, which would (i)
prohibit Parent's or Buyer's ownership or operation of all or a portion of the
business of Seller or (ii) compel Parent or Buyer to dispose of or hold separate
all or a portion of the business or assets of Parent or Seller as a result of
the transactions contemplated by this Agreement;
(d) Parent may terminate this Agreement by written notice if it
is not in material breach of its obligations under this Agreement and there has
been a material breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Seller and such breach has not been
cured within thirty (30) calendar days after written notice to Seller; provided,
however, that, no cure period shall be required for a breach which by its nature
cannot be cured;
(e) Seller may terminate this Agreement by written notice if it
is not in material breach of its obligations under this Agreement and there has
been a material breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Parent and such breach has not been
cured within thirty (30) calendar days after written notice to Parent; provided,
however, that no cure period shall be required for a breach which by its nature
cannot be cured;
(f) Parent or Seller may terminate this Agreement by written
notice if Seller Stockholders shall have taken a final vote on the transactions
contemplated hereby, and such matters shall not have been approved by Seller
Stockholders; and
(g) Parent may terminate this Agreement by written notice if an
event having a Material Adverse Effect on Seller or on the Purchased Assets
shall have occurred after the date of this Agreement.
(h) Seller may terminate this Agreement by written notice if an
event having a Material Adverse Effect on Parent shall have occurred after the
date of this Agreement.
9.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided that each Party
shall remain liable for any willful breaches of this Agreement prior to its
termination and provided, further, that the provisions contained in Section 6.1
(confidentiality) and Section 10 (miscellaneous) shall survive termination.
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ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that (a) Parent may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case
Parent will use its reasonable efforts to advise Seller prior to making the
disclosure) and (b) Seller may correspond with third parties in writings in form
and substance reasonably satisfactory to Parent with respect to obtaining
consents from such parties pursuant to Sections 5.10 and 7.1(f). In furtherance
of the foregoing sentence, the Parties agree and acknowledge that Parent will
issue a press release following the execution and delivery of this Agreement by
the Parties, which Parent shall provide to Seller in advance with an opportunity
to comment thereon. Parent shall accept any reasonable comment of Seller
specifically related to Seller or Seller Stockholders.
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, other than as specifically set forth herein.
10.3 Entire Agreement and Modification. This Agreement (including the
exhibits hereto) constitutes the entire agreement among the Parties with respect
to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all Parties.
10.4 Amendment. At any time prior to the Closing, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto. At any time after the
Closing, this Agreement may be amended by Parent, Buyer and Seller or any
successor thereto (including the Trust) by execution of an instrument in
writing.
10.5 Waivers. The rights and remedies of the Parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party; (ii) no waiver that may be
given by a Party will be applicable except in the specific instance for which it
is given; and (iii) no notice to or demand on one Party
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will be deemed to be a waiver of any obligation of such Party or of the right of
the Party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
10.6 Successors and Assigns. 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 other than the Escrow Agent; provided, however, that so
long as Parent remains liable for all obligations under this Agreement, Parent
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder.
10.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
10.8 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.
10.9 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by certified or registered first class mail, postage
prepaid, return receipt requested, (b) upon delivery, if delivered by hand, (c)
one business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid or (d) one business day after the
business day of facsimile transmission, if delivered by facsimile transmission
with copy by certified or registered first class mail, postage prepaid, return
receipt requested and shall be addressed to the intended recipient as set forth
below:
If to Parent:
Avanex Corporation
40919 Encyclopedia Circle
Fremont, California 94538
Attention: Brian Kinard, Esq., Vice President and
General Counsel
Facsimile: (510) 897-4292
Copy to:
Wilson Sonsini Goodrich & Rosati, Professional
Corporation
Spear Street Tower
One Market Street
San Francisco, California 94105
Attention: Michael J. Kennedy, Esq.
Robert T. Ishii, Esq.
Facsimile: (415) 947-2099
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If to Seller:
Holograhix, Inc.
577 Main Street, Suite 6
Hudson, Massachusetts 95131
Attention: David M. Rowe, President
Facsimile: (978) 562-4182
Copy to:
Burns & Levinson LLP
125 Summer Street
Boston, Massachusetts 02110
Attention: Norman C. Spector, Esq.
Facsimile: (617) 345-3299
If to the Escrow Agent:
Union Bank of California
475 Sansome Street, 12th Floor
San Francisco, California 94111
Attention: Andy Jeremi, Vice President
Telephone: 415-296-6435
Facsimile: 415-296-6757
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 ten (10) days' advance written notice to the other Parties
pursuant to the provisions above.
10.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
10.11 Forum Selection; Consent to Jurisdiction. All disputes arising
out of or in connection with this Agreement (other than matters subject to
arbitration pursuant to the terms of this Agreement or the other agreements
delivered by the Parties pursuant hereto) shall be solely and exclusively
resolved by a court of competent jurisdiction (a) in the case of actions brought
by Parent, Buyer or Escrow Agent, in the State of California, and (b) in the
case of actions brought by Seller or its successors, in the Commonwealth of
Massachusetts. The Parties hereby consent to the jurisdiction of the Courts of
the State of California and the Commonwealth of Massachusetts and the United
States District Courts of the Northern District of California and the District
of Massachusetts and waive any objections or rights as to forum nonconvenience,
lack of personal jurisdiction or similar grounds with respect to any dispute
relating to this Agreement.
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10.12 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.
10.13 Expenses. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. In the event the
transactions contemplated by this Agreement are consummated, Parent will assume
the reasonable costs and expenses (including accounting and legal fees and
expenses) of Seller incurred in connection with this Agreement and the
transactions contemplated thereby ("SELLER EXPENSES") within 10 days of the
receipt of an invoice (supported by reasonable documentation), up to a maximum
of $2,000,000; any costs or expenses in excess of such amount shall be Excluded
Liabilities.
10.14 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. 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. The
word "including" shall mean including without limitation.
10.15 Seller Disclosure Letter.
(a) The disclosures in Seller Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement. Notwithstanding the foregoing, any
contract, agreement, commitment or arrangement set forth in any of paragraphs
(a) - (y) of Section 3.14 herein shall be deemed to be disclosed for any other
paragraph of paragraphs (a) - (y) of Section 3.14.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in Seller Disclosure Letter (other than an
exception expressly set forth as such in Seller Disclosure Letter with respect
to a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
(c) Statements contained within the Seller Disclosure Letter
shall be deemed to be representations and warranties under this Agreement,
including, without limitation, Article VIII.
10.16 Attorneys' Fees. If any legal proceeding or other action relating
to this Agreement is brought or otherwise initiated, the prevailing Party shall
be entitled to recover reasonable attorneys fees, costs and disbursements (in
addition to any other relief to which the prevailing Party may be entitled).
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10.17 Further Assurances. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.18 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
of the date first above written.
PARENT: AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
-----------------------------------------
Name: Walter Alessandrini
----------------------------------------
Title: President and CEO
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BUYER: ASPEN ACQUISITION CORPORATION
By: /s/ BRIAN KINARD
-----------------------------------------
Name: Brian Kinard
----------------------------------------
Title: President
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SELLER: HOLOGRAPHIX INC.
By: /s/ DAVID M. ROWE
-----------------------------------------
Name: David M. Rowe
----------------------------------------
Title: President
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