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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
EZENIA! INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[GRAPHIC]
September 12, 2002
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the Shareholders of
Ezenia! Inc., which will be held at the offices of Bingham McCutchen LLP, 150
Federal Street, Boston, Massachusetts 02110, on Monday, October 21, 2002 at
10:00 a.m., EST.
The Notice of Special Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, accompany this
letter.
All shareholders are invited to attend the Special Meeting. To ensure your
representation at the Special Meeting, however, you are urged to vote by proxy
by following one of the following steps as promptly as possible:
(A) Complete, date, sign and return the enclosed Proxy Card (a
postage-prepaid envelope is enclosed for that purpose); or
(B) Vote via telephone (toll-free) in the United States or Canada (see
instructions on the enclosed Proxy Card); or
(C) Vote via the Internet (see instructions on the enclosed Proxy Card).
The telephone and Internet voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to vote their shares and to
confirm that their instructions have been properly recorded. Specific
instructions to be followed by any registered shareholder interested in voting
via the telephone or Internet are set forth in the Proxy Card. YOUR SHARES
CANNOT BE VOTED UNLESS YOU DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD, VOTE
VIA THE TELEPHONE OR INTERNET OR ATTEND THE SPECIAL MEETING IN PERSON.
Regardless of the number of shares you own, your careful consideration of, and
vote on, the matters before the shareholders is important.
Very truly yours,
Khoa D. Nguyen
Chairman and
Chief Executive Officer
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EZENIA! INC.
154 MIDDLESEX TURNPIKE
BURLINGTON, MASSACHUSETTS 01803
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 21, 2002
------------------------
TO OUR SHAREHOLDERS:
The Special Meeting of Shareholders (the "Special Meeting") of
Ezenia! Inc., a Delaware corporation (the "Company"), will be held on Monday,
October 21, 2002 at 10:00 a.m., EST, at the offices of Bingham McCutchen LLP,
150 Federal Street, Boston, Massachusetts 02110. The purposes of the Special
Meeting shall be:
1. To consider and vote upon the sale of all of our patents, patent
applications and certain related assets relating to our multipoint
videoconferencing business pursuant to an asset purchase agreement, dated
as of August 1, 2002, between the Company and Tandberg Telecom AS. The
full text of the asset purchase agreement is included as Annex A to the
attached proxy statement.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
Shareholders of record on the books of the Company at the close of business
on September 3, 2002 will be entitled to notice of, and to vote at, the Special
Meeting.
Please sign, date and return the enclosed Proxy Card in the enclosed
envelope, or vote via telephone or the Internet (pursuant to the instructions on
the enclosed Proxy Card) at your earliest convenience. If you return the proxy
or vote via telephone or the Internet, you may nevertheless attend the Special
Meeting and vote your shares in person.
All shareholders of the Company are cordially invited to attend the Special
Meeting.
By Order of the Board of Directors,
Khoa D. Nguyen
Secretary
Burlington, Massachusetts
September 12, 2002
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE (I) SIGN, DATE AND MAIL
THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED FROM WITHIN THE UNITED STATES OR (II) OTHERWISE VOTE YOUR SHARES BY
TELEPHONE OR THE INTERNET.
- --------------------------------------------------------------------------------
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EZENIA! INC.
154 MIDDLESEX TURNPIKE
BURLINGTON, MASSACHUSETTS 01803
------------------------
PROXY STATEMENT
------------------------
This proxy statement and the proxy enclosed herewith were first mailed to
our shareholders on or about September 12, 2002.
SUMMARY TERM SHEET
This summary term sheet highlights selected information contained in this
proxy statement regarding the proposed sale of all of the patents, patent
applications and certain related assets relating to our multipoint
videoconferencing business, which together are referred to as the MCU patent
portfolio. The MCU patent portfolio relates to the traditional ISDN-based
videoconferencing products portion of our business, also known as the MCU
business. The MCU business is separate and distinct from the enterprise
collaboration business, which includes the InfoWorkSpace products and services,
that have become the central focus of our operations.
This summary term sheet may not contain all of the information that is
important to you. To understand fully the proposed sale of the MCU patent
portfolio and for a more complete description of the legal terms of the proposed
sale, you should read carefully the entire proxy statement, including the asset
purchase agreement attached as Annex A.
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Parties to the Transaction (pages 11 and Ezenia! Inc., a Delaware corporation, develops and
12): markets products that enable organizations to provide
high-quality group communication and collaboration
capabilities to commercial, consumer and institutional
users.
Tandberg Telecom AS, a corporation organized under the
laws of the Kingdom of Norway and a wholly owned
subsidiary of Tandberg ASA, is a leading global provider
of videoconferencing solutions. Tandberg ASA is publicly
traded on the Oslo Stock Exchange under the ticker
symbol "TAA."
Description of the Transaction (page 12): On August 1, 2002, Ezenia! and Tandberg entered into a
license agreement, risk allocation agreement, secured
promissory note, security agreement and asset purchase
agreement. Under these documents, we granted to Tandberg
a license to use the MCU patent portfolio for $1.25
million, we borrowed $1.25 million from Tandberg and
pledged the MCU patent portfolio as collateral, and we
agreed, subject to shareholder approval, to sell the MCU
patent portfolio to Tandberg for $3.75 million,
consisting of $2.5 million in cash and forgiveness of
the $1.25 million loan.
Asset Purchase Agreement (page 13): GENERALLY. Under the terms of the asset purchase
agreement, we propose to sell to Tandberg our MCU patent
portfolio and certain related assets for $3.75 million,
consisting of $2.5 million in cash and forgiveness of
the $1.25 million that we owe Tandberg. Tandberg will
not assume any of our liabilities, and we will not be
selling our MCU business.
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1
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<Table>
ASSETS TO BE SOLD. The assets that we propose to sell to
Tandberg include:
- The MCU patent portfolio--our U.S. and foreign patents
and patent applications relating to the design,
development, manufacture and use of videoconferencing
interface components and telecommunications bridging
equipment to facilitate multipoint audio and video
conferencing;
- all goodwill associated directly with respect to the
MCU patent portfolio;
- all supporting documentation for the MCU patent
portfolio, including relevant portions of laboratory
notebooks, invention disclosure forms, patent
prosecution files and correspondence, opinions of
counsel and similar documents; and
- rights to seek remedies for infringement of the MCU
patent portfolio and rights to protection of interests
in the MCU patent portfolio.
GENERAL CONTRACT TERMS. We and Tandberg make customary
representations and warranties in the asset purchase
agreement, including, with respect to us,
representations and warranties as to our title to, and
the absence of litigation or infringement claims against
us relating to, the MCU patent portfolio. Tandberg's
obligation to consummate the sale is based on
satisfaction of conditions including our certifying the
continuing accuracy of our representations, our
performance of all required pre-closing obligations and
our obtaining all necessary consents and approvals,
including shareholder approval.
INDEMNIFICATION. Ezenia! and Tandberg have agreed to
indemnify each other and related shareholders, officers,
directors and/or employees against all losses due to any
breach or inaccuracy of the other party's
representations, warranties or covenants under the asset
purchase agreement. Additionally, we have agreed to
indemnify Tandberg and its shareholders, officers,
directors and/or employees against all losses due to
liabilities not expressly assumed by Tandberg or arising
prior to the closing of the asset purchase agreement.
TERMINATION. The asset purchase agreement may be
terminated by mutual consent of Tandberg and us, or by
Tandberg or us if the other party is in breach under the
asset purchase agreement, or by Tandberg if the sale of
the MCU patent portfolio has not closed by October 31,
2002.
RETAINED LICENSE. The asset purchase agreement provides
that, at the closing of the sale of the MCU patent
portfolio, Ezenia! and Tandberg will enter into a
license agreement which allows us to retain a
non-transferable license under the MCU patent portfolio.
</Table>
2
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<Table>
Use and Sufficiency of Sale Proceeds The purpose and goal of our sale of the MCU patent
(page 16): portfolio are to use the sale proceeds for general
operating expenses to finance our enterprise
collaboration business, including our InfoWorkSpace
products, or to attempt to dispose of that business. In
an effort to maximize the value of our common stock, we
are assessing whether the capital requirements and
competitive risks associated with developing our
enterprise collaboration products outweigh the value
that we might realize from a near-term sale of the
business. We have engaged an investment banker to assist
in investigating and assessing possible sale
opportunities. However, we have no current plan,
proposal or arrangement to sell our enterprise
collaboration business.
Background of the Sale of the MCU Patent Since the spring of 2001, we have been exploring
Portfolio (page 16): strategic alternatives in the face of significant
internal restructuring, senior management turnover,
declining financial results and competitive challenges.
Since that time, we have also reported that our ability
to continue as a going concern is dependent upon our
ability to raise additional capital, increase revenue or
substantially improve operating margins. We implemented
restructuring and cost reduction plans in May 2001 and
July 2002 to reduce operating costs. In light of our
need of additional cash to continue operations, on
August 1, 2002 we agreed to sell the MCU patent
portfolio to Tandberg. This transaction offered more
cash than any alternative available to us and only
required us to transfer title to, but not our right to
use, intellectual property relating to our MCU business,
which has been of decreasing importance to us. In the
course of reaching our decision to approve the sale of
the MCU patent portfolio pursuant to the asset purchase
agreement, our board of directors consulted with
management as well as outside legal counsel.
Reasons for the Sale of the MCU Patent Ezenia!'s board of directors considered numerous factors
Portfolio (page 19): relating to the benefits and risks associated with the
asset purchase agreement and the sale of the MCU patent
portfolio and unanimously determined that the sale of
the MCU patent portfolio pursuant to the asset purchase
agreement is expedient and in the best interest of
Ezenia! and our shareholders.
Recommendation of the Board (page 20): In light of our need of additional cash to continue
operations and in recognition of the unavailability of
more favorable financing alternatives, Ezenia!'s board
of directors recommends that our shareholders vote for
the approval of the sale of the MCU patent portfolio
pursuant to the asset purchase agreement.
Accounting Treatment (page 20): The proposed sale of the MCU patent portfolio is
expected to be accounted for as a sale of certain
assets, in accordance with accounting principles
generally accepted in the United States. In the period
in which the proposed sale of the MCU patent portfolio
is consummated, we expect to recognize a gain in the
amount of the difference between the sale price and the
aggregate book value of the net assets sold.
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3
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Material Tax Consequences (page 21): CONSEQUENCES FOR EZENIA!. We will recognize net taxable
gains on the sale of the MCU patent portfolio equal to
the excess of the amount realized on the sale over our
aggregate adjusted basis in the assets sold. Although
the gains will constitute capital gains, to the extent
that we hold the MCU patent portfolio as capital assets,
we expect that the gains will be offset by operating
losses incurred during 2002 and/or by net operating loss
carry-forwards from previous taxable years. The losses
and/or loss carry-forwards so absorbed will not be
available to offset income and gains that we may realize
in the future.
CONSEQUENCES FOR EZENIA!'S SHAREHOLDERS. The sale of the
MCU patent portfolio will not, in and of itself, cause
our shareholders to recognize any income for federal
income tax purposes. The sale will generate "earnings
and profits" for tax purposes. Though not anticipated,
if we have positive earnings and profits for our 2002
taxable year, then some or all of the distributions or
deemed distributions made by us to shareholders during
2002, if any, may be treated as taxable dividends.
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4
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
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SUMMARY TERM SHEET.......................................... 1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND PROXY
STATEMENT................................................. 6
SPECIAL MEETING OF SHAREHOLDERS............................. 9
PURPOSE................................................. 9
TIME, DATE AND PLACE; SOLICITATION...................... 9
RECORD DATE; REQUIRED VOTE; SHARES OUTSTANDING.......... 9
VOTING.................................................. 9
REVOCABILITY OF PROXY................................... 9
SOLICITATION OF PROXIES; EXPENSES....................... 10
MAILING ADDRESS OF EZENIA!'S PRINCIPAL EXECUTIVE
OFFICES................................................ 10
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 10
PROPOSAL: THE SALE OF THE MCU PATENT PORTFOLIO.............. 11
DESCRIPTION OF EZENIA! AND ITS BUSINESS................. 11
DESCRIPTION OF TANDBERG AND ITS BUSINESS................ 12
DESCRIPTION OF THE TRANSACTION.......................... 12
THE ASSET PURCHASE AGREEMENT............................ 13
SALE OF THE MCU PATENT PORTFOLIO........................ 13
PURCHASE PRICE.......................................... 13
REPRESENTATIONS AND WARRANTIES.......................... 14
COVENANTS............................................... 14
CLOSING................................................. 14
CONDITIONS TO CLOSING................................... 15
INDEMNIFICATION......................................... 15
TERMINATION............................................. 16
EXPENSES................................................ 16
USE AND SUFFICIENCY OF SALE PROCEEDS.................... 16
BACKGROUND OF THE SALE OF THE MCU PATENT PORTFOLIO...... 16
EZENIA!'S REASONS FOR THE SALE OF THE MCU PATENT
PORTFOLIO.............................................. 19
RECOMMENDATION OF EZENIA!'S BOARD....................... 20
ACCOUNTING TREATMENT.................................... 20
MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES........................................... 21
TAX CONSEQUENCES FOR EZENIA!............................ 21
TAX CONSEQUENCES FOR EZENIA!'S SHAREHOLDERS............. 21
REGULATORY APPROVALS.................................... 21
DISSENTERS' RIGHTS OF APPRAISAL......................... 21
PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS............ 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 22
VOTING PROCEDURES........................................... 23
OTHER BUSINESS.............................................. 23
SHAREHOLDER PROPOSALS....................................... 23
ASSET PURCHASE AGREEMENT, DATED AS OF AUGUST 1, 2002........ Annex-A
</Table>
5
<Page>
QUESTIONS AND ANSWERS ABOUT THE
SPECIAL MEETING AND PROXY
STATEMENT
WHO IS SOLICITING MY PROXY?
Ezenia!'s board of directors is soliciting proxies from each of our
shareholders.
WHEN AND WHERE IS THE SPECIAL MEETING?
This special meeting will be held on Monday, October 21, 2002 at
10:00 a.m., EST, at the offices of Bingham McCutchen LLP, 150 Federal Street,
Boston, Massachusetts 02110.
WHO MAY VOTE?
Only shareholders of record of our common stock as of the close of business
on September 3, 2002 will be entitled to notice of, and to vote at, the special
meeting and any adjournments thereof. Each shareholder is entitled to one vote
per share.
HOW DO SHAREHOLDERS VOTE?
Registered shareholders can vote their shares (1) by mailing their signed
proxy card, (2) via a toll-free telephone call from the U.S. or Canada, (3) via
the Internet or (4) in person at the special meeting. If a shareholder does not
intend to attend the special meeting, any written proxy or notice should be
returned to us, and any telephonic or Internet vote should be made, not later
than the close of business on Friday, October 18, 2002.
HOW DO PROXIES WORK?
Giving your proxy means that you authorize us to vote your shares at the
special meeting in the manner you direct. If you sign, date and return the
enclosed proxy card but do not specify how to vote, the persons named as proxies
thereon will vote your shares FOR the sale of the MCU patent portfolio pursuant
to the asset purchase agreement and at their discretion with respect to any
other proposals that may properly come before the special meeting. We do not
know of any other matter that will be brought before the special meeting. The
persons named as proxies are employees of Ezenia!.
HOW MAY A PROXY BE REVOKED?
You may revoke your proxy before it is voted (1) by delivering a later-dated
proxy, (2) by making an authorized telephone or Internet communication on a
later date in accordance with the instructions on the enclosed proxy card,
(3) by written notice of revocation to the secretary of Ezenia! at the address
for our principal executive offices set forth in this proxy statement or (4) by
voting in person at the special meeting.
WHAT HAPPENS IF I CHOOSE NOT TO SUBMIT A PROXY OR TO VOTE?
If an Ezenia! shareholder does not submit a proxy or vote, it will have the
same effect as a vote against approval of the sale of the MCU patent portfolio.
HOW MANY VOTES ARE REQUIRED TO APPROVE THE SALE?
The affirmative vote of a majority of the outstanding shares of our common
stock is required for the approval of the sale of the MCU patent portfolio. For
purposes of determining whether a proposal has received a majority vote,
abstentions will be included in the vote totals, with the result being that
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an abstention will have the same effect as a negative vote. In instances where
brokers are prohibited from exercising discretionary authority for beneficial
holders who have not returned a proxy (so-called "broker non-votes"), those
shares will not be included in the vote totals and, therefore, will also have
the same effect as a negative vote. Shares that abstain or for which the
authority to vote is withheld on certain matters will, however, be treated as
present for quorum purposes on all matters.
WHO PAYS FOR THIS PROXY SOLICITATION?
Ezenia! will bear the cost of solicitation of proxies relating to the
special meeting.
WHAT ARE THE SHAREHOLDERS BEING ASKED TO APPROVE?
Each Ezenia! shareholder is being asked to vote in favor of the sale of our
MCU patent portfolio to Tandberg for $3.75 million, consisting of $2.5 million
in cash and forgiveness of the $1.25 million that we owe Tandberg. The
transaction does not involve a sale of our MCU business.
WHY HAS THE BOARD DECIDED TO SELL THE MCU PATENT PORTFOLIO?
In light of our need of additional cash to continue operations and in
recognition of the unavailability of more favorable financing alternatives, our
board of directors has decided that the sale of the MCU patent portfolio
pursuant to the asset purchase agreement is in the best interests of Ezenia! and
its shareholders. The proposed transaction will provide us with a substantial
amount of cash in exchange for the transfer of title to, but not our right to
use, intellectual property relating to our MCU business, a portion of our
business that has become increasingly less important to us as the preferred mode
of corporate collaboration moves from proprietary systems to Web-based
implementation. The board of directors considered various benefits to approving
the transaction, including that the sale of the MCU patent portfolio would
provide capital to fund our operations and enable us to attempt to further
develop or sell our enterprise collaboration business. Our board of directors
also considered various negative factors concerning the sale of the MCU patent
portfolio to Tandberg pursuant to the asset purchase agreement and determined
that overall the risks associated with the transaction were outweighed by the
potential benefits of the sale.
WHAT OTHER OPTIONS DID EZENIA! CONSIDER BEFORE DECIDING TO SELL THE MCU PATENT
PORTFOLIO TO TANDBERG?
Ezenia! explored possible financing and strategic alternatives, including
issuing additional equity securities, obtaining a loan secured by our assets and
selling all or a portion of the company. We were unable to identify any third
party willing to purchase our equity or make us a loan on acceptable terms, nor
were we able to negotiate the timely sale of the MCU patent portfolio with any
party other than Tandberg.
WHAT WILL OCCUR IF THE SALE OF THE MCU PATENT PORTFOLIO IS NOT APPROVED AND
CONSUMMATED?
The board of directors does not believe that the long-term continued
operation of Ezenia! is feasible without additional capital. Therefore, if the
sale to Tandberg of the MCU patent portfolio is not approved, we must either
(1) pursue an infusion of capital or another transaction in which we can sell
all or a portion of our business on acceptable terms, or (2) if no such
transaction is found in the immediate future, liquidate the company under the
protection of federal or state bankruptcy laws. Given current market conditions
and our past experience, we think it unlikely that we would be able to conclude
an acceptable transaction in time to avoid liquidation of the company.
If the sale of the MCU patent portfolio is not approved, we will be required
to repay the $1.25 million loan advanced to us by Tandberg, which is secured by
the MCU patent portfolio, and we
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may not receive the additional $2.5 million payment that is due to us upon the
closing of the sale under the terms of the asset purchase agreement.
WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE SALE OF THE MCU PATENT PORTFOLIO?
Ezenia! will recognize net taxable gains on the sale of the MCU patent
portfolio equal to the excess of the amount realized on the sale over the
aggregate adjusted basis in the assets sold, which gains we expect will be
offset by operating losses. The sale of the MCU patent portfolio will not, in
and of itself, cause our shareholders to recognize any income for federal income
tax purposes.
AM I ENTITLED TO APPRAISAL OR DISSENTER'S RIGHTS?
No, under Delaware law, you are not entitled to exercise appraisal rights
for the proposed sale of the MCU patent portfolio pursuant to the asset purchase
agreement.
WHERE CAN I FIND MORE INFORMATION ABOUT EZENIA!?
Ezenia! is subject to the information requirements of the Securities
Exchange Act of 1934 and is required to file reports, proxy statements and other
information with the Securities and Exchange Commission. You may inspect and
copy our reports, proxy statements and other information at the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information
about the public reference rooms. You may also obtain copies of the reports,
proxy statements and other information from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a world-wide web site on the Internet at HTTP://WWW.SEC.GOV that
contains reports, proxies, information statements, registration statements and
other information filed with the Commission through the EDGAR system.
If you want to contact Ezenia! directly, you may do so at the following
address:
154 Middlesex Turnpike
Burlington, Massachusetts 01803
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SPECIAL MEETING OF SHAREHOLDERS
PURPOSE
The specific proposal to be considered and acted upon at the special meeting
is summarized in the accompanying notice of special meeting of shareholders and
is described in more detail in this proxy statement.
TIME, DATE AND PLACE; SOLICITATION
This proxy statement is furnished in connection with the solicitation by
Ezenia!'s board of directors of proxies for use at the special meeting of
shareholders to be held on Monday, October 21, 2002 at 10:00 a.m., EST, at the
offices of Bingham McCutchen LLP, 150 Federal Street, Boston, Massachusetts
02110, and any adjournments thereof.
RECORD DATE; REQUIRED VOTE; SHARES OUTSTANDING
Only shareholders of record as of the close of business on September 3, 2002
will be entitled to notice of, and to vote at, the special meeting of
shareholders and any adjournments thereof. As of the record date there were
13,631,880 shares (excluding treasury shares) of our common stock, $.01 par
value, issued and outstanding. Such shares of common stock are the only voting
securities of Ezenia!. Shareholders are entitled to cast one vote for each share
of common stock held of record on the record date.
VOTING
Registered shareholders can vote their shares (1) by mailing their signed
proxy card, (2) via a toll-free telephone call from the U.S. or Canada, (3) via
the Internet or (4) in person at the special meeting. The telephone and Internet
voting procedures are designed to authenticate shareholders' identities, to
allow shareholders to vote their shares and to confirm that their instructions
have been properly recorded. The company believes that the procedures that have
been put in place are consistent with the requirements of applicable law.
Specific instructions to be followed by any registered shareholder interested in
voting via telephone or the Internet are set forth on the enclosed proxy card.
Shares represented by duly executed proxies received by us prior to the
special meeting will be voted as instructed in the proxy on each matter
submitted to the vote of shareholders. If any duly-executed proxy is returned
without voting instructions with respect to one or more proposal, the persons
named as proxies thereon intend to vote all shares represented by such proxy FOR
each such proposal and at their discretion with respect to any other proposals
that may properly come before the special meeting. The persons named as proxies
are employees of Ezenia!.
Should there be any amendment to the asset purchase agreement after the
mailing of this proxy statement, each vote in favor of our proposed sale of the
MCU patent portfolio pursuant to the asset purchase agreement, unless revoked,
will be deemed a vote in favor of the transaction pursuant to the agreement as
so amended. We would notify shareholders to whom this proxy statement is mailed
if we were to agree to any amendment to the asset purchase agreement that we
deem material to the proposed sale.
REVOCABILITY OF PROXY
Any shareholder may revoke a proxy at any time prior to its exercise (1) by
delivering a later-dated proxy, (2) by making an authorized telephone or
Internet communication on a later date in accordance with the instructions on
the enclosed proxy card, (3) by written notice of revocation to the secretary of
Ezenia! at our address set forth above or (4) by voting in person at the special
meeting. If a shareholder does not intend to attend the special meeting, any
written proxy or notice should be
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returned to us, and any telephonic or Internet vote should be made, not later
than the close of business on Friday, October 18, 2002.
SOLICITATION OF PROXIES; EXPENSES
Ezenia! will bear the cost of solicitation of proxies relating to the
special meeting of shareholders. Ezenia! is paying Georgeson Shareholder
Communications, Inc., a proxy solicitation firm, to help with this proxy
solicitation. We will pay Georgeson Shareholder Communications a base fee of
$7,500, plus certain other fees and expenses, and we will indemnify it against
any losses arising out of its soliciting proxies on our behalf. We will
reimburse, on request, the reasonable fees and expenses of brokers and other
nominees for forwarding the proxy materials to beneficial holders and obtaining
voting instructions. Also, our employees may solicit proxies personally,
electronically, by telephone or by mail, though no additional compensation will
be paid to our employees for such solicitation.
MAILING ADDRESS OF EZENIA!'S PRINCIPAL EXECUTIVE OFFICES
The mailing address of Ezenia!'s principal executive offices is 154
Middlesex Turnpike, Burlington, Massachusetts 01803.
Unless otherwise indicated or the context otherwise requires, in this proxy
statement, (1) the "company," "we," "us" and "our" refers to Ezenia! Inc., a
corporation organized under the laws of the State of Delaware, and
(2) "Tandberg" refers to Tandberg Telecom AS, a corporation organized under the
laws of the Kingdom of Norway and the wholly owned subsidiary of Tandberg ASA.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This proxy statement includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as "expect," "anticipate," "intend," "plan,"
"believe," "estimate," "likely," "will," "should" and variations of such words
and similar expressions are intended to identify such forward-looking
statements.
These forward-looking statements in this proxy statement are not guarantees
of future performance and are subject to risks, uncertainties and assumptions.
These risks and uncertainties include Ezenia!'s ability to consummate the sale
to Tandberg of the MCU patent portfolio and our ability to further develop or
sell our enterprise collaboration software business. Other risks and
uncertainties include the considerations that are discussed in the Management's
Discussion and Analysis section of Ezenia!'s 2001 Annual Report on Form 10-K for
the year ended December 31, 2001, such as the evolution of Ezenia!'s market,
dependence on major customers, rapid technological change and competition, the
ability to successfully implement our restructuring and cost reduction plan,
risks associated with our acquisition of the InfoWorkSpace product line
(including the company's ability to integrate the InfoWorkSpace product line and
workforce) and other considerations that are discussed further in the
Management's Discussion and Analysis section of our 2001 Annual Report on
Form 10-K for the year ended December 31, 2001 and in our subsequent public
filings. Copies of our 2001 Annual Report on Form 10-K for the year ended
December 31, 2001 and other publicly available financial information and filings
may be received at no charge by contacting Investor Relations at Ezenia!.
The forward-looking statements contained in this proxy statement represent
our judgment as of the date of this proxy statement. Ezenia! cautions readers
not to place undue reliance on such statements. We undertake no obligation to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
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PROPOSAL: THE SALE OF THE MCU PATENT PORTFOLIO
DESCRIPTION OF EZENIA! AND ITS BUSINESS
Ezenia! Inc. develops and markets products that enable organizations to
provide high-quality group communication and collaboration capabilities to
commercial, consumer and institutional users. Our products allow individuals and
groups that are geographically distant from each other to interact and share
information in a natural, spontaneous way--voice-to-voice, face-to-face,
flexibly and in real-time--via a wide range of networks. Using our products,
disparately located individuals can interact through a natural meeting
experience, allowing groups to work together effectively and disseminate vital
information quickly. Ezenia!'s products enable seamless connectivity across a
wide range of networks including LANs, intranets, the Internet, ISDN, ATM and
frame relay.
Our traditional ISDN-based videoconferencing products use videoconferencing
interface components and telecommunications bridging equipment to facilitate
multipoint audio and video conferencing. We refer to our sales and services of
these products as our MCU business. As international telecommunications
standards for videoconferencing over switched digital circuit networks were
adopted in the early 1990s, a standard framework allowed equipment from
different manufacturers to communicate with each other over dial-up networks,
without regard to the type of equipment being used at the transmitting and
receiving ends of the session.
With the growth of the Internet and the innovative technologies that
followed, real-time enterprise collaboration applications were developed and
introduced in the late 1990s. Real-time collaboration takes the best elements of
videoconferencing and joins them with the ubiquity and ease-of-use of the
Internet. Where videoconferencing requires expensive hardware and focuses on
quality video, real-time collaboration uses video when necessary but goes beyond
it by offering a more complete solution, enabling teams to work more effectively
from disperse locations. Real-time solutions often bring video and audio
conferencing to the desktop and can include such other features as integrating
data conferencing, whiteboarding, instant messaging and virtual meeting spaces.
The focus of our enterprise collaboration business is our InfoWorkSpace
suite of Web-enabled collaboration and conferencing applications. The suite is a
Web-based package of collaborative solutions that facilitate communication, data
conferencing and knowledge management among dispersed members of a workgroup who
communicate with each other through a secure virtual workplace. InfoWorkSpace
products are currently used primarily by government organizations, including the
Department of Defense and the Intelligence community. While continuing to
develop the government business, we have attempted to market and sell
InfoWorkSpace products commercially.
For the past several years, we have been shifting our focus toward
enterprise collaboration products and away from our traditional ISDN-based and
related IP-based videoconferencing products. For the six months ended June 30,
2001, revenues from our videoconferencing products and services were
$6.5 million (or approximately 96% of our total revenues), but had dropped to
$3.7 million (or approximately 63% of our total revenues) for the comparable
period ended June 30, 2002. MCU business revenues are expected to continue to
decrease significantly as we recently closed our foreign sales operations and
significantly reduced sales and service operations of our MCU business. Although
we propose to sell the patents, patent applications and certain related assets
relating to our MCU business, which together are referred to as the MCU patent
portfolio, following the proposed transaction, we will retain a fully paid,
worldwide, nontransferable license to use the technology covered by those
patents and patent applications. We will not be selling our MCU business to
Tandberg, and we will be permitted to continue to operate that business.
However, after the proposed sale of the MCU patent portfolio, we intend to offer
only limited sales and servicing of our MCU business products, and to direct
most of our resources to our enterprise collaboration business.
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Our principal corporate offices are located at 154 Middlesex Turnpike,
Burlington, Massachusetts 01803 and our telephone number is (781) 505-2100.
DESCRIPTION OF TANDBERG AND ITS BUSINESS
Tandberg Telecom AS is a wholly owned subsidiary of Tandberg ASA, which is a
leading global provider of videoconferencing solutions. Tandberg ASA designs,
develops and manufactures videoconferencing systems and offers sales, support
and value-added services in more than 60 countries worldwide. Tandberg ASA is a
global company with offices in the United States, Norway, the United Kingdom,
Canada, China and Japan. Tandberg ASA is publicly traded on the Oslo Stock
Exchange under the ticker symbol "TAA." Tandberg Telecom AS is a corporation
organized under the laws of the Kingdom of Norway. Its principal executive
offices are located at Philip Pedersen's Vei 22, N-1324, Lysaker, Norway and its
telephone number is +47 67 125 125.
According to a press release issued by Tandberg in July 2002, Tandberg's
total revenue for the fiscal year ended December 31, 2001 and for the fiscal
quarter ended June 30, 2002 were approximately 1,279 million Norwegian krone and
443 million krone (or approximately $166 million and $57 million, based on
current exchange rates), respectively, and Tandberg's total assets at the end of
each of those periods was approximately 2,319 million krone and 2,580 million
krone (or approximately $301 million and $335 million, based on current exchange
rates), respectively.
DESCRIPTION OF THE TRANSACTION
On August 1, 2002, Ezenia! and Tandberg entered into several agreements to
enable Ezenia! to sell the MCU patent portfolio and certain related assets to
Tandberg and, in the meantime, obtain additional working capital. These
agreements consist of the following:
LICENSE AGREEMENT. We have granted to Tandberg a fully-paid, non-exclusive,
non-transferable, world-wide license to use, manufacture and distribute under
the MCU patent portfolio in exchange for an up-front payment by Tandberg of
$1.25 million. Under the license agreement, Tandberg is permitted to grant
sublicenses to its affiliates, resellers, distributors, manufacturers and
end-users in connection with the manufacture, sale, servicing and use of the
Tandberg products. The license terminates if the sale of the MCU patent
portfolio does not close due to breach by Tandberg of the asset purchase
agreement, provided that the termination will be effective only if we reimburse
Tandberg the $1.25 million license fee on or before December 31, 2002.
RISK ALLOCATION AGREEMENT. Tandberg has agreed to indemnify us against
certain losses and liabilities incurred by us as a result of infringements or
other claims relating to Tandberg's products.
PROMISSORY NOTE. We have agreed to repay the $1.25 million loaned to us by
Tandberg, together with interest at an annual rate of 7.5% (with a penalty
interest rate of 18% for amounts not paid when due), not later than October 31,
2002. We will be in default under the promissory note if, among other things, we
fail to make a payment when due, we dissolve or become insolvent, we are the
subject of a bankruptcy or reorganization proceeding, we transfer or attempt to
transfer all or substantially all of our assets, a foreclosure proceeding or the
like is commenced against us, a substantial part of our business or property is
seized or condemned, an event of default occurs under the security agreement or
we breach the license agreement or the asset purchase agreement. All amounts
owing under the promissory note are to be forgiven upon the closing of the sale
of the MCU patent portfolio to Tandberg.
SECURITY AGREEMENT. We have granted Tandberg a security interest in the MCU
patent portfolio to secure our payment obligations under the promissory note. If
we default under the promissory note or under the security agreement (including
by breaching the license agreement or the asset purchase
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agreement), Tandberg may foreclose on and sell the MCU patent portfolio in an
effort to collect the amounts we owe Tandberg.
ASSET PURCHASE AGREEMENT. Please see the summary below. You should refer to
the full text of the asset purchase agreement, attached to this proxy statement
as Annex A, for details of the terms and conditions thereof.
THE ASSET PURCHASE AGREEMENT
Following is a description of the material provisions of the asset purchase
agreement. We do not purport to describe all of the terms of the asset purchase
agreement. The full text of the asset purchase agreement is attached to this
proxy statement as Annex A and is incorporated by reference. All Ezenia!
shareholders are urged to read the asset purchase agreement in its entirety
because it is the legal document that governs the transaction and the principal
document pursuant to which we propose to sell the MCU patent portfolio to
Tandberg.
SALE OF THE MCU PATENT PORTFOLIO
We propose to sell to Tandberg the MCU patent portfolio and certain related
assets, as described in greater detail below.
PURCHASED ASSETS. The asset purchase agreement identifies the following
items among the assets to be sold to Tandberg:
- the issued patents and patent applications relating to the design,
development, manufacture and use of videoconferencing interface components
and telecommunications bridging equipment to facilitate multipoint audio
and video conferencing, and any foreign counterparts, reissues,
extensions, substitutions, confirmations, registrations, revalidations,
additions, or continuations, continuations-in-part, and divisions thereof,
in existence as of the closing, all of which we refer to collectively as
the MCU patent portfolio,
- all goodwill associated directly with respect to the MCU patent portfolio
and all rights thereunder,
- all supporting documentation for the MCU patent portfolio, including
relevant portions of laboratory notebooks, invention disclosure forms,
patent prosecution files and correspondence, opinions of counsel and
similar documents,
- remedies against infringement of the MCU patent portfolio, and
- rights to protection of interests in the MCU patent portfolio under the
laws of all jurisdictions.
EXCLUDED ASSETS. Tandberg will not be purchasing our MCU business.
Additionally, Tandberg will not acquire funds in the amount of $975,000 which
represent a portion of the settlement payable to us in connection with our
patent infringement suit against Accord Networks Ltd. and which is being held in
escrow until certain Israeli tax matters related to the settlement are resolved.
NON-ASSUMPTION OF LIABILITIES. Tandberg will not assume any liabilities,
debts or obligations of Ezenia! of any kind whatsoever.
PURCHASE PRICE
The purchase price to be paid by Tandberg for the MCU patent portfolio will
be $3.75 million, payable in the following manner: Tandberg shall pay us
$2.5 million by wire transfer in immediately available funds and Tandberg shall
forgive the principal, interest and other amounts that we owe to
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Tandberg under the $1.25 million promissory note. Tandberg's payment obligation
is not subject to any financing contingency.
REPRESENTATIONS AND WARRANTIES
The asset purchase agreement also contains customary representations and
warranties made by Ezenia!. These representations and warranties include, among
other things, matters relating to our corporate standing and ability to enter
into the asset purchase agreement, as well as to our ownership and the state of
the MCU patent portfolio. These representations and warranties must continue to
be true at the time of closing in order for Tandberg to be obligated to
consummate the transaction.
The asset purchase agreement also contains customary representations and
warranties made by Tandberg.
COVENANTS
The asset purchase agreement also contains customary covenants concerning
actions we must take prior to the closing. These covenants contain, among other
things, our agreement to provide Tandberg's representatives access to
documentation relating to the MCU patent portfolio and our obligation to update
our disclosures in the asset purchase agreement and to comply with laws that
might adversely affect the MCU patent portfolio.
We have also agreed, for a period of five years, not to disclose
confidential information relating to the MCU patent portfolio. Additionally, we
have agreed not to assert against Tandberg, its affiliates or certain other
parties, any rights we may have to any patents or patent applications relating
to intellectual property within the field of multipoint videoconferencing, that
may be filed on or prior to August 1, 2004.
Tandberg may not be required to consummate the transaction if we breach any
of these covenants.
Tandberg has agreed, until the closing of the sale of the MCU patent
portfolio, not to disclose confidential information relating to the MCU patent
portfolio.
CLOSING
The closing of the sale of the MCU patent portfolio, if approved by the
Ezenia! shareholders, will take place no later than 5 business days after notice
from us to Tandberg, provided that all of the conditions to closing set forth in
the asset purchase agreement have been satisfied or waived by the applicable
parties.
Ezenia! has agreed that at the closing of the sale of the MCU patent
portfolio we will deliver to Tandberg customary closing documents and documents
required to transfer title to the MCU patent portfolio and related assets. We
are also required to provide a certificate from our patent counsel as to the
payment of issuance, maintenance, annuity and legal fees in connection with the
MCU patent portfolio.
Tandberg has agreed that at the closing of the sale of the MCU patent
portfolio it will pay us the purchase price for the MCU patent portfolio and it
will forgive the promissory note and terminate the security agreement and
license agreement entered into on August 1, 2002.
At the closing, we and Tandberg will also enter into a license agreement
allowing us to retain a fully-paid, non-exclusive, non-transferable and
world-wide license to use, manufacture and distribute under the MCU patent
portfolio and grant sublicenses to our resellers, distributors, manufacturers
and end-users in connection with the manufacture, sale, servicing and use of our
MCU business products and enterprise collaboration software products, which
terminates (with respect to the MCU business) if
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we sell all or substantially all of our MCU business or otherwise abandon that
business for twelve months.
CONDITIONS TO CLOSING
Neither we nor Tandberg is required to close the sale of the MCU patent
portfolio if the other party's representations and warranties are not true and
correct in all material respects on the date of the closing or if the other
party has failed to perform in all material respects all of its obligations
under the asset purchase agreement. At the closing, each party must deliver to
the other a certificate indicating that it is in compliance with these
conditions.
Tandberg's obligation to close the sale of the MCU patent portfolio is also
subject to the following conditions:
- Tandberg must be reasonably satisfied with all proceedings taken by us in
connection with the sale of the MCU patent portfolio, including the
preparation and delivery of documents necessary or appropriate to transfer
and assign title to the MCU patent portfolio to Tandberg,
- there has been no material adverse change in the MCU patent portfolio, and
- we have obtained all necessary consents, approvals and documentation with
respect to the sale of the MCU patent portfolio.
Neither we nor Tandberg is required to close the transaction if there is any
litigation in connection with the sale of the MCU patent portfolio.
INDEMNIFICATION
Under the terms of the asset purchase agreement, Ezenia! has agreed to
indemnify Tandberg, its shareholders, officers, directors and/or employees
against all losses due to or resulting from any of the following:
- any inaccuracy or breach of any representation or warranty made by us in
or pursuant to the asset purchase agreement,
- any breach or default of any covenant or agreement made by us in or
pursuant to the asset purchase agreement,
- any of our liabilities or obligations not expressly assumed in or pursuant
to the asset purchase agreement, or
- any liability arising prior to the closing and relating to the ownership
or use of the MCU patent portfolio.
Additionally, Tandberg, has agreed to indemnify Ezenia!, our shareholders,
officers, directors and/or employees against all losses due to or resulting from
any of the following:
- any inaccuracy or breach of any representation or warranty made by
Tandberg in or pursuant to the asset purchase agreement, or
- any breach or default of any covenant or agreement made by Tandberg in or
pursuant to the asset purchase agreement.
Ezenia! will have no obligation to indemnify Tandberg in excess of the
purchase price payment that we receive from Tandberg under the asset purchase
agreement. Our obligation to indemnify Tandberg pursuant to the asset purchase
agreement will survive the closing for a period of three years.
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TERMINATION
The asset purchase agreement may be terminated at any time prior to the
closing of the sale of the MCU patent portfolio as follows:
- by mutual written consent of Tandberg and us,
- by Tandberg or us, if the other party is in breach of any representation,
warranty or covenant under the asset purchase agreement and fails to cure
such breach within ten days after receipt of notice from the non-breaching
party, or
- by Tandberg, by giving written notice if the sale of the MCU patent
portfolio has not closed by October 31, 2002, unless the closing did not
occur due to a material breach on the part of Tandberg which Tandberg has
failed to cure within ten days after receipt of notice from Ezenia!;
provided that, if the cure period extends to or beyond October 31, 2002,
the requirement to close by that date shall be extended (up to ten days)
to permit Tandberg an opportunity to cure.
EXPENSES
We and Tandberg are required to pay our own expenses and costs incurred in
connection with the asset purchase agreement.
USE AND SUFFICIENCY OF SALE PROCEEDS
The purpose and goal of our sale of the MCU patent portfolio are to use the
proceeds from the sale for general operating expenses in an effort to build and
increase the value of our enterprise collaboration business or to attempt to
dispose of that business.
As we have previously reported, after the July 2002 restructuring and the
relocation of our headquarters, which are described below, we estimate our
cash-flow breakeven point to be approximately $3.5 million in revenues per
quarter, with future revenues expected to be generated primarily from sales and
services associated with our InfoWorkSpace products. We have no long-term debt
and no current expansion plans. Accordingly, we would expect to be able to fund
our long-term liquidity requirements from operating revenues if we are able to
satisfy our short-term obligations.
We anticipate the proceeds from the sale of the MCU patent portfolio to
enable us to continue to fund operations through the first half of 2003,
assuming we are able to significantly extend our obligation to purchase
$2.9 million of our common stock in December 2002 upon exercise of the put
option that we issued in connection with our acquisition of the InfoWorkSpace
business. We cannot be sure that we will be able to renegotiate the terms of the
put option. Further, while we forecast revenues in excess of our projected
breakeven point by the second half of 2003, we are not certain that we will be
generating sufficient revenue from our InfoWorkSpace products to fund continuing
operations by the time that we exhaust the proceeds from the sale of the MCU
patent portfolio.
Therefore, in an effort to maximize the value of our common stock, we are
assessing whether the capital requirements and competitive risks associated with
developing our enterprise collaboration products outweigh the value that we
might realize from a near-term sale of that business. We are attempting to hire
an investment banker to assist in investigating and assessing possible sale
opportunities. However, we have no current plan, proposal or arrangement to sell
our enterprise collaboration business.
BACKGROUND OF THE SALE OF THE MCU PATENT PORTFOLIO
Beginning in the spring of 2001, we began exploring strategic alternatives
in the face of significant internal restructuring, senior management turnover,
declining financial results and competitive challenges in the MCU business.
Since that time, we have also reported that our ability to continue as
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a going concern is dependent upon our ability to raise additional capital,
increase revenue or substantially improve operating margins.
In May 2001, we adopted a restructuring and cost reduction plan to align
company resources and expenses with our sharpened focus on our enterprise
collaboration business. We continued to implement this plan over the remainder
of 2001, but revenues have not materialized in line with our expectations. As a
result, in July 2002, we implemented another restructuring and cost reduction
plan which consisted of the termination of 55 employees (approximately 50% of
our work-force), closing our foreign sales operations, relocating our
headquarters to smaller facilities in Burlington, Massachusetts and
significantly reducing sales and service operations of our MCU business.
In April 2001, through our own efforts and through the preliminary efforts
of an investment adviser, we began to seek out and investigate possible
financing or strategic alternatives. Through the spring of 2002, however,
neither we nor our investment adviser was able to identify any third party
interested in entering into an acceptable strategic or lending relationship with
Ezenia!. Throughout this process, our management kept our board of directors
apprised of the status of possible strategic alternatives. The directors
instructed management to continue to seek out and evaluate opportunities.
In March 2002, we engaged a financial adviser to help us identify third
parties who might make us a loan secured by some of our patents. In connection
with that effort, our advisor engaged PLX Systems Incorporated to provide an
indication of the market value of seven patents included in the MCU patent
portfolio. We have no relationship with PLX Systems, which is a company that is
regularly engaged to provide enterprise-wide, customized intellectual property
valuation appraisals in a variety of scenarios including asset securitization,
mergers and acquisition activity, licensing and intangible asset accounting. We
reimbursed our financial adviser $20,000 for amounts paid to PLX Systems for
their valuation services. The valuation report, which was delivered to our
financial adviser on April 17, 2002, indicated that the market value of the
appraised patents was $56.7 million. A copy of this report will be made
available for inspection and copying at our principle corporate offices during
our regular business hours by any interested holder of our common stock or its
representative who has been so designated in writing.
The methodology underlying the valuation combines option pricing theory and
current, per-product data from publicly traded, technology-specific companies to
assess the value of intellectual property assets relating to future products.
This approach values the patents as if they were call options on future
technology assets and applies the Black-Scholes model to determine present
value. The Black-Scholes model is a mathematical approach typically used to
determine the value of option contracts, based on variables such as the
volatility of a security's return, the level of interest rates, the relationship
between the price of the underlying security and the exercise price of the
option and the exercisable period of the option. Variables considered by PLX
Systems in applying the Black-Scholes model to the valuation of the MCU patent
portfolio included both subjective factors, such as time until launch,
development cost and market-driven product value, and objective factors, such as
time until patent expiration and the rate of the five-year U.S. government bond.
In performing its analysis, PLX System had to make certain assumptions, some
of which were based on information that we provided, such as our estimate that
the technology underlying these patents, when fully developed, would rank in the
90th percentile among competing technologies in the same niche and that
remaining development costs would be approximately $500,000. Additionally, the
appraisal assumes, among other things, that there is no time to product launch,
that the cost of development is paid out instantly at the time of product
launch, that the highest and best use of the technology has been properly
identified and is realizable by Ezenia!, and that our ownership and the validity
of our patents is certain. The analysis assumes the accuracy of information
available from public sources, some of which, such as trading prices of public
companies, is given as of a particular
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point in time. Inaccuracies in the assumptions and other information used in the
analysis can significantly affect the accuracy of the appraisal.
Our financial adviser informed us that it contacted at least four financial
institutions regarding the possibility of obtaining a loan secured by the
appraised assets. Initially, the adviser expected to be able to secure a
financing commitment by the end of April 2002. However, as of July 2002, none of
the financial institutions expressed a willingness to enter into any financing
arrangements with Ezenia!. One institution discussed loaning us up to a total of
$8 million in stages, but decided not to proceed with the transaction.
During this period, we also contacted Cisco Systems, Inc., Tandberg and
Polycom, Inc. to assess their level of interest in purchasing our MCU patent
portfolio or the entire MCU business. One company indicated potential interest
at a price of approximately $3.5 million, but expressed no willingness to
negotiate, even when informed that we were engaged in serious discussions with
another party. Tandberg was the only company to express a substantial interest
in purchasing the MCU patent portfolio and in promptly pursuing a transaction.
Also, in late April 2002, Ezenia! received an unsolicited offer to acquire
all of our outstanding shares for approximately $1 million in cash and
approximately $3 million in shares of a company with stock trading on the OTC
Bulletin Board. While we provided the interested company with access to
information concerning Ezenia!, discussions relating to the disposition of our
MCU patent portfolio presented a more favorable opportunity.
On July 25, 2002, Ezenia! and Tandberg informally agreed to a value of
$5 million for the MCU patent portfolio. Over the following several days, we and
Tandberg negotiated the structure and details of the transaction, under which
Tandberg paid us $1.25 million in cash, at that time, for a non-exclusive
license under the MCU patent portfolio and agreed to pay us an additional
$3.75 million upon our transfer of title to those patents and patent
applications, following approval of the transaction by our shareholders. The
additional $3.75 million is to consist of $2.5 million in cash and forgiveness
of the $1.25 million that Tandberg loaned to us in connection with this
transaction.
Despite the higher valuation stated in the appraisal report, we believe that
the current market value of the MCU patent portfolio (that is, what a willing
buyer would pay for it) is only a fraction of the appraised amount. There are
only a limited number of companies worldwide that compete in the ISDN-based
videoconferencing products market. We contacted and attempted to enter into
negotiations with the companies we thought might be interested in our MCU
business or the MCU patent portfolio. However, other videoconferencing companies
have their own products and technologies, and few were interested in entering
into a transaction with us. As discussed above, Tandberg provided the best offer
available to Ezenia!. Tandberg's $5 million offer was higher than the
$3.5 million proposal suggested by another potential purchaser and higher than
the offer of $4 million for the entire company. Further, no debt financing was
available to us.
On July 29, 2002, at a special meeting of Ezenia!'s board of directors, our
management and legal counsel presented to the board of directors the state of
negotiations with Tandberg, as well as the proposed structure of the
contemplated transaction and the principal terms of the asset purchase agreement
and the other related documents. The board of directors also reviewed
alternatives available to Ezenia! at that time. At the conclusion of this
meeting, in light of Ezenia!'s need of cash in order to continue operations and
in recognition of the unavailability of more favorable financing alternatives,
the board of directors unanimously approved Ezenia!'s granting Tandberg a
non-exclusive license under the MCU patent portfolio, accepting a loan from
Tandberg secured by that intellectual property and, subject to Ezenia!
shareholder approval, selling the MCU patent portfolio to Tandberg.
On August 1, 2002, the company and Tandberg executed the asset purchase
agreement and related documentation.
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EZENIA!'S REASONS FOR THE SALE OF THE MCU PATENT PORTFOLIO
Ezenia!'s board of directors unanimously determined that the sale of the MCU
patent portfolio pursuant to the asset purchase agreement is expedient and in
the best interests of Ezenia! and its shareholders and unanimously recommends
that the shareholders approve the sale of the MCU patent portfolio pursuant to
the asset purchase agreement.
The board of directors believes that the sale of the MCU patent portfolio
will be beneficial to Ezenia! and its shareholders and considered a number of
positive factors in reaching this conclusion, including the following:
- That if we do not sell the MCU patent portfolio we will likely be unable
to continue to fund our operations and will be required to repay the loan
we received from Tandberg;
- That the cash consideration that we will receive in connection with the
sale of the MCU patent portfolio will provide us with additional time to
try to maximize the value of our enterprise collaboration business, either
by enabling us to attempt to build and increase the value of that business
as an ongoing operation or by providing us with additional time to attempt
to dispose of that business;
- That the sale of the MCU patent portfolio enables us to receive a
substantial amount of cash for intellectual property rights relating to a
portion of our business that has become increasingly less important to us
as the preferred mode of corporate collaboration moves from proprietary
systems to Web-based implementation;
- That the cash consideration that we will receive in connection with the
sale of the MCU patent portfolio far exceeds the total value of all of our
outstanding shares, based on the recent trading prices of our common
stock;
- That, based on the history of our discussions with other parties, no other
transaction involving the MCU business is likely to be more favorable to
us and our shareholders;
- That the asset purchase agreement enables us to retain a fully-paid,
non-exclusive, non-transferable license under the MCU patent portfolio,
enabling us to use the intellectual property covered by those patents and
patent applications in connection with our operation of our MCU and
enterprise collaboration businesses; and
- That the terms of the asset purchase agreement are reasonable and do not
contain any extraordinary conditions, such as a financing contingency, to
Tandberg's obligation to close the purchase of the MCU patent portfolio.
The board of directors also considered a number of potentially negative
factors in its deliberations concerning the sale of the MCU patent portfolio,
including:
- That the consummation of the sale of the MCU patent portfolio is
conditioned upon a number of factors including: approval by our
shareholders, the accuracy of the representations and warranties of the
parties and compliance by the parties with their obligations under the
asset purchase agreement, and absence of a material adverse change related
to the MCU patent portfolio;
- That the failure of the sale to be consummated for any reason would likely
render Ezenia! unable to pay its obligations and could result in our
ceasing operations and/or filing for bankruptcy protection; and that if we
are unable to repay the $1.25 million that we owe to Tandberg pursuant to
the promissory note, Tandberg could foreclose on and cause the sale of the
MCU patent portfolio;
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- That after the consummation of the sale of the MCU patent portfolio, we
intend to focus heavily on our enterprise collaboration business; that as
a result, our total revenues will be lower than they are currently; and
that while we believe that the enterprise collaboration business has
growth potential, to date that business has not generated a profit and has
incurred significant operating losses;
- That the proceeds of the sale may not be sufficient to enable us to
operate our enterprise collaboration business long enough to generate
revenue sufficient to fund continuing operations;
- That we have agreed to indemnify Tandberg against certain losses to
satisfy claims for the payment of these losses should they arise;
- That the asset purchase agreement provides, in effect, that Tandberg and
parties related to Tandberg may, without additional payment to us, use
certain intellectual property subject to any videoconferencing patents
that we may file prior to August 1, 2004; and
- That we will remain responsible for preclosing liabilities relating to our
ownership of the MCU patent portfolio.
The board of directors believed that certain of these negative factors were
unlikely to occur or unlikely to have a material impact on Ezenia!, while we
could avoid or mitigate others, and that overall, the risks associated with the
sale of the MCU patent portfolio to Tandberg were outweighed by the potential
benefits of the sale.
The foregoing discussion of information and factors considered by the board
of directors is not intended to be all-inclusive. In view of the wide variety of
factors considered, the board of directors did not find it practicable to
quantify or otherwise assign relative weight to the specific factors considered.
However, after taking into account all of the factors set forth above, the board
of directors unanimously determined that the sale of the MCU patent portfolio
was expedient and in the best interests of Ezenia! and its shareholders and that
the company should proceed with the sale of the MCU patent portfolio.
RECOMMENDATION OF EZENIA!'S BOARD
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE SALE OF THE MCU PATENT PORTFOLIO PURSUANT TO THE ASSET PURCHASE
AGREEMENT AND THE RELATED AGREEMENTS AND HAS DETERMINED THAT THE SALE OF THE MCU
PATENT PORTFOLIO IS EXPEDIENT AND IN THE BEST INTERESTS OF EZENIA! AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE FOR APPROVAL OF THE SALE OF THE MCU PATENT PORTFOLIO
PURSUANT TO THE ASSET PURCHASE AGREEMENT.
ACCOUNTING TREATMENT
The proposed sale of the MCU patent portfolio is expected to be accounted
for as a sale of certain assets, in accordance with accounting principles
generally accepted in the United States. In the period in which the proposed
sale of the MCU patent portfolio is consummated, we expect to recognize a gain
in the amount of the difference between the sale price and the aggregate book
value of the net assets sold.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain U.S. federal income tax
consequences of the sale of the MCU patent portfolio. The discussion is based on
the Internal Revenue Code, Treasury Regulations, existing administrative
interpretations and court decisions, all of which may change, possibly with
retroactive effect. This discussion is not a complete analysis or description of
every potential U.S. federal income tax consequence, and does not address any
consequences under state, local or foreign tax laws or non-income tax laws.
TAX CONSEQUENCES FOR EZENIA!
We will recognize net taxable gains on the sale of the MCU patent portfolio
equal to the excess of the amount realized on the sale over our aggregate
adjusted basis in the assets sold. Although the gains will constitute capital
gains, to the extent that we hold the MCU patent portfolio as capital assets, we
expect that the gains will be offset by operating losses incurred during 2002,
and/or by net operating loss carry-forwards from previous taxable years. The
losses and/or loss carry-forwards so absorbed will not be available to offset
income and gains that we may realize in the future.
TAX CONSEQUENCES FOR EZENIA!'S SHAREHOLDERS
The sale of the MCU patent portfolio will not, in and of itself, cause our
shareholders to recognize any income for federal income tax purposes. The sale
will generate "earnings and profits" for tax purposes. Though not anticipated,
if we have positive earnings and profits for our 2002 taxable year, then some or
all of the distributions or deemed distributions made by us to shareholders
during 2002, if any, may be treated as taxable dividends.
REGULATORY APPROVALS
No federal or state regulatory requirements must be complied with and no
third-party approvals must be obtained in connection with our sale of the MCU
patent portfolio or any of the transactions contemplated by the asset purchase
agreement and related agreements.
DISSENTERS' RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law, our shareholders are not
entitled to rights of appraisal in connection with the sale of the MCU patent
portfolio or any of the transactions contemplated by the asset purchase
agreement and the related agreements.
PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS
Ezenia! is not an affiliate of Tandberg or any of its affiliates. Other than
the agreements that we entered into with Tandberg in connection with the
proposed sale of the MCU patent portfolio, our only relationships with Tandberg
or its affiliates have been commercial arrangements entered into in the ordinary
course of business. During the period from 1996 to the present, Tandberg and
certain of its affiliates have been authorized resellers of our ISDN- and
IP-based videoconferencing products pursuant to reseller agreements containing
standard terms and conditions typical of our reseller agreements.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of July 31, 2002 by (i) each person who is
known by us to own beneficially more than five percent of our common stock,
(ii) each member of our board of directors, (iii) our chief executive officer
and the next five most highly compensated executive officers, including two
individuals who were not serving as executive officers at the end of fiscal year
2001 and (iv) all directors and executive officers as a group.
<Table>
<Caption>
SHARES BENEFICIALLY
OWNED
--------------------
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS NUMBER PERCENT
- --------------------------------------- --------- --------
Khoa D. Nguyen (1)........................................ 933,934 6.44%
John F. Keane, Jr. (2).................................... 39,805 *
John A. McMullen (3)...................................... 29,805 *
Roy G. Perry (4).......................................... 35,805 *
Stephen G. Bassett (5).................................... 141,751 1.03%
Paul W. Haverstock (6).................................... 86,875 *
Edward C. Wade (7)........................................ 162,241 1.18%
Arthur J. Souza (8)....................................... 0 *
Steven M. Chomicz (9)..................................... 0 *
All executive officers and directors as a group (9
persons)(10)............................................ 1,430,216 9.60%
</Table>
- ------------------------
* Less than 1%
(1) Includes 864,750 shares that Mr. Nguyen has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options.
(2) Includes 29,805 shares that Mr. Keane has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options.
(3) Represents shares that Mr. McMullen has the right to acquire within 60 days
of July 31, 2002 by the exercise of stock options.
(4) Includes 29,805 shares that Mr. Perry has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options.
(5) Includes 138,751 shares that Mr. Bassett has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options. Mr. Bassett's
employment with Ezenia! ceased on July 31, 2002.
(6) Represents shares that Mr. Haverstock has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options. Mr. Haverstock's
employment with Ezenia! ceased on July 31, 2002.
(7) Includes 87,875 shares that Mr. Wade has the right to acquire within
60 days of July 31, 2002 by the exercise of stock options. Mr. Wade's
employment with Ezenia! ceased on July 31, 2002.
(8) Mr. Souza's employment with Ezenia! ceased in August 2001.
(9) Mr. Chomicz's employment with Ezenia! ceased in April 2001.
(10) Includes 1,267,666 shares that directors and executive officers of Ezenia!
have the right to acquire within 60 days of July 31, 2002 by the exercise of
stock options.
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VOTING PROCEDURES
The affirmative vote of a majority of the outstanding shares of our common
stock is required for the approval of the sale of the MCU patent portfolio. For
purposes of determining whether a proposal has received a majority vote,
abstentions will be included in the vote totals, with the result being that an
abstention will have the same effect as a negative vote. In instances where
brokers are prohibited from exercising discretionary authority for beneficial
holders who have not returned a proxy (so-called "broker non-votes"), those
shares will not be included in the vote totals and, therefore, will also have
the same effect as a negative vote. Shares that abstain or for which the
authority to vote is withheld on certain matters will, however, be treated as
present for quorum purposes on all matters.
OTHER BUSINESS
The board of directors knows of no business which will be presented for
consideration at the special meeting other than that stated above. If other
business should come before the special meeting, the persons named in the
proxies solicited hereby, each of whom is an employee of the company, may vote
all shares subject to such proxies with respect to any such business in the best
judgment of such persons.
SHAREHOLDER PROPOSALS
It is currently contemplated that the 2003 Annual Meeting of Shareholders
will be held on or about May 21, 2003. Proposals of shareholders intended for
inclusion in the proxy statement to be furnished to all shareholders entitled to
vote at the next annual meeting of the company and/or for inclusion in the
agenda for that meeting must be received at the company's principal executive
offices not later than December 19, 2002. It is suggested that proponents submit
their proposals by certified mail, return receipt requested.
Dated: September 12, 2002
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ANNEX A
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of the
1st day of August, 2002, by and between EZENIA! INC., f/k/a VideoServer, Inc. a
corporation organized and existing under the laws of the State of Delaware,
U.S.A. (the "Seller"), and TANDBERG TELECOM AS, a corporation organized and
existing under the laws of the Kingdom of Norway (the "Buyer").
RECITALS
WHEREAS, the Seller owns certain Patents related to multipoint video
conferencing; and
WHEREAS, the Seller has licensed to Buyer certain rights under such Patents
pursuant to the terms of the License Agreement executed between the parties
hereto concurrently herewith (the "License Agreement"); and
WHEREAS, the Buyer desires to purchase such Patents from Seller, and the
Seller desires to sell and transfer to the Buyer such Patents, all as more fully
set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Buyer and the Seller hereby agree as follows:
ARTICLE 1--PURCHASE AND SALE OF ASSETS
1.1 DEFINED TERMS. Capitalized terms used herein have the meanings set
forth in Section 12.1.
1.2 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, and in reliance upon the representations, warranties, covenants and
agreements made in this Agreement by the Seller and the Buyer, the Buyer shall
purchase, accept and acquire from the Seller, and the Seller shall sell,
transfer, convey, assign and deliver to the Buyer (i) the Patents, all goodwill
associated directly with respect to the Patents and all rights thereunder,
(ii) all supporting documentation for the Patents, including relevant portions
of laboratory notebooks, invention disclosure forms, patent prosecution files,
and correspondence, opinions of counsel, and similar documents
("Documentation"), (iii) remedies against infringements thereof (but excluding
$975,000 held in escrow and described further in SCHEDULE 4.7(D) hereto) and
(iv) rights to protection of interests therein under the laws of all
jurisdictions (the "Purchased Assets").
1.3 CLOSING. The closing (the "Closing") of the purchase and sale of the
Purchased Assets shall take place at 10 a.m., local time, on the Closing Date,
at the offices of Klett, Rooney, Lieber and Schorling, The Brandywine Building,
Suite 1410, 1000 West Street Wilmington, DE 19810, or at such other time and
place as may be mutually agreed to by the Buyer and the Seller. The "Closing
Date" means the date on which the Closing shall occur, which shall be no later
than five business days after such date as Seller shall specify to Buyer by
written notice. Effective upon completion of the Closing, the Parties shall
cause the License Agreement and the Security Agreement to terminate.
ARTICLE 2--PURCHASE PRICE
In consideration of the transfer, sale and assignment of the Purchased
Assets, Buyer agrees to pay Seller Three Million Seven Hundred and Fifty
Thousand US Dollars ($3,750,000) (the "Purchase Price") payable in the following
manner:
2.1 One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) has been
advanced to Buyer pursuant to the terms of the Promissory Note executed
concurrently herewith; which Note
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(including all principal, interest and other amounts owing thereunder or under
the Security Agreement) shall be cancelled and considered paid in full as of the
completion of the Closing; and
2.2 Two Million Five Hundred Thousand Dollars ($2,500,000) shall be paid to
Seller at Closing by wire transfer in immediately available funds to an account
designated by Seller in Schedule 2.2 hereof.
ARTICLE 3--NON-ASSUMPTION OF LIABILITIES
The Buyer shall not be responsible for, assume, pay, perform, discharge, or
accept any liabilities, debts or obligations of the Seller of any kind
whatsoever, whether actual, contingent, accrued, known or unknown, including,
without limitation, any relating to interest and termination penalties on
indebtedness, taxes, breach or negligent performance of any contract,
liabilities resulting from breach of contract, illegal activity, unlawful
business practice, infringement of intellectual property rights, any
liabilities, obligations or commitments by Seller relating to or arising out of
the ownership of the Purchased Assets prior to the Closing, or the transfer of
the Purchased Assets or any other liability or obligation of the Seller
whatsoever. All such non-assumed liabilities, debts and obligations shall remain
the responsibility of the Seller.
ARTICLE 4--REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce the Buyer to enter into this Agreement, the Seller makes
the following representations and warranties to the Buyer, each of which shall
be deemed to be independently material and relied upon by the Buyer, regardless
of any investigation made by, or information known to, the Buyer. Any matter
described on the disclosure schedules attached hereto and incorporated herein
shall be set forth with reference to each separate Section of this Agreement to
which the matter relates.
4.1 OWNERSHIP, ORGANIZATION AND QUALIFICATION. The Seller is a corporation
duly incorporated and validly existing and in good standing under the laws of
the State of Delaware, has not filed articles of dissolution and has a perpetual
period of existence. The Seller has all requisite power and authority to own,
operate and lease its properties and to conduct its business as now being
conducted.
4.2 AUTHORIZATION. The Seller has obtained the approval from its Board of
Directors to enter into this Agreement and has all necessary power and authority
to enter into this Agreement and subject to obtaining any requisite approval of
the shareholders of Seller, Seller shall have all necessary power and authority
to perform the transactions contemplated hereby in accordance with the terms and
conditions hereof. Seller shall use its best efforts to obtain all necessary
approvals and consents.
4.3 ENFORCEABILITY. This Agreement and all other agreements of the Seller
contemplated hereby are or, upon the execution and delivery thereof will be, the
valid and binding obligations of the Seller, enforceable against it in
accordance with their terms, subject to any limitation of enforceability that
may be imposed by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting creditor's rights and
remedies generally and by the application by a court of equitable jurisdiction
(whether such enforceability is considered a proceeding in equity or in law).
4.4 CONFLICTING OBLIGATIONS. The execution and delivery of this Agreement
does not, and the consummation of the sale and purchase of the Purchased Assets
contemplated hereby will not: (a) conflict with or violate any provisions of the
articles or certificate of incorporation or bylaws of the Seller, as amended and
in effect on and as of the date hereof and on and as of the Closing Date;
(b) conflict with or violate any provisions of, or result in the maturation or
acceleration of, any obligations under any contract, agreement, instrument,
document, lease, license, permit, indenture, or obligation, or any law, statute,
ordinance, rule, regulation, code, guideline, order, arbitration award, judgment
or decree, to which the Seller is subject or to which the Seller is a party; or
(c) conflict with,
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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 the Seller is a party or by which it is bound or
to which any of the Purchased Assets are subject (or result in the imposition of
any Lien upon any of the Purchased Assets).
4.5 TITLE TO ASSETS; SUFFICIENCY. The Seller has good and marketable fee
simple title to all of the Purchased Assets, free and clear of any Lien or
restriction on transfer (other than those granted to or imposed by Buyer); and
the instruments of conveyance, and other endorsements and instruments of
transfer and assignment contemplated by this Agreement are sufficient to
transfer good and marketable title to the Purchased Assets to Buyer, free and
clear of all Liens (other than those granted to or imposed by Buyer). The
Purchased Assets encompass all of the Patents owned or controlled by Seller
related to the Field.
4.6 THIRD PARTY CONSENTS. No material third party consents, approvals or
authorizations are necessary for the execution and consummation of the
transactions contemplated hereby, nor are any such consents, approvals or
authorizations required in order for any of the Purchased Assets to be assigned
to the Buyer.
4.7 PATENTS.
(a) Schedule 4.7(a) identifies each patent or registration that has been
issued to or is owned by the Seller within the Field and identifies each
pending patent application or application for registration which the Seller
has made with respect to any intellectual property within the Field. Seller
has made available to the Buyer correct and complete copies of all of the
Patents and any licenses, agreements, options or other rights related to the
Patents.
(b) Seller owns the entire right, title and interest in and to all
Patents free and clear of all liens, claims and encumbrances (other than
those granted to or imposed by Buyer). The Seller has taken all actions that
are necessary or appropriate to maintain and (except for the Seller's not
having given notice to or taken action against each person suspected of
infringing upon a Patent) to protect each of the Patents, including, but not
limited to payment of any and all issuance fees, maintenance fees and
annuities.
(c) With respect to each of the Patents: (i) the Patent is not subject
to any outstanding injunction, judgment, order, decree, ruling, or charge;
(ii) no action, suit, opposition or reexamination proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Seller's Knowledge, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the Patent; (iii) no person has
notified the Seller of any claim concerning any alleged interference,
infringement, misappropriation, reexamination, opposition or other conflict
of any of the Patents with the intellectual property of any third party; and
(iv) the Seller has no Knowledge of any state of facts or contemplated event
that may give rise to any claim, action, suit, proceeding, complaint,
investigation or inspection which could adversely affect the ownership,
validity or use of the Purchased Assets.
(d) The Seller has no Knowledge of any products, inventions or
procedures of competitors which infringe or misappropriate any Patent and
has not given any notice of infringement or sent any demand to "cease and
desist" to any third party based on any claim in the Patents except as set
forth in Schedule 4.7(d).
4.8 NO SALE, TRANSFER OR LICENSE. Except for (i) the license granted to
the Buyer pursuant to the terms of the License Agreement, (ii) the lien granted
to the Buyer pursuant to the terms of the Security Agreement dated as of the
date hereof between the Buyer and the Seller, and (iii) licenses granted by the
Seller in the ordinary course of conducting its business to purchasers of its
products for the use and/or assembly of such products, and except for the
license referenced in Schedule 4.7(d);
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(a) the Seller has not sold, leased, transferred, or assigned any interest in
any of the Purchased Assets; (b) the Seller has not imposed or permitted any
third party to impose any Lien upon any of the Purchased Assets; (c) the Seller
has not granted any option, license or sublicense of any rights under or with
respect to any Patents; and (d) the Seller has not committed to any of the
foregoing.
4.9 BROKERAGE. The Seller has neither incurred nor made commitments for,
any brokerage, finders' or similar fee in connection with the transaction
contemplated by this Agreement.
4.10 BANKRUPTCY. The Seller has not filed a petition for relief under the
United States Bankruptcy Code or under any state insolvency statute.
4.11 NO BULK SALES LAWS. No "bulk sales" laws are applicable to the
acquisition of the Purchased Assets or any transactions contemplated by this
Agreement.
4.12 EXCEPT AS SPECIFICALLY AND EXPLICITLY PROVIDED HEREIN (INCLUDING,
WITHOUT LIMITATION, IN SECTIONS 4.5, 4.6 AND 4.7 ABOVE), THE PURCHASED ASSETS
ARE BEING SOLD "AS IS" WITHOUT WARRANTY OF ANY KIND AND SELLER HEREBY DISCLAIMS
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE PURCHASED ASSETS INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
TITLE, NON-INFRINGEMENT, NON-INTERFERENCE WITH ENJOYMENT, ACCURACY, INTEGRATION,
VALIDITY, EXCLUSIVITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND
ALL WARRANTIES IMPLIED FROM ANY COURSE OF DEALING OR USAGE OF TRADE. LICENSEE
ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY PROVIDED HEREIN NO OTHER WARRANTIES HAVE
BEEN MADE TO LICENSEE BY OR ON BEHALF OF LICENSOR OR OTHERWISE FORM THE BASIS
FOR THE BARGAIN BETWEEN THE PARTIES.
4.13 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The representations
and warranties contained herein, and all other documents, certifications,
materials and statements or information given to the Buyer by or on behalf of
the Seller or disclosed in this Agreement, do not include any untrue statement
of a material fact or omit to state a material fact required to be stated herein
or therein in order to make the statements herein or therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE 5--REPRESENTATIONS OF THE BUYER
In order to induce the Seller to enter into this Agreement, the Buyer makes
the following representations and warranties to the Seller, each of which shall
be deemed to be independently material and relied upon by the Seller, regardless
of any investigation made by, or information known to, the Seller.
5.1 OWNERSHIP, ORGANIZATION AND QUALIFICATION. The Buyer is a corporation
duly incorporated and validly existing under the laws of the Kingdom of Norway,
has not filed articles of dissolution and has a perpetual period of existence.
Buyer has all requisite power and authority to own, operate and lease its
properties and conduct its business as now being conducted.
5.2 AUTHORIZATION. The Buyer has all necessary power and authority to
enter into and perform the transactions contemplated hereby in accordance with
the terms and conditions hereof.
5.3 ENFORCEABILITY. This Agreement and all other agreements of the Buyer
contemplated hereby are or, upon the execution thereof, will be the valid and
binding obligations of the Buyer enforceable against it in accordance with their
terms, subject to any limitation of enforceability that may be imposed by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or
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other similar laws affecting creditor's rights and remedies generally and by the
application by a court of equitable jurisdiction (whether such enforceability is
considered a proceeding in equity or in law).
5.4 CONFLICTING OBLIGATIONS. The execution and delivery of this Agreement
do not, and the consummation of the sale and purchase of the Purchased Assets
contemplated hereby will not: (a) conflict with or violate any provisions of the
certificate of incorporation of the Buyer; (b) conflict with or violate any
provisions of, or result in the maturation or acceleration of, any obligations
under any contract, agreement, instrument, document, lease, license, permit,
indenture, or obligation, or any law, statute, ordinance, rule, regulation,
code, guideline, order, arbitration award, judgment or decree, to which the
Buyer is subject to or which the Buyer is a party; 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 the Buyer is a party or by which it is bound or to
which any of its assets is subject.
5.5 BROKERAGE. The Buyer has neither incurred, nor made commitment for,
any brokerage, finders or similar fee in connection with the transactions
contemplated by this Agreement.
ARTICLE 6--COVENANTS OF THE SELLER
The Seller covenants and agrees with the Buyer as follows:
6.1 MAINTENANCE OF PROPERTY. From the date hereof and until the Closing
Date, the Seller, with prior consultation with Buyer, shall take all actions
necessary or appropriate to maintain its right, title and interest in and to the
Purchased Assets. The Seller shall pay all costs related to the same. Commencing
immediately, Seller and its agents shall refrain from any activity to sell,
license, sublicense, assign, hypothecate, alienate, encumber, pledge or
otherwise transfer any of Seller's interest in or to any portion of the Patents
except for licenses granted to customers of Seller in conjunction with the
purchase of product for the and/use or assembly of such products.
6.2 ACCESS. Between the date of this Agreement and the Closing Date,
Seller will, and will instruct its agents and representatives to, give Buyer and
its employees, agents or representatives access to the Documentation and permit
Buyer to make reasonable inspection and copies thereof. Further, Buyer shall
instruct its prosecuting patent counsel or patent agent in each country where
the Patents are issued or pending to reasonably cooperate with Buyer and its
employees, agents or representatives to enable and assist such persons in
understanding the prosecution history of the Patents and to facilitate the
continuing prosecution of the any pending Patents following Closing. All such
access and inspections will be conducted during Seller's (or its patent
counsel's or patent agent's, as applicable) normal business hours and in a
manner that does not unreasonably interfere with the conduct of Seller's (or its
patent counsel's or patent agent's) business.
6.3 COMPLIANCE WITH LAWS. From the date hereof and until the Closing Date,
the Seller shall comply with all applicable laws, statutes, ordinances, rules,
regulations, guidelines, orders, arbitration awards, judgments and decrees
applicable to, or binding upon, the Seller if the breach of any of the foregoing
could reasonably be expected to materially adversely affect the Purchased
Assets.
6.4 SUPPLEMENTAL DISCLOSURE. As it becomes aware of such information and
in any event not later than the Closing Date, the Seller shall inform the Buyer
in writing of all information, events or actions which, if this Agreement were
signed on the Closing Date, would be required to be disclosed on the Schedules
in order to make the Seller's representations and warranties contained herein
true and not misleading. The delivery thereof by the Seller shall not absolve
the Seller from liability for breach of any representation or warranty which was
untrue when made.
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6.5 DOCUMENTS OF TRANSFER. On the Closing Date, the Seller shall duly
execute and deliver to the Buyer:
(a) the Bill of Sale as described in Exhibit 6.5(a);
(b) the Patent Assignment as set forth in Exhibit 6.5(b);
(c) The Ezenia! License Agreement in the form attached hereto as
Exhibit 7.1(c); and
(d) All such other assignments that shall be required to transfer title
to the Buyer pursuant to the terms as set forth herein.
6.6 OTHER DELIVERIES. On the Closing Date, the Seller shall deliver to the
Buyer the following:
(a) A certificate from Seller's patent counsel certifying that all
issuance, maintenance and annuity fees for each of the Patents have been
paid through the Closing Date and that all legal fees for prosecution of the
Patents have been paid up through and including the Closing Date.
(b) A certified resolution of the Board of Directors of Seller approving
the transaction contemplated by this Agreement;
(c) A certificate from the Corporate Secretary of Seller certifying that
all necessary approvals from the shareholders of the Seller have been
obtained;
(d) A certificate from an officer of Seller as described in Sections 8.1
and 8.2 below;
(e) All Documentation; and
(f) All other documents reasonably requested by counsel for the Buyer to
consummate the transactions herein contemplated.
6.7 FURTHER ASSURANCES. The Seller, upon request of the Buyer, shall
execute, acknowledge and deliver such other instruments as reasonably may be
requested to more effectively transfer and vest in the Buyer, the Purchased
Assets pursuant to the terms of this Agreement or to otherwise carry out the
terms and conditions of this Agreement.
6.8 CONFIDENTIALITY. The Purchased Assets and the Documentation constitute
confidential information that Seller shall hold confidential for a period of
five (5) years from the date of this Agreement except (a) information that is or
becomes publicly available (through no act of the Seller or any of its
Affiliates in violation of this Section 6.8); (b) information that is disclosed
to Seller or any of its Affiliates by a third party that did not disclose in
violation of a duty of confidentiality; (c) disclosures that are required to be
made by Seller under any applicable laws or regulations; or (d) information that
is independently developed, as demonstrated by Seller's written records.
6.9 COVENANT NOT TO ASSERT. Seller will not assert against Buyer or its
Affiliates or their respective, contract manufacturers, distributors, resellers
or customers in connection with their relationship with Buyer (the "Covered
Parties"), any Relevant Rights; provided that this covenant does not extend to
any attempt by any of the Covered Parties to contest the validity of any patents
contained within the Relevant Rights or to obtain for itself or others patent
rights with respect to such Relevant Rights. In the event Seller seeks to sell,
assign, transfer or license (but only if such license permits the licensee to
assert enforcement rights with respect to) any of its Relevant Rights to a third
party after the Closing, Seller shall notify Buyer of such proposed sale and
shall obtain the written undertaking from such party to abide by the terms of
this covenant. As used herein "Relevant Rights" shall mean any patent or patent
applications with respect to any intellectual property within the Field, owned
or controlled by Seller or its successors or assigns, that was filed on or
before the second anniversary of the Effective Date.
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ARTICLE 7--COVENANTS OF THE BUYER
7.1 The Buyer covenants and agrees with the Seller that on the Closing Date,
the Buyer shall deliver to Seller:
(a) The Purchase Price in accordance with the terms set forth in
Article 2 above;
(b) A certificate from an officer of Seller as described in Section 9.1
and 9.2 below; and
(c) The Ezenia! License Agreement to Buyer in the form attached hereto
as Exhibit 7.1(c); and
(d) Written confirmation of forgiveness of the Promissory Note and
termination of the Security Agreement and the License Agreement.
7.2 Subject to Section 13.12, Buyer shall hold confidential until the
Closing Date any information regarding any of the Purchased Assets except
(a) information that is or becomes publicly available (through no act of the
Buyer or any of its Affiliates in violation of this Section 7.2);
(b) information that is disclosed to Buyer or any of its Affiliates by a third
party that did not disclose in violation of a duty of confidentiality;
(c) disclosures that are required to be made by Buyer under any applicable laws
or regulations; or (d) information that is independently developed, as
demonstrated by Buyer's written records.
ARTICLE 8--CONDITIONS OF THE BUYER'S OBLIGATION TO CLOSE
The obligation of the Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction and fulfillment, prior to
and on the Closing Date, of the following express conditions precedent:
8.1 REPRESENTATION AND WARRANTIES. The representations and warranties in
this Agreement made by the Seller shall be true and correct in all material
respects as of and at the Closing Date with the same force and effect as though
said representations and warranties had been again made on the Closing Date, and
the Buyer shall have been furnished a certificate signed by the President of the
Seller to that effect.
8.2 PERFORMANCE OF COVENANTS AND OBLIGATIONS. The Seller shall have
performed and complied in all material respects with all of its covenants and
obligations under this Agreement which are to be performed or complied with by
it prior to or on the Closing Date, and the Buyer shall have been furnished a
certificate signed by an officer of the Seller to that effect.
8.3 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings, corporate
or otherwise, to be taken in connection with the transactions contemplated by
this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Buyer. The Seller shall have made
available to the Buyer, either directly or through its patent counsel, for
examination the originals or true and correct copies of all documents which the
Buyer reasonably may request in connection with the transactions contemplated by
this Agreement.
8.4 ADVERSE CHANGE. From and after the date of this Agreement and until
the Closing Date, the Buyer (in its reasonable discretion) shall have determined
that there has been no material adverse change in the Purchased Assets from that
disclosed to the Buyer in or under this Agreement.
8.5 NO LITIGATION. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency in which
it is sought to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
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8.6 CONSENTS, APPROVALS, CERTIFICATIONS, LICENSES AND PERMITS. All
necessary consents, approvals, certifications, licenses and permits with respect
to the transaction contemplated hereby shall have been received by the Buyer on
or before the Closing Date.
8.7 ASSIGNMENTS. Seller shall have prepared and delivered to Buyer all
documents necessary or appropriate to transfer and assign to Buyer title to the
Purchased Assets, including any foreign counterparts.
ARTICLE 9--CONDITIONS TO THE SELLER'S OBLIGATION TO CLOSE
The obligation of the Seller to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction and fulfillment, prior to
and on the Closing Date, of the following express conditions precedent:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties in
this Agreement made by the Buyer shall be true and correct in all material
respects as of and at the Closing Date with the same force and effect as though
said representations and warranties had been again made on the Closing Date, and
the Seller shall have been furnished a certificate signed by the President of
the Buyer to that effect.
9.2 PERFORMANCE OF COVENANTS AND OBLIGATIONS. The Buyer shall have
performed and complied with all of its covenants and obligations under this
Agreement which are to be performed or complied with by it prior to or on the
Closing Date, and the Seller shall have been furnished a certificate signed by
the President of the Buyer to that effect.
9.3 NO LITIGATION. No investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental agency in which
it is sought to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE 10--INDEMNIFICATION BY SELLER
10.1 INDEMNIFICATION. Notwithstanding the Closing, and regardless of any
investigation made by or on behalf of the Buyer or any information known to the
Buyer, the Seller, subject to the terms and conditions of this Article 10,
indemnifies and saves the Buyer, its shareholders, officers, directors and/or
employees (collectively, the "Buyer" as used in this Article 10) harmless from
and against any and all losses, claims, damages, actions, liabilities, costs,
expenses or deficiencies including, but not limited to, reasonable attorneys'
fees and other costs and expenses reasonably incident to proceedings or
investigations or the defense or settlement of any claim or claims, incurred by
or asserted against the Buyer or the Purchased Assets due to or resulting from
any of the following: (a) the inaccuracy or breach of any representation or
warranty of the Seller given in or pursuant to this Agreement; (b) any breach or
default in the performance by the Seller of any of its covenants, obligations or
agreements in or pursuant to this Agreement; (c) any liability or obligation of
the Seller not expressly assumed by the Buyer pursuant to this Agreement; or
(d) the ownership or use of the Purchased Assets at any time prior to the
Closing, or any incident, occurrence, condition or claim existing, arising or
accruing prior to the Closing and relating to the ownership or use of the
Purchased Assets. The foregoing are collectively referred to as "Indemnifiable
Damages." The term "Indemnifiable Damages" shall also include an amount of
interest on the amount of such Indemnifiable Damages (computed before the
application of this sentence), which interest shall be computed at the
Applicable Rate in simple interest per annum from the Closing Date and until
paid by the Seller. Notwithstanding the Closing, and regardless of any
investigation made by or on behalf of the Seller or any information known to the
Seller, the Buyer, subject to the terms and conditions of this Article 10,
indemnifies and saves the Seller, its shareholders, officers, directors and/or
employees (collectively, the "Seller" as used in this Article 10) harmless from
and against any and as Indemnifiable Damages incurred by or asserted
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against the Seller due to or resulting from any of the following: (a) the
inaccuracy or breach of any representation or warranty of the Buyer given in or
pursuant to this Agreement; or (b) any breach or default in the performance by
the Buyer of any of its covenants, obligations or agreements in or pursuant to
this Agreement.
10.2 LIMITATION ON INDEMNIFICATION OBLIGATION. The Seller will not have
any obligation to indemnify or save harmless the Buyer from and against any
Indemnifiable Damages in excess of the Purchase Price (or such portion thereof
as the Buyer shall then have paid to the Seller).
10.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD PARTY
CLAIMS. In the event that the Indemnified Party asserts a claim (a "Notice of
Claim") for Indemnifiable Damages (but excluding a claim for Indemnifiable
Damages resulting from the assertion of liability by third parties), it shall
give written notice to the Indemnifying Party specifying the nature and amount
of the Indemnifiable Damages. If the Indemnifying Party, within 15 business days
after receipt of such Notice of Claim by the Indemnified Party, has not given
written notice (a "Notice of Objection") to the Indemnified Party announcing its
intent to contest such assertion by the Indemnified Party, such assertion shall
be deemed accepted and the amount of Indemnifiable Damages stated in the Notice
of Claim shall be deemed a valid c therefor. In the event, however, that the
Indemnifying Party contests the assertion of a Notice of Claim by delivering a
Notice of Objection to the Indemnified Party within such 15 business day period,
then if the parties, acting in good faith, cannot reach agreement with respect
to such claim within 20 days after such notice, the contested assertion of the
claim shall be referred to arbitration in Wilmington, Delaware, in accordance
with the then-current rules of the American Arbitration Association. The
determination made in accordance with such rules shall be delivered in writing
to the parties and shall be final and binding and conclusive on the parties and
the amount of damages, if any, determined to exist shall be valid Indemnifiable
Damages. Each party shall pay its own legal, accounting and other fees in
connection with such a contest.
10.4 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS. If
any third party notifies the Indemnified Party with respect to any matter that
may give rise to a claim for indemnification against the Indemnifying Party
under this Article 10, then the Indemnified Party will notify the Indemnifying
Party thereof promptly and in any event within 30 days after receiving any
written notice from a third party; provided that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless, and then solely to the
extent that, the Indemnifying Party is prejudiced thereby. Once the Indemnified
Party has given notice of the matter to the Indemnifying Party, the Indemnified
Party may defend against the matter in any manner it reasonably may deem
appropriate. In the event the Indemnifying Party notifies the Indemnified Party
within 30 days after the date the Indemnified Party has given notice of the
matter that the Indemnifying Party is assuming the defense of such matter
(a) the Indemnifying Party will defend the Indemnified Party against the matter
with counsel of its choice reasonably satisfactory to the Indemnified Party,
(b) the Indemnified Party may retain separate counsel at its sole cost and
expense (except that the Indemnifying Party will be responsible for the fees and
expenses of such separate co-counsel to the extent the Indemnified Party
concludes in good faith that the counsel the Indemnifying Party has selected has
a conflict of interest), (c) the Indemnified Party will not consent to the entry
of a judgment or enter into any settlement with respect to the matter, or take
any measure that imposes any burden or encumbrance upon the conduct of the
Indemnified Party or its operations, without the written consent of the
Indemnifying Party (not to be withheld or delayed unreasonably), (d) the
Indemnifying Party will not consent to the entry of a judgment with respect to
the matter or enter into any settlement that does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld or delayed unreasonably), and (e) the
Indemnified Party shall have the right to attend, at its own expense, any
meetings relating to, and to receive upon request
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copies of all correspondence, reports or other documents submitted or received
by or on behalf of the Indemnifying Party in connection with, the defense of
such matter.
10.5 SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION. The Seller's
obligation to pay Indemnifiable Damages and to comply with this Article 10 shall
survive the Closing of this transaction for a period of three (3) years.
10.6 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy the Buyer may have with respect to the Seller,
or the transactions contemplated by this Agreement.
ARTICLE 11--TERMINATION
11.1 RIGHTS TO TERMINATE. This Agreement may be terminated at any time
prior to the Closing only as follows:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Seller by giving written notice to the Buyer if the Buyer is
in breach of any representation, warranty or covenant under this Agreement
and fails to cure such breach, if curable, within ten (10) days after
receipt of notice from the Seller requesting that such breach be cured (and
the Seller is not then in breach of any representation, warranty or
covenant);
(c) by the Buyer by giving written notice to the Seller if the Seller is
in breach of any representation, warranty or covenant under this Agreement
and fails to cure such breach, if curable, within ten (10) days after
receipt of notice from the Buyer requesting that such breach be cured (and
the Buyer is not then in breach of any representation, warranty or
covenant); or
(d) by the Buyer by giving written notice to the Seller if the Closing
shall not have occurred by October 31, 2002, unless the failure of the
Closing to have occurred by such date is due to a material breach on the
part of the Buyer which Buyer has failed to cure within ten (10) days after
receipt of notice from the Seller requesting such breach be cured; PROVIDED
that, if such cure period extends to or beyond October 31, 2002, the
requirement to close by such date shall be extended for so long as required
(up to 10 days) to permit the Closing to occur after Buyer has had an
opportunity to cure.
(e) Each party's right to termination pursuant to this Section 11 is in
addition to any of the rights it may have hereunder or otherwise.
11.2 EFFECTS OF TERMINATION. Notwithstanding any other provision of this
Agreement, no termination of this Agreement shall release any party of any
Liability arising hereunder for any pre-termination breach hereof or intentional
misrepresentations made herein.
ARTICLE 12--DEFINITIONS
12.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the meanings specified in this Section 12.1 unless the context
otherwise requires.
"Affiliate" shall mean any entity that is now or hereafter becomes
Controlled by, is in Control of, or is under common Control with a Party.
"Control" shall mean a fifty percent (50%) or more ownership of issued and
outstanding voting securities, or fifty percent (50%) or more of the voting
rights in a partnership, directly or indirectly.
"Agreement" means this Asset Purchase Agreement, together with all Exhibits
and Schedules hereto, as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
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"Bill of Sale" means that Bill of Sale Agreement, dated as of the Closing
Date, between the Seller and the Buyer and as set forth in Exhibit 6.4(a).
"Closing" has the meaning set forth in Section 1.3.
"Closing Date" has the meaning set forth in Section 1.3.
"Documentation" has the meaning set forth in Section 1.2.
"Field" shall mean the design, development, manufacture and use of
videoconferencing interface components and telecommunications bridging equipment
to facilitate multipoint audio and video conferencing.
"Governmental Authority" means the government of the United States of
America and any other country, and any state, province, municipality or other
governmental unit, or any agency, board, bureau, instrumentality, department or
commission (including any court or other tribunal) of any of the foregoing.
"Indemnifiable Damages" has the meaning set forth in Section 10.1.
"Knowledge" means, with respect to any party, the knowledge of such party
after due inquiry and, if such party fails to make such inquiry, shall include
the constructive knowledge of such facts as would have been learned had such due
inquiry been made.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"Lien" means any pledge, lien, encumbrance, charge or other security
interest of any kind.
"Notice of Claim" has the meaning set forth in Section 10.3.
"Notice of Objection" has the meaning set forth in Section 10.3.
"Patent Assignment" means that Patent Assignment, dated as of the Closing
Date, between the Seller and the Buyer and as set forth in Exhibit 6.4(b).
"Patents" means the issued patents and applications for patents set forth on
SCHEDULE 4.7(A) hereto, and any foreign counterparts, reissues, extensions,
substitutions, confirmations, registrations, revalidations, additions, or
continuations, continuations-in-part, and divisions thereof in existence as of
the Closing Date.
"Purchase Price" has the meaning set forth in Section 2.
"Purchased Assets" has the meaning set forth in Section 1.2.
ARTICLE 13--MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties (and disclaimers thereof) of the parties
contained in this Agreement shall survive the Closing hereunder for a period of
two (2) years.
13.2 BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, successors, assignees,
and beneficiaries in interest; provided, however, that this Agreement may not be
assigned by the either party without the prior written consent of the other
party, other than in connection with the sale of all or substantially all of the
assets of such party.
13.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware (regardless of such
State's conflict of laws principles), and without reference to any rules of
construction regarding the party responsible for the drafting hereof.
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13.4 EXPENSES. Except as otherwise herein provided, all expenses incurred
in connection with this Agreement or the transactions herein provided for shall
be paid by the party incurring such expenses and costs.
13.5 SUBMISSION TO JURISDICTION. Each of the Buyer and the Seller submits
to the exclusive jurisdiction of any state or federal court sitting in Delaware
in any action or proceeding arising out of or relating to this Agreement and all
agreements and transactions contemplated hereby, and agrees that all claims in
respect of the action or proceeding may be heard and determined in any such
court. Each of the Buyer and the Seller also covenants and agrees not to bring
any action or proceeding arising out of or relating to this Agreement or any
agreement or transaction contemplated hereby in any other court. Each of the
Buyer and the Seller waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto. Each
party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
13.6 NOTICES. Any and all notices, demands, and communications provided
for herein or made hereunder shall be given in writing and shall be deemed given
to a party at the earlier of (i) when hand delivered to such party, (ii) when
facsimile transmitted to such party to the facsimile number indicated for such
party below (or to such other facsimile number for a party as such party may
have substituted by notice pursuant to this Section 13.6), or (iii) when
received if sent by express courier, confirmed by receipt, and addressed to such
party at the address designated below for such party (or to such other address
for such party as such party may have substituted by notice pursuant to this
Section 13.6):
<Table>
If to the Buyer: Tandberg Telecom AS
Philip Pedersen's Vei 22
N-1324, Lysaker
NORWAY
With a copy to: Peri & Stewart, L.L.C.
108 Baker Street
Maplewood, NJ 07040
Fax: 973-762-5801
Attention: Steven B. Peri, Esq.
If to the Seller: Ezenia!, Inc.
154 Middlesex Turnpike
Burlington, MA 01803
Fax: 781-505-2559
Attention: President
With a copy to: Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
Attention: David L. Engel, Esq. and
Barry N. Hurwitz, Esq.
</Table>
13.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, provided that all such
counterparts, in the aggregate, shall contain the signatures of all parties
hereto.
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13.8 HEADINGS. All Section headings herein are inserted for convenience
only and shall not modify or affect the construction or interpretation of any
provision of this Agreement.
13.9 AMENDMENT, MODIFICATION AND WAIVER. This Agreement may not be
modified, amended or supplemented except by mutual written agreement of all the
parties hereto. Any party may waive in writing any term or condition contained
in this Agreement and intended to be for its benefit; provided, however, that no
waiver by any party, whether by conduct or otherwise, in any one or more
instances, shall be deemed or construed as a further or continuing waiver of any
such term or condition. Each amendment, modification, supplement or waiver shall
be in writing signed by the party or the parties to be charged.
13.10 ENTIRE AGREEMENT. This Agreement and the Addenda and Schedules
attached hereto represent the full and complete agreement of the parties with
respect to the subject matter hereof and supersede and replace any prior
understandings and agreements among the parties with respect to the subject
matter hereof and no provision or document of any kind shall be included in or
form a part of such agreement unless signed and delivered to the other party by
the parties to be charged.
13.11 THIRD-PARTY BENEFICIARIES. No third parties are intended to benefit
from this Agreement, and no third-party beneficiary rights shall be implied from
anything contained in this Agreement.
13.12 PUBLICITY. The Buyer and the Seller shall cooperate in making
appropriate public announcements concerning the terms of this Agreement and the
transactions contemplated hereby, but each Party shall unilaterally have the
authority to make such statements to the extent it reasonably decides such
disclosure is required in order to comply with the laws or stock exchange rules
of any country.
13.13 INTERPRETATION. Each of the Parties have been represented by counsel
and has had the opportunity to negotiate, review, revise and comment on the
terms set forth herein. As a result, the Parties acknowledge and agree that in
interpreting the provisions of this contract no weight shall be given to which
Party drafted or revised any provision of this Agreement, each provision
considered to have been the joint work product of both Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
<Table>
EZENIA!, INC.
/s/ KHOA NGUYEN
---------------------------------------------
By: Khoa Nguyen
Title: President
TANDBERG TELECOM A/S
/s/ BENGT THURESSON
---------------------------------------------
By: Bengt Thuresson
Title: Chairman
/s/ ROBERT BERNTSEN
---------------------------------------------
By: Robert Berntsen
Title: Member of the Board
</Table>
A-13
ANNEX
FORM OF PROXY CARD
[SIDE ONE]
PROXY
EZENIA! INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR A SPECIAL MEETING OF SHAREHOLDERS TO
BE HELD OCTOBER 21, 2002
The undersigned hereby appoints Khoa D. Nguyen and Robert Quinn as
proxies, each with full power of substitution, and hereby authorizes them or
either of them to represent and to vote as designated below all shares of Common
Stock of Ezenia! Inc. (the "Company") held of record by the undersigned on
September 3, 2002 at the Special Meeting of Shareholders to be held at the
offices of Bingham McCutchen LLP, 150 Federal Street, Boston, Massachusetts
02110 on Monday, October 21, 2002 at 10:00 a.m. EST, and at any adjournments or
postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE PROPOSAL.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1
[SIDE TWO]
- ------------------------------ ------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------------ ------------------------
It's fast, convenient and immediate! It's fast, convenient and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- ------------------------------------------------------------ ------------------------------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy 1. Read the accompanying Proxy Statement and Proxy
Card. Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). HTTP://WWW.EPROXYVOTE.COM/EZEN
------------------------------
3. Enter your Voter Control Number located on your 3. Enter your Voter Control Number located on your
Proxy Card above your name. Proxy Card above your name.
4. Follow the recorded instructions. 4. Follow the Instructions provided.
- ------------------------------------------------------------ ------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
CALL 1-877-PRX-VOTE ANYTIME! GO TO HTTP://WWW.EPROXYVOTE.COM/EZEN ANYTIME!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
1. To consider and vote upon the sale of all of our patents, patent
applications and certain related assets relating to our multipoint
videoconferencing business pursuant to an asset purchase agreement,
dated as of August 1, 2002, between the Company and Tandberg Telecom
AS. The full text of the asset purchase agreement is included as Annex
A to the accompanying proxy statement.
|_| FOR |_| AGAINST |_| ABSTAIN
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
Please sign exactly as your name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If shares are held of record by a corporation, please
sign in full corporate name by president or other authorized officer.
Partnerships should sign in partnership name by an authorized signatory.
Signature: Date: Signature: Date:
------------------ ------ ------------------ ------
2