EXHIBIT 4.5
ASSET PURCHASE AGREEMENT
among
FINISAR CORPORATION,
a Delaware corporation,
DATA TRANSIT CORP.,
a Delaware corporation,
AND
DALE T. SMITH and JANIS H. SMITH,
individual residents of the State of California.
DATED
AUGUST 4, 2004
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS................................................................... 2
1.1 "Acquisition Proposal"........................................................ 2
1.2 "Affiliates".................................................................. 2
1.3 "Agreement"................................................................... 2
1.4 "Allocation Schedule"......................................................... 2
1.5 "Analyzer Business"........................................................... 2
1.6 "Ancillary Agreements"........................................................ 2
1.7 "Article IV Losses"........................................................... 3
1.8 "Article V Losses"............................................................ 3
1.9 "Assigned Agreements"......................................................... 3
1.10 "Assumed Liabilities"......................................................... 3
1.11 "Basket Amount"............................................................... 3
1.12 "Bill of Sale and Assumption Agreement"....................................... 3
1.13 "Books and Records"........................................................... 3
1.14 "Business".................................................................... 3
1.15 "Business Day"................................................................ 3
1.16 "Closing"..................................................................... 4
1.17 "Closing Date"................................................................ 4
1.18 "COBRA"....................................................................... 4
1.19 "Code"........................................................................ 4
1.20 "Confidentiality Agreement"................................................... 4
1.21 "Contract".................................................................... 4
1.22 "Copyright Assignment"........................................................ 4
1.23 "Covenant Not to Compete"..................................................... 4
1.24 "Current Customer Backlog "................................................... 4
1.25 "Defenses and Claims"......................................................... 5
1.26 "Domain Name Assignment"...................................................... 5
1.27 "Documentation"............................................................... 5
1.28 "ERISA"....................................................................... 5
1.29 "Employee Plan"............................................................... 5
1.30 "Employee" and "Employees".................................................... 5
1.31 "Encumbrances"................................................................ 5
1.32 "Environmental Laws".......................................................... 5
1.33 "Exchange Act"................................................................ 6
1.34 "Excluded Assets"............................................................. 6
1.35 "Excluded Liabilities"........................................................ 6
1.36 "Expiration Date"............................................................. 6
1.37 "Facilities "................................................................. 6
1.38 "Founder Shares "............................................................. 6
1.39 "GAAP"........................................................................ 6
1.40 "Governmental Authority"...................................................... 6
1.41 "Governmental Permit"......................................................... 6
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1.42 "Hazardous Substances"........................................................ 7
1.43 "Indemnifiable Losses"........................................................ 7
1.44 "Indemnified Party"........................................................... 7
1.45 "Indemnifying Party".......................................................... 7
1.46 "Indemnitor" and "Indemnitee"................................................. 7
1.47 "Indemnification Claim"....................................................... 7
1.48 "Intellectual Property Rights"................................................ 7
1.49 "Inventory"................................................................... 8
1.50 "I-Tech Agreement"............................................................ 8
1.51 "Key Business Employees"...................................................... 8
1.52 "Lease"....................................................................... 8
1.53 "Lease Assignment"............................................................ 8
1.54 "Liabilities"................................................................. 8
1.55 "Losses"...................................................................... 9
1.56 "Trademark Rights Assignment "................................................ 9
1.57 "Material Adverse Effect"..................................................... 9
1.58 [Reserved].................................................................... 9
1.59 "New Purchaser Employees"..................................................... 9
1.60 "NNM"......................................................................... 9
1.61 "Note Amount"................................................................. 9
1.62 "Note Term"................................................................... 9
1.63 "Patent Assignment"........................................................... 9
1.64 "Paying Party"................................................................ 9
1.65 "Permitted Encumbrances"...................................................... 9
1.66 "Person"...................................................................... 9
1.67 "Prepaid Assets".............................................................. 10
1.68 "Products".................................................................... 10
1.69 "Promissory Note"............................................................. 10
1.70 "Purchased Assets"............................................................ 10
1.71 "Purchaser Common Stock"...................................................... 12
1.72 "Purchaser Group "............................................................ 12
1.73 "Purchaser Preferred Stock ".................................................. 12
1.74 "Purchaser SEC Reports"....................................................... 12
1.75 "Purchaser Securities"........................................................ 12
1.76 "Purchaser Share Price"....................................................... 12
1.77 "Registrable Securities"...................................................... 12
1.78 "Registration Period"......................................................... 12
1.79 "Registration Statement"...................................................... 12
1.80 "Reimbursing party"........................................................... 12
1.81 "SEC"......................................................................... 12
1.82 "Section 1060 Purchase Price"................................................. 13
1.83 "Securities Act".............................................................. 13
1.84 "Seller Agreements"........................................................... 13
1.85 "Seller Balance Sheet"........................................................ 13
1.86 "Seller Customers"............................................................ 13
1.87 "Seller Customer Assets"...................................................... 13
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1.88 "Seller Financial Statements"................................................. 13
1.89 "Seller Group"................................................................ 13
1.90 "Seller IP Rights"............................................................ 13
1.91 "Seller IP Rights Agreements"................................................. 13
1.92 "Seller Losses"............................................................... 13
1.93 "Seller Product".............................................................. 13
1.94 "Seller Shares"............................................................... 14
1.95 "Seller Tangible Personal Property"........................................... 14
1.96 "Seller Technology"........................................................... 14
1.97 "Seller Technology Assets".................................................... 14
1.98 "Seller Unaudited Financial Statements"....................................... 14
1.99 "Seller-Licensed IP".......................................................... 14
1.100 "Seller-Licensed IP Rights"................................................... 14
1.101 "Seller-Owned IP Rights"...................................................... 14
1.102 "Stock Resale Agreement"...................................................... 14
1.103 "Stockholder Consulting Agreement"............................................ 14
1.104 "Straddle Period"............................................................. 15
1.105 "Suspension Right"............................................................ 15
1.106 "Tax"......................................................................... 15
1.107 "Tax-Exempt Use Property"..................................................... 15
1.108 "Tax Return".................................................................. 15
1.109 "Third Party Claim"........................................................... 15
1.110 "Transfer Taxes".............................................................. 15
1.111 "Transfer Tax Return"......................................................... 15
1.112 "WARN Act".................................................................... 15
1.113 "2003 Financial Statements"................................................... 16
ARTICLE II. PURCHASE AND SALE OF PURCHASED ASSETS; ASSUMPTION OF LIABILITIES............. 16
2.1 Purchase and Sale............................................................. 16
2.2 Excluded Assets............................................................... 16
2.3 Asset Transfer; Passage of Title; Delivery.................................... 16
2.4 Assumption of Liabilities; Excluded Liabilities............................... 17
2.5 Payment of Purchase Price..................................................... 20
2.6 Unassignable Assets........................................................... 20
2.7 Stockholder Consulting Agreement.............................................. 21
2.8 Private Placement............................................................. 21
ARTICLE III. THE CLOSING................................................................. 22
3.1 The Closing................................................................... 22
3.2 Closing Deliveries by Seller and Stockholder.................................. 22
3.3 Closing Deliveries by Purchaser............................................... 23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER..................... 24
4.1 Organization.................................................................. 24
4.2 Seller Capital Structure...................................................... 24
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4.3 Subsidiaries.................................................................. 24
4.4 Authorization................................................................. 24
4.5 No Conflicts; Consents........................................................ 25
4.6 Financial Statements.......................................................... 26
4.7 Absence of Undisclosed Liabilities............................................ 26
4.8 Absence of Certain Changes or Events.......................................... 26
4.9 Taxes......................................................................... 28
4.10 Title to and Condition of Assets; Sufficiency of Assets; Warranties........... 29
4.11 Intellectual Property......................................................... 30
4.12 [Reserved].................................................................... 33
4.13 Inventory..................................................................... 33
4.14 Litigation and Claims......................................................... 34
4.15 Compliance with Laws and Regulations, Governmental Licenses, Etc.............. 34
4.16 Employees..................................................................... 34
4.17 No Representations to Employees............................................... 36
4.18 Environmental Compliance...................................................... 36
4.19 Product Liability............................................................. 36
4.20 Contracts; Customers.......................................................... 37
4.21 Sale of Products; Services.................................................... 39
4.22 I-Tech Agreement.............................................................. 40
4.23 Certain Transactions and Agreements........................................... 40
4.24 No Brokers.................................................................... 40
4.25 Restrictions on Business...................................................... 40
4.26 Fairness of Consideration..................................................... 41
4.27 No Other Negotiations......................................................... 41
4.28 Investment Representations.................................................... 41
4.29 Accuracy of Material Facts; Copies of Materials............................... 42
4.30 Warranty Disclaimer........................................................... 42
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................... 43
5.1 Organization.................................................................. 43
5.2 Purchaser Capital Structure................................................... 43
5.3 Authorization................................................................. 44
5.4 No Conflicts; Consents........................................................ 44
5.5 SEC Filings................................................................... 45
5.6 Absence of Certain Changes or Events.......................................... 45
5.7 Litigation and Claims......................................................... 45
5.8 Brokers....................................................................... 46
5.9 Accuracy of Material Facts.................................................... 46
ARTICLE VI. COVENANTS OF SELLER AND STOCKHOLDER.......................................... 46
6.1 Advice of Changes............................................................. 46
6.2 Conduct of Business........................................................... 46
6.3 Access to Information......................................................... 48
6.4 Regulatory Approvals.......................................................... 48
6.5 Satisfaction of Conditions Precedent.......................................... 48
6.6 Exclusive Dealings............................................................ 48
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6.7 Books and Records............................................................. 49
6.8 Discharge of Excluded Liabilities............................................. 49
6.9 Stockholder Proxies and Consents.............................................. 49
6.10 Other Obligations of Seller................................................... 49
ARTICLE VII. COVENANTS OF PURCHASER...................................................... 51
7.1 Advice of Changes............................................................. 51
7.2 Regulatory Approvals.......................................................... 51
7.3 Satisfaction of Conditions Precedent.......................................... 51
7.4 Discharge of Assumed Liabilities.............................................. 51
7.5 SEC Filings................................................................... 51
ARTICLE VIII. ADDITIONAL AGREEMENTS...................................................... 52
8.1 Confidentiality............................................................... 52
8.2 Publicity..................................................................... 52
8.3 Restrictions on Transferability of Purchaser Securities....................... 52
8.4 Form S-3 Registration Statement............................................... 53
8.5 Tax Allocation................................................................ 57
8.6 Taxes and Facility Costs...................................................... 57
8.7 Advance to Seller............................................................. 59
8.8 New Purchaser Employees....................................................... 59
8.9 NASDAQ Quotation.............................................................. 60
ARTICLE IX. CONDITIONS TO CLOSING........................................................ 61
9.1 Conditions to Each Party's Obligations........................................ 61
9.2 Conditions to Obligations of Seller........................................... 61
9.3 Conditions to Obligations of Purchaser........................................ 62
ARTICLE X. POST-CLOSING MATTERS.......................................................... 64
10.1 Further Assurances of Seller.................................................. 64
10.2 Further Assurances of Purchaser............................................... 64
10.3 Covenant not to Compete....................................................... 65
10.4 Name Change................................................................... 66
10.5 Collection of Accounts Receivable............................................. 66
10.6 Post Closing Retention........................................................ 66
ARTICLE XI. TERMINATION OF AGREEMENT..................................................... 67
11.1 Termination by Purchaser...................................................... 67
11.2 Termination by Seller......................................................... 67
11.3 Mutual Consent................................................................ 68
11.4 Effect of Termination......................................................... 68
ARTICLE XII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION................. 68
12.1 Survival of Representations and Warranties.................................... 68
12.2 Indemnification by Seller and Stockholder..................................... 68
12.3 Indemnification by Purchaser.................................................. 70
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12.4 Procedures for Indemnification................................................ 72
12.5 Defense of Third Party Claims................................................. 72
12.6 Settlement of Third Party Claims.............................................. 73
ARTICLE XIII. GENERAL.................................................................... 73
13.1 Governing Law................................................................. 73
13.2 Bulk Sales.................................................................... 73
13.3 Assignment; Binding upon Successors and Assigns............................... 74
13.4 Severability.................................................................. 74
13.5 Entire Agreement.............................................................. 74
13.6 Counterparts.................................................................. 74
13.7 Expenses...................................................................... 74
13.8 Other Remedies................................................................ 75
13.9 Amendment..................................................................... 75
13.10 Waiver........................................................................ 75
13.11 Notices....................................................................... 75
13.12 Construction and Interpretation of Agreement.................................. 76
13.13 No Rights of Set Off.......................................................... 77
13.14 No Joint Venture.............................................................. 77
13.15 Absence of Third Party Beneficiary Rights..................................... 77
13.16 DISPUTE RESOLUTION............................................................ 77
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EXHIBITS AND SCHEDULES
Exhibit Description
- ------- -------------------------------------
A Promissory Note
B Stockholder Consulting Agreement
C Bill of Sale and Assumption Agreement
D Lease Assignment Agreement
E Patent Assignment
F Copyright Assignment
G Domain Name Assignment
H Trademark Rights Assignment
I Stock Resale Agreement
Schedule Description
- -------- ----------------------------------------------------------
1.24 Customer Sales Backlog
1.34 Excluded Assets
1.49 Inventory
1.51 Key Business Employees
1.65 Permitted Encumbrances
1.68 Products
1.71(g) Contracts
1.71(h) Prepaid Assets
1.71(k) Other Tangible Assets
1.97 Seller Technology Assets
4.5 Required Approvals, Consents, etc.
4.6 Accounting Adjustments
4.7 Undisclosed Liabilities
4.10(b) Leased Realty and Leases
4.10(c) Other Intellectual Property Rights, Licenses and Royalties
4.11(b) Patents, etc.
4.11(c) Royalties, etc.
4.11(d) Employee Agreements
4.13 Inventory Defects
4.14 Litigation and Claims
4.15 Noncompliance
4.16(a) Employees
4.16(c) Employee Agreements and Employee Plans
4.16(d) Employee Visas
4.16(e) Employee Plan Changes
4.20(a) Seller Agreements
4.20(b) Material Contracts and Defaults, Disputes and Claims
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4.20(c) Clients
4.20(d) Unresolved Claims
4.20(e) Orders Outside Ordinary Course
4.21 Product Defects, Claims, Etc.
4.29 Undisclosed Contracts
9.3(c) Required Consents
10.1 Post-Closing Conveyances
-- Allocation Schedule
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
August 4, 2004 by and among FINISAR CORPORATION, a Delaware corporation
("Purchaser") DATA TRANSIT CORP., a Delaware corporation ("Seller"), and, DALE
T. SMITH and JANIS H. SMITH, individual residents of San Jose, California
(collectively "Stockholder").
RECITALS
A. Seller is engaged, among other things, in the business of
researching, developing, manufacturing, selling and servicing advanced computer
system interconnect analysis systems known generally as "BusDoctor(TM) Protocol
Analyzers" and the "BusDoctor(TM) Rx Protocol Analyzers" in support of, or that
otherwise work with, the following protocols:
i. ATA/ATAPI/UDMA;
ii. Serial ATA (SATA);
iii. Serial Attached SCSI (SAS);
iv. IEEE 1394a (Firewire);
v. SCSI including SCSI-1 320;
vi. InfiniBand;
vii. Ethernet including Gigabit Ethernet;
viii. iSCSI;
ix. PCMCIA;
x. CardBus;
xi. Fibre Channel including 1 & 2 Gb/s;
xii. Compact Flash;
xiii. USB including USB 1.1 & USB 2.0;
xiv. Logic;
xv. PCI/X; and
xvi. PCI Express;
and future versions or successors to one or more of such protocols
(collectively, the "Analyzer Business");
B. In addition to the Analyzer Business, Seller is engaged in other
businesses, including but not necessarily limited to the business of
researching, developing, manufacturing, selling and servicing the
PacketMaker(TM) traffic generator product line and in addition has acquired the
dormant business known as Bus Probes(TM), formerly a sole proprietorship of
Stockholder which was engaged in the business of researching, developing,
manufacturing, selling and servicing interface pods for certain Tektronix
branded analyzers (such other businesses, collectively, with the Analyzer
Business, the "Business");
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C. Seller desires to sell and assign to Purchaser, and Purchaser
desires to purchase and acquire from Seller, substantially all the assets of
Seller related to the Business, excluding cash and certain other assets as more
particularly provided herein, and Purchaser agrees to assume certain of the
liabilities of Seller related to the Business on the terms and conditions set
forth in this Agreement;
D. Stockholder also joins in this Agreement for the purposes of making
warranties and representations and of agreeing not to compete and as otherwise
set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth or referenced below:
1.1 "Acquisition Proposal"
shall have the meaning set forth in Section 6.6 hereof.
1.2 "Affiliates"
shall mean, with respect to any specified person, any other person that
directly or indirectly controls, is controlled by, or is under common control
with, such specified person (where, for purposes of this definition, "control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of stock, as an officer, director, trustee or executor, by contract or
otherwise).
1.3 "Agreement"
shall have the meaning set forth in the introductory paragraph of this
Agreement.
1.4 "Allocation Schedule"
shall have the meaning set forth in Section 8.5 hereof.
1.5 "Analyzer Business"
shall have the meaning set forth in Paragraph A of the Recitals to this
Agreement.
1.6 "Ancillary Agreements"
2
shall mean all assignments, certificates, documents or agreements required to
be executed and delivered by either party hereto pursuant to this Agreement.
"Purchaser Ancillary Agreements" means all of the certificates and documents
that Purchaser is required to execute and deliver pursuant to this Agreement.
"Seller Ancillary Agreements" means all of the assignments, certificates and
documents that Seller or Stockholder is required to execute and deliver pursuant
to this Agreement.
1.7 "Article IV Losses"
shall have the meaning set forth in Section 12.2(b) hereof.
1.8 "Article V Losses"
shall have the meaning set forth in Section 12.3(b) hereof.
1.9 "Assigned Agreements"
shall have the meaning set forth in Section 1.70 hereof.
1.10 "Assumed Liabilities"
shall have the meaning set forth in Section 2.4(a) hereof.
1.11 "Basket Amount"
shall have the meaning set forth in Section 12.2(b) hereof.
1.12 "Bill of Sale and Assumption Agreement"
shall have the meaning set forth in Section 3.2(a) hereof.
1.13 "Books and Records"
shall mean, to the extent not already included in the Documentation, all
books, records, books of account, financial records, financial statements,
files, data and papers, whether in hard copy or computer format, used or held
for use by Seller (other than the corporate minute books and Tax Returns of
Seller), including engineering information, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of present and former
suppliers, lists of present and former personnel.
1.14 "Business"
shall have the meaning set forth in Paragraph B of the Recitals of this
Agreement
1.15 "Business Day"
shall mean any day on which national banks are open for business in
Sunnyvale, California.
3
1.16 "Closing"
shall mean the closing of the sale of the Purchased Assets, subject to the
terms and conditions of this Agreement.
1.17 "Closing Date"
shall mean August 4, 2004 or if the conditions set forth in Sections 9.1, 9.2
or 9.3 applicable to the Purchased Assets have not been satisfied and/or waived
in accordance with this Agreement on or before such day then the Business Day on
which Closing occurs and which is two (2) Business Days after all the conditions
set forth in Sections 9.1, 9.2 or 9.3 applicable to the Purchased Assets have
been satisfied and/or waived in accordance with this Agreement, or at such other
time and date, and at such other place, as may be agreed to by Purchaser and
Seller.
1.18 "COBRA"
shall mean Section 4980B of the Code.
1.19 "Code"
shall mean the Internal Revenue Code of 1986, as amended.
1.20 "Confidentiality Agreement"
shall mean the Confidentiality Agreement, dated January 6, 2004, between
Purchaser and Seller, as amended by an amendment thereto dated February 3, 2004.
1.21 "Contract"
shall mean any written, oral or other agreement, contract, subcontract,
lease, sublease, mortgage, instrument, indenture, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan, memorandum
of understanding, letter of intent, promise, arrangement, commitment or
undertaking of any nature of Seller.
1.22 "Copyright Assignment"
shall have the meaning set forth in Section 3.2(c) hereof.
1.23 "Covenant Not to Compete"
shall mean, collectively, the covenants of the Stockholder and Seller set
forth in Section 10.3 hereof.
1.24 "Current Customer Backlog "
shall mean the total dollar amount of Seller's accepted Product purchase
orders from Customers at any specified date; at the date of this Agreement, the
Current Customer Backlog is set forth on Schedule 1.24.
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1.25 "Defenses and Claims"
shall have the meaning set forth in Section 2.4(b) hereof.
1.26 "Domain Name Assignment"
shall have the meaning set forth in Section 3.2(c) hereof.
1.27 "Documentation"
shall mean, collectively, all programmers' notes or logs, source code
annotations, user guides, manuals, instructions, software architecture designs,
layouts, any know-how, and any other designs, plans, drawings, documentation,
materials, supplier lists, software source code and object code, photographs,
development tools, blueprints, media, memoranda and records of Seller, that are
primarily related to or otherwise necessary for the use and exploitation of any
Seller Technology Assets, whether in tangible or intangible form.
1.28 "ERISA"
shall mean the Employment Retirement Income Security Act of 1974, as amended.
1.29 "Employee Plan"
shall mean each employment and consulting Contract, pension, retirement,
disability, medical, dental or other health plan, life insurance or other death
benefit plan, profit sharing, deferred compensation agreement, stock, option,
bonus or other incentive plan, vacation, sick, holiday or other paid leave plan,
severance plan or other similar employee benefit plan, including all "employee
benefit plans" as defined in Section 3(3) of ERISA maintained by Seller or any
of its affiliates, which covers any Employee.
1.30 "Employee" and "Employees"
shall have the meanings set forth in Section 4.16 hereof.
1.31 "Encumbrances"
shall mean, other than for purposes of Section 4.11, any restrictions on or
conditions to transfer or assignment, claims, liabilities, liens, pledges, title
retention devices, collateral assignments, mortgages, deeds of trust, or
security interests of any kind, or any charge, adverse claim of title or
ownership or any other encumbrance whatsoever, whether accrued, absolute,
contingent, or otherwise. For purposes of Section 4.11, "Encumbrances" shall
mean Encumbrances as defined in the immediately preceding sentence and also
licenses, restrictions on receipt of income derived from any asset or on the
possession, exercise or transfer of any other attribute of ownership of any
asset or an adverse claim of a right to use any asset.
1.32 "Environmental Laws"
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shall mean all U.S. and non-U.S. federal, state and local laws and
regulations relating to pollution, the protection of human health or the
environment (including without limitation ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation laws and
regulations relating to emissions, discharges, releases or threatened releases
of Hazardous Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, disposal, transport or handling of Hazardous
Substances.
1.33 "Exchange Act"
shall mean the Securities Exchange Act of 1934, as amended.
1.34 "Excluded Assets"
shall mean cash at Closing and other assets of Seller listed on Schedule
1.34.
1.35 "Excluded Liabilities"
shall have the meaning set forth in Section 2.4(c) hereof.
1.36 "Expiration Date"
shall have the meaning set forth in Section 6.3 hereof.
1.37 "Facilities "
shall have the meaning set forth in Section 4.10(b) hereof.
1.38 "Founder Shares "
shall have the meaning set forth in Section 6.9 hereof.
1.39 "GAAP"
shall have the meaning set forth in Section 4.6 hereof.
1.40 "Governmental Authority"
shall any (a) nation, province, state, county, city, town, district or other
jurisdiction of any nature; (b) federal, provincial, state, local, municipal,
foreign or other government; (c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official or
entity and any court or other tribunal); (d) multi-national organization or
body; or (e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing power of any
nature.
1.41 "Governmental Permit"
shall have the meaning set forth in Section 4.16 hereof.
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1.42 "Hazardous Substances"
shall mean any pollutant, contaminant, toxic, hazardous or noxious substance
or waste which is regulated by the laws of any state, local, federal or other
governmental authority or jurisdiction, including but not limited to the United
States and the State of California, and includes but is not limited to (a) any
oil or petroleum compounds, flammable substances, explosives, radioactive
materials, or any other materials or pollutants which pose a hazard to persons
or cause any real property to be in violation of any Environmental Laws, (b) to
the extent so regulated, asbestos or any asbestos-containing material of any
kind or character, (c) polychlorinated biphenyls, as regulated by the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., (d) any materials or
substances designated as "hazardous substances" pursuant to (1) Section 311 of
the Clean Water Act, 33 U.S.C. Section 1251 et seq., or (2) Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., (e) "chemical substance," "new chemical substance" or
"hazardous chemical substance or mixture" pursuant to Sections 3, 6 and 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and (f) any
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq.
1.43 "Indemnifiable Losses"
shall have the meaning set forth in Section 12.2(a) hereof.
1.44 "Indemnified Party"
shall have the meaning set forth in Section 8.4(k) hereof.
1.45 "Indemnifying Party"
shall have the meaning set forth in Section 8.4(k) hereof.
1.46 "Indemnitor" and "Indemnitee"
shall have the respective meanings set forth in Section 12.4(a) hereof.
1.47 "Indemnification Claim"
shall have the meaning set forth in Section 12.4(b) hereof.
1.48 "Intellectual Property Rights"
shall mean any rights exercisable or available in any jurisdiction of the
world constituting industrial or intellectual property rights or protections,
whether owned, licensed or otherwise used or held, including without limitation
all of the following: (i) all patents, patent applications and the inventions,
designs and improvements described and claimed therein, patentable inventions,
and other patent rights (including any divisions, continuations,
continuations-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
7
applications are amended, modified, withdrawn, or resubmitted); (ii) all
trademarks, service marks, trade dress, trade names, brand names, Internet
domain names and URLs, designs, logos, or corporate names (including, in each
case, the goodwill associated therewith), whether registered or unregistered,
and all registrations and applications for registration thereof; (iii) all
copyrights, including all renewals and extensions, copyright registrations and
applications for registration, and non-registered copyrights and moral rights;
(iv) all trade secrets, confidential business information, concepts, ideas,
designs, research or development information, processes, procedures, techniques,
technical information, specifications, operating and maintenance manuals,
engineering drawings, methods, know-how, data, mask works, discoveries,
inventions, modifications, extensions, improvements, and other proprietary
rights (whether or not patentable or subject to copyright, trademark, or trade
secret protection); (v) all computer software programs, including all source
code, object code and documentation related thereto; and (vi) all databases and
data collections and rights therein.
1.49 "Inventory"
shall mean all of the inventory, including all raw materials,
work-in-progress and finished goods, of Seller, including the inventory
described on Schedule 1.49 hereto, as such Schedule shall be amended as of the
Closing Date to reflect changes therein occurring in the ordinary course of the
Business prior to the Closing.
1.50 "I-Tech Agreement"
shall have the meaning set forth in Section 4.23 hereof.
1.51 "Key Business Employees"
shall mean those Employees identified as either "Individual Key Employees" or
"Group Key Employees" on Schedule 1.51 hereto.
1.52 "Lease"
shall mean that certain Lease dated May 1, 2003 by and between Bassett
Street, LLC, a California limited liability company, and Seller, which was
assigned to San Ignacio LLC by Bassett Street, LLC.
1.53 "Lease Assignment"
shall have the meaning set forth in Section 3.2(a) hereof.
1.54 "Liabilities"
shall mean debts, liabilities and obligations, whether accrued or fixed,
absolute or contingent, matured or unmatured, determined or determinable, known
or unknown, including those arising under any law (under law or equity and under
any theory of liability), action or governmental order and those arising under
any Contract.
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1.55 "Losses"
shall mean any and all loss, demand, action, cause of action, assessment,
damage, liability, cost or expense, including without limitation, interest,
penalties and, subject to Section 12.5 hereof, reasonable attorneys' and other
professional fees and expenses incurred in the investigation, prosecution,
defense or settlement thereof.
1.56 "Trademark Rights Assignment"
shall have the meaning set forth in Section 3.2(c) hereof.
1.57 "Material Adverse Effect"
shall have the meaning set forth in Section 13.12(c) hereof.
1.58 [Reserved]
1.59 "New Purchaser Employees"
shall mean the Employees who are offered and accept employment by Purchaser
from and after the Closing pursuant to Section 8.6(d) hereof.
1.60 "NNM"
shall have the meaning set forth in Section 8.9 hereof.
1.61 "Note Amount"
shall have the meaning set forth in Section 2.5(a) hereof.
1.62 "Note Term"
shall have the meaning set forth in Section 2.5(a) hereof.
1.63 "Patent Assignment"
shall have the meaning set forth in Section 3.2(c) hereof.
1.64 "Paying Party"
shall have the meaning set forth in Section 8.6(a) hereof.
1.65 "Permitted Encumbrances"
shall mean those items listed on Schedule 1.65 hereto.
1.66 "Person"
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shall mean an individual, corporation, company, partnership, limited
liability company, joint venture, joint stock company, association, business
trust, unincorporated business, unincorporated organization, governmental
authority, or other entity of whatever nature.
1.67 "Prepaid Assets"
shall have the meaning set forth in Section 1.70(h) hereof.
1.68 "Products"
shall mean all of the products of Seller, including those products listed on
Schedule 1.68 hereto, and "Product" shall mean any of the Products.
1.69 "Promissory Note"
shall have the meaning set forth in Section 2.5(a) hereof.
1.70 "Purchased Assets"
shall mean, collectively, all of the following:
(a) all of the Seller Technology Assets in intangible form;
(b) all Documentation in intangible form;
(c) any and all copies in tangible medium and any and all
other tangible embodiments of all of the Seller Technology Assets and of all of
the Documentation;
(d) all Intellectual Property Rights owned by Seller,
including all patents, rights in patent applications and invention rights listed
in the Patent Assignment, all copyrights listed in the Copyright Assignment, all
marks listed in the Trademark Rights Assignment and all domain names listed in
the Domain Name Assignment, including the Intellectual Property Rights listed or
otherwise described on Schedule 4.11(b);
(e) all Books and Records, other than those relating
exclusively to Excluded Assets;
(f) to the extent lawfully transferable, all Governmental
Permits;
(g) (i) all of Seller's rights under the Contracts listed or
described on Schedule 1.70(g) attached hereto (as such Schedule shall be amended
as of the Closing Date to reflect changes therein occurring in the ordinary
course of the Business prior to the Closing), which Contracts shall include any
schedule, exhibit, appendix, or similar attachment thereto, any side letter or
written modification or extension thereof (collectively, the "Assigned
Agreements"), and (ii) to the extent any Contract related to the Business
existing on the date of this Agreement the terms of which have not been
10
disclosed in all material respects to Purchaser is discovered or otherwise
disclosed to Purchaser after the date of this Agreement or after the Closing,
Purchaser will have the right to elect whether or not such Contract shall be
deemed an Assigned Agreement; Assigned Agreements will also include any Contract
related to the Business entered into after the date of this Agreement without
violation of Section 6.2 of this Agreement;
(h) all prepaid expenses, deposits and similar prepaid items
of Seller existing on the Closing Date, including the prepaid items described on
Part I to Schedule 1.70(h) (collectively, the "Prepaid Assets"), which Schedule
will be updated to reflect the Prepaid Assets as of the Closing Date at least
one Business Day prior to the Closing Date, other than such items of the type
set forth on Part II to Schedule 1.70(h) attached hereto;
(i) a complete list of all Seller Customers and prospect lists
(whether current or prior), and Seller Customer account histories,
correspondence, notes and plans for Seller Customers or prospective customers,
including all data regarding such Seller Customers, and all other marketing,
promotional, Seller Customer and sales information, whether stored in written
form, magnetic or electronic media or in any other form (collectively, the
"Seller Customer Assets");
(j) all rights, claims, credits, causes of action or rights of
setoff of Seller against third parties, whether liquidated or unliquidated,
fixed or contingent, and all rights of Seller, under or pursuant to all
warranties, representations and guarantees made by suppliers, manufacturers,
contractors and other third parties, other than those related exclusively to the
Excluded Assets;
(k) all Inventory and other tangible assets, including the
tangible assets identified on Schedule 1.70(k) attached hereto (as such Schedule
shall be amended as of the Closing Date to reflect changes therein occurring in
the ordinary course of the Business prior to the Closing) and all warranties and
guaranties, express or implied, issued to or in favor of Seller, or any of
Seller's predecessors in title, from any contracts, contractors, subcontractors,
materialmen, suppliers or vendors relating to such assets, (collectively, the
"Seller Tangible Personal Property");
(l) all policy rights and proceeds payable under any insurance
policy covering the Purchased Assets with respect to damage to the Purchased
Assets or other insurable or covered event affecting the condition of the
Purchased Assets that occurred prior to the Closing; provided, however that to
the extent any policy rights and proceeds payable under any insurance policy
covering the Purchased Assets for damage to the Purchased Assets also relate to
any Excluded Assets, then such policy rights and proceeds will be apportioned
based on the value of the Purchased Assets covered under any such insurance
policy versus the value of the Excluded Assets covered under any such insurance
policy;
(m) all goodwill and going concern value of Seller, including
without limitation, all rights of Seller in the name "Data Transit", together
with the right to represent to third parties that Purchaser is the successor to
the Business; and
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(n) any and all other property rights of Seller (real,
personal, mixed, tangible or intangible) used in the conduct of the Business
(including, without limitation, post office boxes and telephone and facsimile
numbers).
1.71 "Purchaser Common Stock"
shall mean the common stock, $0.001 par value, of Purchaser.
1.72 "Purchaser Group "
shall have the meaning set forth in Section 12.2(a) hereof.
1.73 "Purchaser Preferred Stock "
shall have the meaning set forth in Section 5.2(a) hereof.
1.74 "Purchaser SEC Reports"
shall have the meaning set forth in Section 5.5 hereof.
1.75 "Purchaser Securities"
shall have the meaning set forth in Section 2.8 hereof.
1.76 "Purchaser Share Price"
shall mean, as of any date, the average closing trading price per share of
the Purchaser Common Stock on the NNM for the ten (10) trading days ending two
(2) Business Days prior to (i) each date on which this Agreement provides for
shares of Purchaser Common Stock to be issued to Seller or, if such date is
delayed for any reason, (ii) the date on which such shares are actually
delivered.
1.77 "Registrable Securities"
shall have the meaning set forth in Section 8.4(a) hereof.
1.78 "Registration Period"
shall have the meaning set forth in Section 8.4(c) hereof.
1.79 "Registration Statement"
shall have the meaning set forth in Section 8.4(a) hereof.
1.80 "Reimbursing party"
shall have the meaning set forth in Section 8.6(a) hereof.
1.81 "SEC"
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shall mean the United States Securities and Exchange Commission.
1.82 "Section 1060 Purchase Price"
shall have the meaning set forth in Section 8.5 hereof.
1.83 "Securities Act"
shall mean the Securities Act of 1933, as amended.
1.84 "Seller Agreements"
shall have the meaning set forth in Section 4.20(a) hereof.
1.85 "Seller Balance Sheet"
shall have the meaning set forth in Section 4.6 hereof
1.86 "Seller Customers"
shall have the meaning set forth in Section 4.20(c) hereof.
1.87 "Seller Customer Assets"
shall have the meaning set forth in Section 1.70(i) hereof.
1.88 "Seller Financial Statements"
shall have the meaning set forth in Section 4.6 hereof.
1.89 "Seller Group"
shall have the meaning set forth in Section 12.3 hereof.
1.90 "Seller IP Rights"
shall have the meaning set forth in Section 4.11(a) hereof.
1.91 "Seller IP Rights Agreements"
shall have the meaning set forth in Section 4.12(c) hereof.
1.92 "Seller Losses"
shall have the meaning set forth in Section 12.3 hereof.
1.93 "Seller Product"
shall have the meaning set forth in Section 4.20(c) hereof.
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1.94 "Seller Shares"
shall have the meaning set forth in Section 4.2 hereof.
1.95 "Seller Tangible Personal Property"
shall have the meaning set forth in Section 1.70(k) hereof.
1.96 "Seller Technology"
shall mean all of Seller's computer software (including software programs,
objects, modules, routines, algorithms and any other software code) in both
source code and object code form, copyrightable works, inventions (whether or
not patentable), trade secrets (including Seller's customer lists), know-how,
processes, designs, techniques, confidential business information and other
proprietary information and technologies, including without limitation any of
the above related to software programs and updates, upgrades, new versions and
new releases of such software programs currently under development by or for
Seller; "Seller Technology" also includes the above-described assets of
Stockholder used in the Business.
1.97 "Seller Technology Assets"
shall mean all of the Seller Technology including without limitation the
Seller Technology described on Schedule 1.97 attached hereto as such Schedule
shall be amended as of the Closing Date to reflect changes therein occurring in
the ordinary course of the Business prior to the Closing.
1.98 "Seller Unaudited Financial Statements"
shall have the meaning set forth in Section 4.6 hereof.
1.99 "Seller-Licensed IP"
shall have the meaning set forth in Section 4.12(b) hereof.
1.100 "Seller-Licensed IP Rights"
shall have the meaning set forth in Section 4.11(a) hereof.
1.101 "Seller-Owned IP Rights"
shall have the meaning set forth in Section 4.11(a) hereof.
1.102 "Stock Resale Agreement"
shall have the meaning set forth in Section 3.2(a) hereof.
1.103 "Stockholder Consulting Agreement"
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shall have the meaning set forth in Section 2.7 hereof.
1.104 "Straddle Period"
shall have the meaning set forth in Section 8.6(b) hereof.
1.105 "Suspension Right"
shall have the meaning set forth in Section 8.4(h) hereof.
1.106 "Tax"
or, collectively, "Taxes" shall mean any and all federal, state and local
taxes of any country, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
1.107 "Tax-Exempt Use Property"
shall have the meaning set forth in Section 4.9(j) hereof.
1.108 "Tax Return"
shall mean any returns, estimates, information statements, declarations,
reports, statements and any other document required to be filed in respect of
any Tax.
1.109 "Third Party Claim"
shall have the meaning set forth in Section 12.5 hereof.
1.110 "Transfer Taxes"
shall mean all sales taxes, use taxes, conveyance taxes, transfer taxes,
value-added taxes, filing fees, recording fees, reporting fees, fees for
clearing customs, customs duties and other similar duties, taxes and fees, if
any, imposed upon, or resulting from, the transfer of the Purchased Assets to
Purchaser hereunder, except federal, state or local income or similar taxes
based upon or measured by revenue, income, profit or gain from the transfer of
the Purchased Assets or the operation of the Business prior to the Closing.
1.111 "Transfer Tax Return"
shall mean a Tax Return prepared and filed pursuant to Section 8.6(a) hereof.
1.112 "WARN Act"
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shall mean The Worker Adjustment and Retraining Notification Act, as amended
through the date hereof.
1.113 "2003 Financial Statements"
shall have the meaning set forth in Section 4.6.
ARTICLE II.
PURCHASE AND SALE OF PURCHASED ASSETS;
ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale.
Subject to and upon the terms and conditions of this Agreement, effective as
of the Closing, Seller agrees to sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser agrees to purchase from Seller, all of Seller's right,
title and interest in and to the Purchased Assets. The Purchased Assets shall be
sold, assigned, transferred and conveyed to Purchaser on the Closing Date, free
and clear of all Encumbrances other than Permitted Encumbrances.
2.2 Excluded Assets.
All Excluded Assets will be retained by Seller and will not be sold,
assigned, transferred or conveyed to Purchaser.
2.3 Asset Transfer; Passage of Title; Delivery.
(a) Upon the Closing, all of the right, title and interest
of Seller in and to all of the Purchased Assets shall pass to Purchaser, and
Seller shall deliver to Purchaser possession or control of all of the Purchased
Assets and shall further deliver to Purchaser proper assignments, conveyances
and bills of sale sufficient to convey to Purchaser good (and in the case of
tangible assets, marketable) title to all of the Purchased Assets, free and
clear of all Encumbrances other than Permitted Encumbrances, as well as such
other instruments of conveyance as Purchaser may reasonably determine are
necessary (both at and after the Closing) to effect or evidence the transfers
contemplated hereby.
(b) At the Closing, Seller shall deliver or cause to be
delivered to Purchaser all of the Purchased Assets, which shall be delivered to
Purchaser in the form and to the location to be determined by Purchaser in its
reasonable discretion before the Closing Date at Purchaser's cost and expense;
provided, that (i) Seller shall deliver possession of all of Seller's tangible
personal property at 6399 San Ignacio Avenue, Suite 100, San Jose, California
95119-1206 at that location and (ii) all other Purchased Assets, shall be
delivered in a manner reasonably acceptable to Purchaser. Except as otherwise
provided in Section 10.6, Seller shall not retain any copy of any Purchased
Asset following the Closing. Purchased Assets not located at 6399 San Ignacio
Avenue are listed on Schedule 2.3(b).
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(c) At the Closing, Seller shall deliver possession and
control of the premises at 6399 San Ignacio Avenue, Suite 100, San Jose,
California 95119-1206 in accordance with Seller's current lease of such
premises.
2.4 Assumption of Liabilities; Excluded Liabilities.
(a) Subject to and upon the terms and conditions of this
Agreement, effective as of the Closing, Purchaser agrees to assume from Seller
and to pay, perform and discharge according to their terms all of the following
liabilities and obligations of Seller (the "Assumed Liabilities"):
(i) liabilities and obligations (including Taxes)
related to the Purchased Assets or the Business, but only to the extent accruing
or arising from and after the Closing;
(ii) liabilities or obligations with respect to New
Purchaser Employees, arising from and after the Closing;
(iii) liabilities and obligations for repair or
ongoing support with respect to the installed base of the BusDoctor(TM) Protocol
Analyzer product platform, the PacketMaker(TM) traffic generator product line
and the BusProbe business, in accordance with, but only to the extent of,
Seller's current support efforts and provided that any such liabilities or
obligations (A) shall not have accrued or arisen as a result of or otherwise
constitute any breach by Seller or Stockholder of any representation or
warranties contained in Article IV of this Agreement when made on the date
hereof or at Closing or as a result of the infringement of any Intellectual
Property Right of any other Person, (B) shall not relate to any Excluded Asset,
(C) arose under a Contract with a Customer listed on Schedule 4.20(c), and (D)
do not require a refund, payment under a warranty provision or any similar
payment of a portion or all of the purchase price therefor; provided, however,
that with respect to any Liability for the repair of products sold or services
provided prior to the Closing that would otherwise become an Excluded Liability
pursuant to clause (A) or (D) of this Section 2.4(a)(iii), Purchaser must first
use its commercially reasonable efforts to repair such products or services
before such Liability will be deemed to be an Excluded Liability, provided that
such repair would not constitute an unpermitted infringement of any Intellectual
Property Right of any other Person, and provided further that such repair shall
not affect Seller's or Stockholder's obligations concerning any breach of any
provision in this Agreement;
(iv) Seller's existing lease of the premises located
at 6399 San Ignacio Avenue, Suite 100, San Jose, California 95119-1206, such
assumption to be documented as either an assignment or sublease, at Purchaser's
option, but only to the extent accruing or arising from and after the Closing,
but only up to an aggregate amount of $250,000, plus any liability arising from
damages to the Premises that occur during Purchaser's possession thereof;
(v) subject to Section 2.6, the obligation to perform
Seller's or Stockholder's obligations under the Assigned Agreements, but only to
the extent that (A)
17
such Liabilities accrued or arose after the Closing for reasons other than any
breach, violation or default by Seller of any of the terms of any of the
Assigned Agreements (other than by reason of Seller's performance under Section
6.10(h), provided Seller provides Purchaser prompt written notice of any
obligation arising with respect thereto), and (B) any such obligation did not
accrue or arise as a result of the infringement of any Intellectual Property
Right of any other Person with respect to Products shipped prior to Closing;
(vi) Liabilities of Seller arising from the
termination of Seller's distributorship agreements and manufacturers
representative agreements contemporaneously with Closing in accordance with the
terms of such agreements; provided, however, that Purchaser shall not assume any
other Liabilities accruing or arising before Closing concerning any of such
distributorship agreements or manufacturers representative agreements or other
obligations of Seller to its distributors or manufacturer's representatives
other than obligations to fulfill open purchase orders reflected on Schedule
1.24; and
(vii) Seller's trade accounts payable at Closing that
are attributable to Inventory purchases, up to an aggregate amount not exceeding
$500,000, provided that such accounts payable (A) do not include any commissions
payable or any obligations to Purchaser and (B) are not more than 30 days old at
Closing.
(b) Nothing herein shall be deemed to deprive Purchaser of
any defenses, set-offs or counterclaims which Seller may have had or which
Purchaser shall have with respect to any of the Assumed Liabilities (the
"Defenses and Claims"). Upon Purchaser's request, Seller agrees to assign,
transfer and convey to Purchaser any Defenses and Claims and agrees to cooperate
with Purchaser to share, maintain, secure, perfect and enforce such Defenses and
Claims, including the execution of documents, the giving of any testimony or the
taking of any such other action as is reasonably requested by Purchaser in
connection with such Defenses and Claims. In the event Seller fails to assign,
transfer or convey any such Defenses and Claims, or fails to cooperate with
Purchaser in maintaining, securing, perfecting and enforcing such Defenses and
Claims, Seller shall indemnify Purchaser against any losses or damages arising
out of such failure in accordance with Section 12.2(a)(ii) hereof.
(c) Purchaser does not assume, and Seller does not transfer
or assign, any Liabilities, whether or not related to the Business, and whether
presently fixed and determined, contingent or otherwise, other than the Assumed
Liabilities to be expressly assumed by Purchaser pursuant to Section 2.4 hereof.
All such Liabilities not expressly assumed by Purchaser ("Excluded Liabilities")
shall remain Liabilities of Seller, which shall be solely liable to perform and
discharge such liabilities and obligations. Excluded Liabilities shall include,
without limitation, the following:
(i) any Liabilities related to any of the Purchased
Assets or the operation of the Business arising or accruing prior to the Closing
other than those liabilities and obligations described in Section 2.4(a)(iii)
and (a)(vi) hereof and Taxes as set forth in Section 8.6 hereof;
18
(ii) any Liabilities for continued health care
coverage for any M&A Qualified Beneficiary (as defined in Treasury Regulation
Section 54.4980B-9, Q&A 4(a)) under COBRA;
(iii) any Liabilities with respect to Employees
through the Closing Date;
(iv) except as provided in Section 2.4(a)(iii), any
and all Liabilities now or hereafter arising from or with respect to the sale,
license, provision, performance or delivery of any products or services of, by
or for Seller or any of its Affiliates, including, but not limited to, all past
sales and licenses of the products and services in connection with the Business
by Seller or any of its Affiliates; or any Liability arising or accruing prior
to Closing under claims based on rights of privacy and/or copyrights in
third-party content sourced from the World Wide Web (including claims of
contributory infringement);
(v) any and all Liabilities arising from any breach
or default by Seller or any of its Affiliates of any Contract of Seller or any
of its Affiliates that occurred prior to Closing, including, but not limited to,
any breach, violation or default by Seller or any of its Affiliates of any of
the Assigned Agreements that occurred prior to the Closing;
(vi) any and all Liabilities under any Contract that
is not an Assigned Agreement;
(vii) any and all Liabilities arising under the
Employee Plans of Seller and any and all Liabilities to current or former
employees or consultants of Seller related to or arising from or with respect to
any act or omission of Seller, including any Liabilities to such employees and
consultants for the payment of any and all wages or accrued and unused vacation
time or for the reimbursement of any expenses incurred by such employees and
consultants;
(viii) any and all Liabilities arising from the
termination by Seller or any of its Affiliates of the employment of any current,
former or future employees or consultants of Seller, any other claims brought
against Seller arising from the employment by Seller or any of its Affiliates of
any person, or arising from any duties or obligations under any Employee Plans
of Seller or any of its Affiliates;
(ix) any and all present or future Liabilities of
Seller or any of its Affiliates to employees or consultants of Seller under
ERISA, the WARN Act or the rulings and regulations promulgated thereunder, or
any severance pay obligations of Seller;
(x) any and all Liabilities relating to or arising
out of any of the Excluded Assets;
(xi) any and all Liabilities arising from any claim,
action, demand, lawsuit, investigation or proceeding instituted by or against
Seller or from the
19
actual or alleged infringement or misappropriation by Seller of any Intellectual
Property Rights of a third party with respect to Products shipped prior to
Closing;
(xii) all costs and expenses, including fees and
disbursements of counsel, financial advisors and accountants, incurred by Seller
in connection with this Agreement and the transactions contemplated hereby;
(xiii) any Liabilities under Environmental Laws;
(xiv) any and all Liabilities arising from the
violation (or alleged violation) by Seller or any of its Affiliates of any
statute, law, ordinance, regulation, order, judgment or decree of any
Governmental Authority or any jurisdiction (other than Assumed Liabilities); and
(xv) any and all Liabilities arising as a result of
any failure of Seller to pay its trade accounts payables, except those accounts
payable expressly assumed by Purchaser in Section 2.4(a)(vi).
2.5 Payment of Purchase Price.
In consideration for the sale and purchase of the Purchased Assets and
Seller's and Stockholder's agreements set forth herein, including without
limitation the Covenant Not to Compete, at the Closing, Purchaser shall (i)
execute and deliver a convertible and adjustable promissory note (the
"Promissory Note") substantially in the form of Exhibit A hereto, in the
aggregate amount of Sixteen Million Two Hundred Seventy Thousand Dollars
($16,270,000) (the "Note Amount"), payable in full at the end of the two-year
period beginning on the Closing Date (the "Note Term"), and (ii) assume the
Assumed Liabilities. The Promissory Note shall bear simple interest at a rate of
eight percent (8%) and shall be convertible into shares of Purchaser Common
Stock as more specifically provided in the Promissory Note.
2.6 Unassignable Assets.
(a) Notwithstanding any other provision of this Agreement
or any of the Ancillary Agreements, but subject to Section 9.3(c) hereof, to the
extent that any of the Purchased Assets are not assignable or otherwise
transferable to Purchaser, or if such assignment or transfer would constitute a
breach thereof or a violation of any applicable law, then neither this Agreement
nor such Ancillary Agreements shall constitute an assignment or transfer (or an
attempted assignment or transfer) thereof until such consent, approval or waiver
of such party or parties has been duly obtained. With respect to each such
Purchased Asset, each of Seller and Purchaser shall use its respective
commercially reasonable efforts to obtain the consent, approval or waiver of the
consenting, approving or waiving party to the assignment or transfer of Seller's
rights and obligations thereunder as promptly as practicable, but in any event
prior to the Closing Date. The parties agree to cooperate with each other and to
supply relevant information to such third party in order to assist each other in
its obligations under this Section. Notwithstanding the foregoing, nothing
contained herein shall obligate Seller or Purchaser to expend or pay any amount
to third parties to obtain any consents, approvals or waivers.
20
(b) If, within 30 days after Closing (or such longer period
as Purchaser in its sole discretion may determine), the other party to any
Assigned Agreement shall not consent (on terms reasonably satisfactory to
Purchaser) to the assignment of the rights of Seller thereunder to Purchaser,
then Seller and Purchaser shall cooperate with each other in reasonable and
lawful arrangements designed to provide the benefits of such Assigned Agreement
to the greatest extent possible to Purchaser, including the enforcement by
Seller at the expense of Purchaser and for the benefit of Purchaser of any and
all rights of Seller against a third party thereunder; provided, however, that
if Purchaser determines that the other party's consent is not required and
waives the consent requirement set forth in this Section 2.6, the Contract shall
thereupon be considered an Assigned Agreement).
(c) If, within 30 days after Closing (or such longer period
as Purchaser in its sole discretion may determine), the other party to any
Assigned Agreement shall not consent (on terms reasonably satisfactory to
Purchaser) to the assignment of the rights of Seller thereunder to Purchaser
(but Seller is permitted to subcontract with Purchaser for Purchaser to perform
the work under such Contract), Purchaser shall enter into a subcontract with
Seller for that purpose.
(d) If, within 30 days after Closing (or such longer period
as Purchaser in its sole discretion may determine), the other party to any
Assigned Agreement concerning Seller-Licensed IP shall not consent (on terms
reasonably satisfactory to Purchaser) to the assignment of the rights of Seller
thereunder to Purchaser (but Seller is permitted to sublicense Purchaser for the
purpose of enabling Purchaser to perform the work under such Contract), Seller
shall enter into a sublicense with Seller for that purpose.
(e) If, within 30 days after Closing (or such longer period
as Purchaser in its sole discretion may determine), the other party to any
Assigned Agreement concerning Seller's Product distribution arrangements shall
not consent (on terms reasonably satisfactory to Purchaser) to the assignment of
the rights of Seller thereunder to Purchaser, then Seller shall agree to act on
Purchaser's behalf pursuant to such Contract.
2.7 Stockholder Consulting Agreement.
At Closing, Purchaser shall also agree to engage Dale T. Smith pursuant to a
consulting agreement, in substantially the form attached hereto as Exhibit B
(the "Stockholder Consulting Agreement"), for a one-year period beginning on the
day following Closing at the compensation rate of $200,000 annually, payable
monthly in arrears.
2.8 Private Placement.
The Promissory Note and the Purchaser Common Stock issuable under the
Promissory Note (collectively, the "Purchaser Securities") will be exempt from
registration requirements of the Securities Act pursuant to the private
placement exemption provided by Rule 506 of Regulation D promulgated under the
Securities Act and/or Section 4(2) of the Securities Act, and applicable state
securities laws. Seller hereby agrees to take all
21
actions and execute all documents necessary to assist Purchaser to qualify
issuance of the Purchaser Securities for such exemptions.
ARTICLE III.
THE CLOSING
3.1 The Closing.
The Closing shall take place at the offices of Finisar Corporation, 1308
Moffett Park Drive, Sunnyvale, California 94089-1113, or at such other location
as Seller and Purchaser may agree, at 10:00 a.m., Pacific Time, on the Closing
Date.
3.2 Closing Deliveries by Seller and Stockholder.
At the Closing, in addition to Seller's and Stockholder's delivery of the
items, documents and certificates to be delivered by Seller and Stockholder at
the Closing pursuant to Section 9.3, Seller and Stockholder will deliver or
cause to be delivered to Purchaser the following items, documents and
certificates, against delivery to Seller of the items, payments, documents and
certificates to be delivered to Seller by Purchaser at the Closing pursuant to
Section 3.3 and Section 9.2:
(a) counterparts of each of the Bill of Sale and Assumption
Agreement, in substantially the form of Exhibit C attached hereto (the "Bill of
Sale and Assumption Agreement"), the Lease Assignment Agreement, in
substantially the form of Exhibit D attached hereto (the "Lease Assignment"),
the Stock Resale Agreement, insubstantially the form of Exhibit I attached
hereto (the "Stock Resale Agreement"), all executed on Seller's behalf by an
authorized officer of Seller, and the Stockholder Consulting Agreement, executed
by the Stockholder;
(b) possession of the Purchased Assets, which shall be
delivered to Purchaser in accordance with Section 2.3;
(c) assignments from Seller to Purchaser of any and all
patent rights, rights in patent applications and invention rights, registered
and unregistered copyrights, trademarks, service marks and domain names included
in the Purchased Assets and all pending applications for registration or
recordation of any copyrights, trademarks, service marks and domain names
included in the Purchased Assets, duly executed on behalf of Seller by an
authorized officer of Seller and notarized, in a form acceptable for recording
with the United States Patent and Trademark Office, the United States Copyright
Office, or InterNIC Registration Services (or other applicable registrar), as
applicable, and in substantially the forms of Exhibit E attached hereto (the
"Patent Assignment"), Exhibit F attached hereto (the "Copyright Assignment"),
Exhibit G attached hereto (the "Domain Name Assignment") or Exhibit H attached
hereto (the "Trademark Rights Assignment"), as applicable;
(d) copies of resolutions of the board of directors of
Seller authorizing the execution, delivery and performance by Seller of this
Agreement, each of the Seller
22
Ancillary Agreements, and the consummation of the sale, assignment and delivery
of the Purchased Assets hereunder and all other transactions contemplated hereby
and thereby, certified as true and correct on the Closing Date by the Secretary
of Seller;
(e) certificates from the Secretary of State of the State
of California and Delaware, dated as of a date that is no more than three
Business Days before the Closing Date regarding the corporate good standing of
Seller with each such agency as of such date, in each case with such good
standing confirmed verbally with each such agency on the Closing Date; and
(f) evidence of Seller's receipt of all consents, waivers
and approvals from third parties and Governmental Authorities, if any, that are
necessary to effect the assignment and transfer to Purchaser of good (and, in
the case of tangible assets, marketable) title to all of the Purchased Assets,
and the assignment to Purchaser of all Assigned Agreements, in each case free
and clear of all Encumbrances other than Permitted Encumbrances; all such
consents, waivers and approvals shall be set forth on Schedule 9.3(c).
3.3 Closing Deliveries by Purchaser.
(a) At the Closing, in addition to Purchaser's respective
delivery of the items, documents and certificates to be delivered by it at the
Closing pursuant to Section 9.2, Purchaser will deliver or cause to be delivered
to Seller the following items, documents and certificates, against delivery to
Purchaser of the items, documents and certificates to be delivered to it at the
Closing pursuant to Section 3.2 and Section 9.3:
(i) the Promissory Note duly executed by Purchaser;
(ii) counterparts of each of the Bill of Sale and
Assumption Agreement, the Lease Assignment and the Stock Resale Agreement, each
executed on Purchaser's behalf by an authorized officer of Purchaser, as the
case may be;
(iii) a copy of resolutions of the board of directors
of Purchaser authorizing the execution, delivery and performance by Purchaser of
this Agreement and each of the Purchaser Ancillary Agreements, certified as true
and correct on the Closing Date by the Secretary of Purchaser, respectively; and
(iv) certificates from the Secretary of State of the
States of Delaware and California, as applicable, dated as of a date that is no
more than three Business Days before the Closing Date, regarding the corporate
good standing of Purchaser with that agency as of such date, in each case with
such good standing confirmed verbally with each such agency on the Closing Date.
(b) At the Closing, Purchaser will deliver or cause to be
delivered to Dale T. Smith, against delivery to Purchaser of the items,
documents and certificates to be delivered to it at the Closing pursuant to
Section 3.2, the Stockholder Consulting Agreement, executed on Purchaser's
behalf by an authorized officer of Purchaser.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER
Seller and Stockholder hereby jointly and severally represent and
warrant to Purchaser as follows as of the date of this Agreement and again as of
the Closing Date:
4.1 Organization.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power to
own, lease and operate its properties and to conduct all of its businesses as
they are currently being conducted. Seller is duly qualified or licensed to do
business as a foreign corporation in each jurisdiction in which the failure to
be so qualified or licensed would have a Material Adverse Effect on the Business
or the Purchased Assets. Seller has made available to Purchaser and Purchaser's
legal counsel copies of its Certificate of Incorporation and Bylaws, each as
currently in effect. Seller is not in violation of its Certificate of
Incorporation or Bylaws, each as currently in effect.
4.2 Seller Capital Structure.
The authorized capital stock of Seller consists of 10,000,000 shares of
Common Stock, $0.001 par value, of which 8,500,000 shares are issued and
outstanding, and all of which are duly authorized and validly issued and fully
paid and nonassessable (the "Seller Shares"). Stockholder owns 100% of the
Seller Shares, free and clear of any Encumbrances.
4.3 Subsidiaries.
Seller does not own any equity interest, directly or indirectly, in any
corporation, partnership, limited liability company, joint venture, business,
trust or other entity, whether or not incorporated.
4.4 Authorization.
This Agreement and all of the Ancillary Agreements to which Seller is or will
be a party have been, or upon their execution and delivery hereunder will have
been, duly and validly executed and delivered by Seller and constitute, or will
constitute, valid and binding agreements of Seller, enforceable against Seller
in accordance with their respective terms. Seller has the requisite corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements to which Seller is or will be a party and, at the time of the Closing
will have the requisite corporate power and authority to sell the Purchased
Assets and carry out all other transactions contemplated by this Agreement and
the Ancillary Agreements. The execution, delivery and performance by Seller of
this Agreement and the Ancillary Agreements, and the sale of the Purchased
Assets, have been duly and validly approved and authorized by Seller's Board of
Directors and Stockholder. This Agreement and all of the Ancillary Agreements to
which Stockholder is or will be a party have been, or upon their execution and
delivery
24
hereunder will have been, duly and validly executed and delivered by Stockholder
and constitute, or will constitute, valid and binding agreements of Stockholder,
enforceable against Stockholder in accordance with their respective terms. Each
Stockholder is an individual fully competent with full power and authority to
execute and deliver and perform his or her obligations under this Agreement and
to consummate the transactions contemplated hereby.
4.5 No Conflicts; Consents.
The execution and delivery by Seller of this Agreement and the Ancillary
Agreements to which Seller is or will be a party do not, and the consummation of
the transactions contemplated hereby and thereby, including the sale of the
Purchased Assets, and compliance by Seller with the provisions hereof and
thereof will not, contravene, conflict with, result in a breach of, constitute a
default (with or without notice or lapse of time, or both) under or violation
of, or result in the creation of any Encumbrance pursuant to, (i) any provision
of the Certificate of Incorporation or Bylaws of Seller, (ii) any judgment,
order, decree, rule, law or regulation of any court or Governmental Authority,
foreign or domestic, applicable to Seller or to any of Seller's assets or
properties except where any such contravention, conflict, breach or default
would not have an adverse affect on Purchaser's ownership or use of the
Purchased Assets, or Purchaser's ability to operate the Business as currently
conducted or proposed to be conducted, or (iii) except as otherwise provided in
Schedule 4.5, any provision of any Assigned Agreement or any other agreement,
instrument or understanding to which Seller is a party or by which Seller or any
of the Purchased Assets is bound, nor will such actions give to any other person
or entity any interests or rights of any kind, including rights of termination,
acceleration or cancellation, in or with respect to any of the Purchased Assets,
or result in the creation of any Encumbrance on any of the Purchased Assets. The
execution and delivery by Stockholder of this Agreement and the Ancillary
Agreements to which Stockholder is or will be a party do not, and the
consummation of the transactions contemplated hereby and thereby, including the
sale of the Purchased Assets, and compliance by Stockholder with the provisions
hereof and thereof will not, contravene, conflict with, result in a breach of,
constitute a default (with or without notice or lapse of time, or both) under or
violation of, or result in the creation of any Encumbrance other than a
Permitted Encumbrance pursuant to (i) any judgment, order, decree, rule, law or
regulation of any court or Governmental Authority, foreign or domestic,
applicable to Stockholder or to any of Stockholder's assets or properties except
where any such contravention, conflict, breach or default would not have an
adverse affect on Purchaser's ownership or use of the Purchased Assets, or
Purchaser's ability to operate the Business as currently conducted or proposed
to be conducted, or (ii) any provision of any Assigned Agreement or any other
agreement, instrument or understanding to which Stockholder is a party or by
which Stockholder is bound, nor will such actions give to any other person or
entity any interests or rights of any kind, including rights of termination,
acceleration or cancellation, in or with respect to any of the Purchased Assets,
or result in the creation of any Encumbrance on any of the Purchased Assets.
Except as set forth on Schedule 4.5, no consent, approval, order or
authorization of, or registration, declaration or filing with, any third party
or any Governmental Authority is required to be obtained on the part of Seller
25
or Stockholder to permit the consummation of the transactions contemplated by
this Agreement or the Ancillary Agreements.
4.6 Financial Statements.
Seller has delivered to Purchaser (i) its audited consolidated financial
statements for the years ended December 31, 2001, 2002 and 2003 (the December
31, 2003 audited financial statements being referred to as the "2003 Financial
Statements"), and (ii) its unaudited consolidated financial statements,
including balance sheet as of June 30, 2004 (the "Seller Balance Sheet") and
statements of operations and cash flows for the three-month period ended June
30, 2004 (the "Seller Unaudited Financial Statements") (collectively, the
financial statements described in (i) and (ii) shall be referred to as the
"Seller Financial Statements"). The Seller Financial Statements present fairly,
in all material respects the consolidated financial position of Seller as of the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved, subject, in the case of Seller Unaudited Financial Statements, to the
absence of notes thereto and the adjustments described on Schedule 4.6. Seller
maintains, and until the Closing will continue to maintain, a standard system of
accounting established and administered in accordance with GAAP.
4.7 Absence of Undisclosed Liabilities.
Seller has no liabilities, either accrued or contingent (whether or not
required to be reflected in financial statements in accordance with GAAP), and
whether due or to become due, other than (i) liabilities reflected or provided
for on the Seller Balance Sheet, (ii) liabilities contemplated by this Agreement
or described in Schedule 4.7, (iii) normal or recurring liabilities incurred
since March 31, 2004 in the ordinary course of business consistent with past
practices and (iv) Liabilities under the Assigned Agreements and the Contracts
listed on Schedule 4.20(a).
4.8 Absence of Certain Changes or Events.
Since March 31, 2004, Seller has conducted its business in the ordinary
course and in a manner consistent with past practices and, since such date,
Seller has not:
(a) suffered any event or occurrence that has had or could
reasonably be expected to have a Material Adverse Effect on Seller, the Business
or the Purchased Assets;
(b) suffered any damage, destruction or loss, whether or
not covered by insurance, having a Material Adverse Effect on Seller, the
Business or the Purchased Assets;
(c) granted any material increase in the compensation
payable or to become payable by Seller to any of its officers or employees or in
any bonus, pension, severance, retention, insurance or other benefit payment or
arrangement (including stock awards, stock option grants, stock appreciation
rights or stock option grants) made to or
26
with any of such officers or employees, or any other change in the terms of
employment of any such officer or employee;
(d) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares other than as necessary to enable Stockholder to make
required estimated individual federal and state income tax deposits;
(e) issued any shares of its capital stock or any warrants,
rights, or options for, or entered into any commitment relating to such capital
stock;
(f) made any change in the accounting methods or practices
it follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any
real property, machinery, equipment or other operating property other than in
the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise
disposed of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible assets;
(i) amended, relinquished, terminated or failed to renew
any Assigned Agreement, other than such Assigned Agreements as may expire
pursuant to their own terms, or a right or obligation set forth in any Assigned
Agreement, or received any written or, to Seller's actual knowledge, oral
indication or assertion by the other party thereto of any material problems with
Seller's products, services or performance under any Assigned Agreement or its
desire to so amend, relinquish, terminate or not renew any Assigned Agreement
(or a right or obligation set forth therein);
(j) entered into any material commitment or transaction
(including, without limitation, any borrowing or capital expenditure) or failed
to take action other than in the ordinary course of business;
(k) incurred any material liability, except in the ordinary
course of business and consistent with past practice;
(l) permitted or allowed any of its property or assets to
be subjected to any Encumbrance, except for Permitted Encumbrances;
(m) made any capital expenditure or commitment for
additions to property, plant or equipment individually in excess of $10,000, or,
in the aggregate, in excess of $50,000;
27
(n) paid, loaned or advanced any amounts to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with, any of its officers, directors or stockholders or any
affiliate of any of the foregoing, other than employee compensation and benefits
and reimbursement of employment related business expenses incurred in the
ordinary course of business;
(o) agreed or committed to take any action described in
this Section 4.8; or
(p) taken any other action that would have required the
consent of Purchaser pursuant to Section 6.2 (and which has not been obtained)
had such action occurred after the date of this Agreement.
4.9 Taxes.
(a) Seller has prepared and timely filed all Tax Returns
relating to any and all Taxes concerning or attributable to Seller or its
operations, such Tax Returns are true and correct in all material respects and
have been completed in all material respects in accordance with applicable law.
(b) As of the Closing Date, Seller (i) will have paid all
Taxes it is required to pay prior to the Closing Date and (ii) will have
withheld with respect to its employees all Taxes required to be withheld.
(c) Seller is not delinquent in the payment of any Tax.
There is no Tax deficiency outstanding or assessed or proposed against Seller
that is not reflected as a liability on the Seller Balance Sheet, nor has Seller
executed any agreements or waivers extending any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(d) The liability of Seller for unpaid Taxes (whether
actual or contingent) for all periods through the date hereof and the Closing
Date does not and will not, in the aggregate, exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes that reflect
differences between financial accounting income and taxable income) reflected on
the Seller Balance Sheet (other than Taxes which have accrued or will accrue
after the date of such Seller Balance Sheet).
(e) Seller is not a party to any tax-sharing agreement or
similar arrangement with any other party, and Seller has not assumed or agreed
to pay any Tax obligation of, or with respect to any transaction relating to,
any other person or agreed to indemnify any other person with respect to any
Tax.
(f) No Tax Returns of Seller have been audited by a
government or taxing authority, nor is any such audit in process or pending, and
Seller has not been notified of any request for such an audit or other
examination.
(g) Seller has not ever been a member of an affiliated
group of corporations filing a consolidated federal income tax return.
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(h) Seller has made available to Purchaser copies of all
Tax Returns filed by Seller for all periods since its inception.
(i) Seller has not ever filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(4) apply to any
disposition of assets owned by it.
(j) None of Seller's assets is treated as "tax-exempt use
property," within the meaning of Section 168(h) of the Code ("Tax-Exempt Use
Property").
(k) Seller is not, nor has it been, a "reporting
corporation" subject to the information reporting and record maintenance
requirements of Section 6038A of the Code and the regulations thereunder.
(l) Seller has not ever been a party to any joint venture,
partnership or other agreement that could be treated as a partnership for Tax
purposes.
(m) There are (and immediately following the Effective Time
there will be) no Encumbrances on the assets of Seller relating or attributable
to Taxes other than Permitted Encumbrances.
4.10 Title to and Condition of Assets; Sufficiency of Assets;
Warranties.
(a) The Seller Tangible Personal Property constitutes all
tangible assets and properties that are necessary to conduct the Business as
currently conducted. The Seller Tangible Personal Property collectively
constitutes all tangible assets and properties which are reflected on the Seller
Balance Sheet or acquired since March 31, 2004. The Seller Tangible Personal
Property is in good operating condition and repair, ordinary wear, tear and
calibration excepted. Seller has good and marketable title to all the Seller
Tangible Personal Property (except properties, interests in properties and
assets sold or otherwise disposed of since March 31, 2004 in the ordinary course
of business), free and clear of all Encumbrances other than Permitted
Encumbrances. Upon consummation of the transactions contemplated hereby,
Purchaser will have acquired good (and, in the case of tangible assets,
marketable) title in and to, or a valid leasehold interest in, each of the
Purchased Assets, free and clear of all Encumbrances other than Permitted
Encumbrances or any Encumbrances created by Purchaser. The Purchased Assets
shall include all assets reflected on the Seller Balance Sheet other than (i)
Excluded Assets, (ii) assets acquired since March 31, 2004 and (iii) assets
disposed of in the ordinary course of the Business consistent with the past
practices of Seller.
(b) Seller owns no real property. Schedule 4.10(b) sets
forth a true and complete list of all real property leased or occupied by Seller
during the previous five (5) years (collectively, the "Facilities"). The
Facilities are not subject to any Encumbrances, encroachments, building or use
restrictions, exceptions, reservations or limitations, except those which,
individually or in the aggregate, are not reasonably expected to have a Material
Adverse Effect on Seller or the Business or prevent any continued use of any of
the Facilities in the usual and normal conduct of Seller business. Seller is not
in default under or in breach or violation by Seller of, any such lease. To
29
Seller's knowledge, no other party is in default under or in breach or violation
of, nor is there any valid basis for any claim of default by any such party
under, or breach or violation by any such party of, any such lease. All such
real property leases for Facilities currently occupied by Seller are in full
force and effect and valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to creditors' rights generally, and (ii) general principles of equity. Schedule
4.10(b) sets forth a list of all such leases, and true and correct copies of all
such real property leases for Facilities currently occupied by Seller have been
provided to Purchaser.
(c) Except as set forth in Schedule 4.10(c), the Purchased
Assets constitute all the Intellectual Property Rights that are necessary to
conduct the Business as currently being conducted and all the other assets,
properties and rights that are necessary to conduct the Business as currently
being conducted and to continue to sell and otherwise use and create derivative
works based on the products and services that are provided in connection with
the Business in the same manner as Seller as of the Closing Date without: (i)
the need for Purchaser to acquire or license any other intangible asset,
intangible property or Intellectual Property Right and (ii) the breach or
violation of any Contract or commitment. Except as set forth in Schedule
4.10(c), none of the Purchased Assets is licensed or leased from any third
party, and no royalties, license fees or similar payments are due or payable (or
may become due or payable) to any third party under any license, lease or other
agreement of, to or affecting the Purchased Assets and none of the Purchased
Assets are licensed to any third party other than pursuant to standard
non-exclusive licenses to Seller's customers, clients and business partners
granted in the ordinary course of business.
4.11 Intellectual Property.
Except as set forth in Schedule 4.11, the following representations and
warranties are true and correct:
(a) Seller owns, or is licensed or otherwise possesses
legally enforceable rights to use, without future payment to any person, all
Intellectual Property Rights that are necessary to conduct the Business as
currently being conducted (all of which are referred to as the "Seller IP
Rights"), free and clear of all Encumbrances other than Permitted Encumbrances.
The foregoing definition and representation, as it relates to Seller-Licensed IP
Rights (as defined below), is limited to Seller's interest pursuant to licenses
from third parties, each of which is in full force and effect, is valid, binding
and enforceable and grants Seller such rights to such intellectual property as
are necessary to conduct the Business of Seller as currently conducted, except
as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to creditors' rights generally, and
(ii) general principles of equity. As used herein, the term "Seller-Owned IP
Rights" means Seller IP Rights that are owned by or exclusively licensed to
Seller; and "Seller-Licensed IP Rights" means Seller IP Rights that are not
Seller-Owned IP Rights.
30
(b) Schedule 4.11- Part (b) contains an accurate and
complete list of (i) all patents, patent applications, registered trademarks,
registered trade names, registered service marks, unregistered trademarks,
unregistered trade names and unregistered services marks currently in use by
Seller, and registered copyrights and applications therefor included in the
Seller IP Rights, including (except in the case of unregistered trademarks,
trade names and service marks) the jurisdiction in which each such Seller IP
Right has been issued or registered or in which any such application for such
issuance or registration has been filed, (ii) all licenses, sublicenses,
distribution agreements, options, rights (including marketing rights), and other
agreements to which Seller is a party and pursuant to which any person is
authorized to use any Seller IP Rights or has the right to manufacture,
reproduce, market or exploit any product of Seller (a "Seller Product") or any
adaptation, translation or derivative work based on any Seller Product or any
portion thereof, (iii) all licenses, sublicenses and other agreements to which
Seller is a party and pursuant to which Seller is authorized to use any right,
claim or invention under any third party technology, trade secret, know-how,
process, patent, trademark or copyright, including software ("Seller-Licensed
IP"), which is used in the manufacture of, incorporated in or forms a part of
any Seller Product (other than joint development agreements to which Seller is a
party), and (iv) all agreements with Governmental Authorities or other third
parties pursuant to which Seller has obtained funding for research and
development activities. To Seller's knowledge, all registered patents,
copyrights, trademarks, service marks and rights in Internet or World Wide Web
domain names or URLs or addresses owned by Seller are valid, enforceable and
subsisting. Neither Seller nor Stockholder holds any patents related directly or
indirectly to the Business issued by any jurisdiction outside the United States
and neither has applied for any such patents.
(c) The execution and delivery of this Agreement,
compliance with its terms and the consummation of the transactions contemplated
hereby do not and will not (i) conflict with, or result in any forfeiture,
termination, violation or breach of, or default (with or without notice or lapse
of time or both) or give rise to any right, license or Encumbrance relating to
any Contract affecting Seller IP Rights (collectively, "Seller IP Rights
Agreements"), or the loss or encumbrance of any Seller IP Rights or material
benefit related thereto, or result in or require the creation, imposition or
extension of any Encumbrance upon any Seller IP Rights, or (ii) materially
impair the right of Seller (prior to Closing), and following the Closing,
Purchaser or any of their respective subsidiaries, to use, possess, sell or
license any Seller-Owned IP Right or to use, possess, or license any
Seller-Licensed IP Rights (other than commercially available software with a
retail purchase price of five hundred dollars ($500) or less) or portion thereof
included in or related to the development, operation or maintenance the
Purchased Assets in the same manner as such Seller IP Rights are currently being
used by Seller or the customers of Seller, or to be able to hold and use the
Purchased Assets. Except as set forth in Schedule 4.11 - Part (c), there are no
royalties, honoraria, fees or other payments payable by Seller to any third
person (other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license-in, sale, marketing, advertising or
disposition of any Seller IP Rights by Seller to the extent necessary for
Purchaser to continue to conduct the Business in the same manner as Seller is
currently conducting the Business or for Purchaser to hold
31
and use the Purchased Assets in the same manner as Seller is currently holding
and using the Purchased Assets, and none will become payable as a result of the
consummation of the transactions contemplated hereby.
(d) The use, development, manufacture, marketing, license,
sale, or furnishing of the Purchased Assets by Seller, including portions of the
Purchased Assets under development, does not violate any Contract between Seller
and any third party or, to Seller's knowledge, infringe or misappropriate any
Intellectual Property Right of any other party, including copyrights in
third-party content sourced from the World Wide Web. There is no pending or, to
Seller's actual knowledge, threatened claim or litigation contesting the
validity, ownership or right of Seller to exercise any Seller IP Right, nor to
Seller's knowledge, is there any legitimate basis for any such claim, nor has
Seller received any written notice or, to Seller's actual knowledge, any oral
notice asserting that any Seller IP Right or the proposed (as stated or
represented to Purchaser or any third party) use, sale, license or disposition
thereof conflicts or will conflict with the rights of any other party, nor, to
Seller's knowledge, is there any legitimate basis for any such assertion. There
is no pending or, to Seller's actual knowledge, threatened claim or litigation
with respect to or relating to the Purchased Assets or the Business asserting
infringement (including contributory infringement) of any copyrights in
third-party content that is posted or distributed through Seller's websites
before the Closing. All designs, drawings, specifications, source code, object
code, documentation, flow charts and diagrams incorporated, embodied or
reflected in any Seller Product at any state of its development were written,
developed and created solely and exclusively by (i) employees of Seller without
the assistance of any third party, (ii) employees of Seller with the assistance
of third parties who assigned ownership of the rights with respect thereto to
Seller by means of valid and enforceable agreements which are listed and
described in the Schedule 4.11- Part (d) and copies of which have been provided
to Purchaser, or (iii) third parties who assigned ownership of their rights with
respect thereto to Seller by means of valid and enforceable agreements which are
listed and described in the Schedule 4.11 - Part (d) and copies of which have
been provided to Purchaser.
(e) Seller is not, and, to the knowledge of Seller, no
other party to any licensing, sublicensing, distributorship or other similar
arrangements with Seller relating to the Seller IP Rights is, in breach of or
default under any material obligations under such arrangements.
(f) To the knowledge of Seller, no person is infringing on
or otherwise violating any right of Seller with respect to any Seller IP Rights.
(g) Seller has not assigned, sold or otherwise transferred
ownership of, or granted an exclusive license or right to use, any patent,
patent application, trademark, mask work right, service mark or copyright.
(h) Neither Seller nor any of its current or former
officers, employees or consultants has any patents issued or patent applications
pending for any device, process, method, design or invention of any kind now
used or needed by Seller in the furtherance of its business operations as
currently being conducted by Seller, which
32
patents or applications have not been assigned to Seller with such assignment
duly recorded in the United States Patent Office or with the applicable foreign
Governmental Authority. No current or former employee, officer, director,
stockholder, consultant or independent contractor of Seller has any right, claim
or interest in or with respect to any Seller IP Rights.
(i) Seller has taken all reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Seller IP Rights (except Seller IP Rights whose value would not be
impaired by disclosure). Without limiting the generality of the foregoing, (i)
all current and former employees of Seller who are or were involved in, or who
have contributed to, the creation or development of any material Seller IP
Rights have executed and delivered to Seller an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is materially
the same as the form of confidential information and invention assignment
agreement previously delivered by Seller to Purchaser, and (ii) all current and
former consultants and independent contractors to Seller who are or were
involved in, or who have contributed to, the creation or development of any
material Seller IP Rights have executed and delivered to Seller an agreement
(containing no material exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of consultant confidential
information and invention assignment agreement previously delivered to
Purchaser. Neither the execution or delivery of any such agreement by any such
person, nor the carrying on by any such person, as an employee, consultant or
independent contractor, of Seller's business as currently conducted has or will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such persons is obligated.
(j) Seller has commercially released Seller's 3G Wide Port
SAS, 3G Wide Port, SATA pod, and BusDoctor Rx(TM) Analyzer in a manner that does
not infringe any third party rights.
(k) To the knowledge of Seller, no component or product
from a supplier infringes or misappropriates any intellectual property of a
third party. This subsection (k) is the only representation and warranty made by
Seller and Stockholder relating to components or products from suppliers.
4.12 [Reserved].
4.13 Inventory.
Schedule 1.49 is an accurate and complete detailed listing and description of
the Inventory as of July 31, 2004 and such Schedule shall be updated as of
Closing. Seller owns, and has good and valid title to, the Inventory, free and
clear of any Encumbrances other than Permitted Encumbrances. Except as provided
in Schedule 4.13, the Inventory is of such quality and quantity as to be usable
and saleable by Seller in the ordinary course of the Business, and, to Seller's
knowledge, is in all material respects free of any defect or deficiency.
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4.14 Litigation and Claims.
Except as provided in Schedule 4.14, there are no claims, actions, suits,
proceedings or, to Seller's knowledge, investigations in progress or pending
before any Governmental Authority, against Seller that relate to the Business or
any of the Purchased Assets, nor, to Seller's knowledge, any threat thereof.
Seller is not a party to any judgment, decree, order or arbitration award (or
agreement entered into in any administrative, judicial or arbitration proceeding
with any Governmental Authority) with respect to the Business, or any of the
Purchased Assets.
4.15 Compliance with Laws and Regulations, Governmental
Licenses, Etc.
Except as provided in Schedule 4.15, Seller is in compliance in all material
respects with all statutes, laws, rules and regulations with respect to or
affecting the Business or the Purchased Assets or which could reasonably be
expected to affect Purchaser's conduct of the Business as currently proposed to
be conducted by Seller, including, without limitation, laws, rules and
regulations relating to anticompetitive or unfair pricing or trade practices,
false advertising, consumer protection, export or import controls, occupational
health and safety, equal employment opportunities, fair employment practices,
and sex, race, religious and age discrimination. Seller is not subject to any
order, injunction or decree issued by any Governmental Authority which could
reasonably be expected to impair the ability of Seller to consummate the
transactions contemplated hereby or which could reasonably be expected to
adversely affect Purchaser's conduct of the Business as currently conducted by
Seller. Seller possesses all licenses, permits and governmental or other
regulatory approvals and authorizations which are required in order for Seller
to operate the Business as presently conducted (each, a "Governmental Permit"),
except where the failure to possess such Governmental Permits would not
reasonably be expected to have an adverse effect on Purchaser's conduct of the
Business as currently conducted by Seller, and Seller is in compliance in all
material respects with all such Governmental Permits.
4.16 Employees.
(a) Schedule 4.16(a) contains a list of all employees of
Seller engaged in the Business (each an "Employee" and collectively the
"Employees"). Seller has provided to Purchaser a list that correctly reflects,
in all material respects, such employees' salaries or wages, other compensation,
dates of employment and positions.
(b) Seller is in compliance in all material respects with
all applicable statutes, laws, rules and regulations that are applicable or
relevant to the Business regarding employment practices, terms and conditions of
employment, and wages and hours (including ERISA, the WARN Act or any similar
national, state or local law) and has correctly classified Employees as exempt
employees and non-exempt employees under the Fair Labor Standards Act. Seller
has no Contract with Employees currently in effect that are not terminable at
will (other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions).
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Each of the Employees is legally permitted to be employed by Seller in the
jurisdiction in which such Employee is employed. Seller, with respect to the
Business: (i) has never been and is not now subject to a union organizing
effort; (ii) is not subject to any collective bargaining agreement with respect
to any Employee; (iii) is not subject to any other Contract with any trade or
labor union, employees' association or similar organization and (iv) has no
current labor disputes and has had no material labor disputes or claims of
unfair labor practices. To Seller's knowledge, Seller has good labor relations
with the Employees, and Seller has no knowledge of any facts indicating that the
consummation of the transactions provided for herein will adversely affect such
labor relations, and Seller has no knowledge that any Employee intends to leave
Seller's employ or to decline to accept employment with Purchaser following the
Closing. No Employee has given written notice that such Employee intends to
terminate his or her employment with Seller. There are no strikes, material
slowdowns, work stoppages or lockouts, or threats thereof by or with respect to
any Employees.
(c) Schedule 4.16(c) contains a list of all employment and
consulting agreements and Employee Plans. Seller has made available true and
complete copies or descriptions of all the Employee Plans to Purchaser's legal
counsel. No Employee Plan is a "multiemployer plan" within the meaning of
Section 3(37) or ERISA, and no Employee Plan is subject to Title IV of ERISA or
Section 412 of the Code. Neither Seller nor any of its Affiliates has incurred
any Liability under Title IV of ERISA arising in connection with the termination
of any plan covered or previously covered by Title IV of ERISA or Section 412 of
the Code that could become, after the Closing, an obligation of Purchaser or any
of its Affiliates. Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from Tax pursuant to Section 501(a) of the Code. No Employee will become
entitled to any retirement, severance or similar benefit or enhanced benefit
solely as a result of the transactions contemplated hereby. In addition, within
the past five years, Seller has never been a participant in any "prohibited
transaction," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which it
sponsors as employer or in which it participates as an employer, which was not
otherwise exempt pursuant to Section 408 of ERISA (including any individual
exemption granted under Section 408(a) of ERISA), or which could result in an
excise Tax under the Code. No Employee Plan provides, or has any liability to
provide, retiree life insurance, retiree health or other retiree employee
welfare benefits to any person for any reason, except as may be required by
COBRA or other applicable statute, and Seller has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute. Each Employee Plan has been established, maintained and
administered in material compliance with its terms and conditions and with the
requirements prescribed by any and all statutory or regulatory laws that are
applicable to such Employee Plan. The full text of Seller's 2004 Data Transit
Severance Plan is included in Schedule 4.16(c).
35
(d) Except as provided in Schedule 4.16(d), no Employee
holds any visa from the United States government, and Seller is not sponsoring
any Employees with respect to any visa or other authorization. All Employees
were hired in compliance with all laws, statutes, regulations and requirements
for the lawful hiring of employees who are not citizens of the United States of
America.
(e) Except as provided in Schedule 4.16(e) and as otherwise
expressly contemplated by this Agreement, the execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(f) To Seller's knowledge, no Employee is in material
violation of any term of any employment Contract or any restrictive covenant
relating to the right of any such Employee to be employed by Seller or to use
trade secrets or proprietary information of others, and the employment of any
Employee does not subject Seller to any liability to any third party.
(g) The group health plans (as defined in Section 4980B(g)
of the Code) that benefit Employees are in compliance, in all material respects,
with the continuation coverage requirements of Section 4980B of the Code. There
are no material outstanding, uncorrected violations under COBRA with respect to
any of the Employee Plans that could materially adversely affect the Business or
the Purchased Assets after the Closing.
4.17 No Representations to Employees.
Seller has made no representation to any employee (including any Employee),
consultant or contractor of Seller, or any subsidiary or other affiliate of
Seller, that Purchaser will hire or retain as a consultant any of its employees,
consultants or contractors.
4.18 Environmental Compliance.
The Purchased Assets have at all times been operated in compliance with all
approvals, permits, licenses, clearances, consents and other authorizations
required under all Environmental Laws for the conduct of the Business and in a
manner that would not result in liability to Purchaser or adversely affect
Purchaser's operation of the Purchased Assets under any Environmental Law. The
Purchased Assets will be delivered to Purchaser free of all Hazardous Substances
the presence of which constitutes a violation of any Environmental Law.
4.19 Product Liability.
Except as provided in Schedule 4.21, to Seller's knowledge, Seller has no
liability (and there is no reasonably meritorious basis for, or threat of, any
present or future action, suit,
36
proceeding, hearing, investigation, charge, complaint, claim or demand against
Seller reasonably expected to give rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession or
use of any Seller Product or prototype of any Seller Product manufactured or
delivered by Seller or any subsidiary or other affiliate of Seller prior to the
Closing Date.
4.20 Contracts; Customers.
(a) Schedule 4.20(a) sets forth a list of each of the
following types of Contracts (other than the Assigned Agreements) to which
Seller is a party and which relates to any of the Purchased Assets or the
Business (the "Seller Agreements"), a true and correct copy of each of which
Seller has delivered to Purchaser:
(i) any Contract providing for payments (whether
fixed, contingent or otherwise) by or to Seller in an aggregate amount of
$10,000 or more;
(ii) any Contract with any dealer, distributor, OEM
(original equipment manufacturer), VAR (value added reseller), sales
representative or similar party under which any third party is authorized to
sell, sublicense, lease, distribute, market or take orders for, any product,
service or technology of Seller which is included in the Purchased Assets or
which relates to the Business;
(iii) any Contract providing for the development of
any software, content (including textual content and visual, photographic or
graphics content), technology or intellectual property for (or for the benefit
or use of) Seller, or providing for the purchase or license of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property to (or for the benefit or use of)
Seller, which software, content, technology or intellectual property is in any
manner used or incorporated (or is presently contemplated by Seller to be used
or incorporated) in connection with any aspect or element of any product,
service or technology of Seller which is included in the Purchased Assets or
which relates to the Business (other than software generally available to the
public at a per copy license fee of less than $500 per copy);
(iv) any joint venture, investment or partnership
Contract that has involved, or is reasonably expected to involve, a sharing of
profits, expenses or losses with any other party or the joint development of any
product, service, software or other technology with any third party;
(v) any Contract with any Employee, including any
Contract for or relating to the employment of such Employee or providing for any
bonus or severance payment to such Employee;
(vi) any Contract under which Seller is lessee of or
holds or operates any items of tangible personal property or real property owned
by any third party;
37
(vii) any Contract (i) that restricts Seller from
freely setting prices for Seller's products, services or technologies (including
most favored customer pricing provisions) or that grants any exclusive rights to
any party or (ii) containing any covenant (A) limiting in any respect the right
of Seller to engage in any line of business, to make use of any Intellectual
Property Rights, develop, market or distribute products or services or compete
with any person or (B) otherwise limiting the right of Seller to sell,
distribute or manufacture any products or services or to purchase or otherwise
obtain any computer software or any services;
(viii) any Seller IP Rights Agreement, other than
standard non-exclusive licenses to Seller's customers granted in the ordinary
course of business;
(ix) any Contract with or commitment to any labor
union;
(x) any Governmental Permit;
(xi) any Contract obligating Seller to indemnify any
person, except for any licenses of commercial off-the-shelf computer software
under shrink-wrap agreements and standard form agreements and except for
standard non-exclusive licenses to Seller's customers granted in the ordinary
course of business;
(xii) any website hosting, co-location, linking,
content or data sharing, data feed, information exchange, order or transaction
processing or similar arrangement relating to the Business; and
(xiii) any other Contract or other instrument not
specified above which is material to the Purchased Assets or the Business.
(b) Except as disclosed in Schedule 4.20(b), other than as
expressly listed in (a) above and the Assigned Agreements, Seller is not a party
to or otherwise bound by the terms of any Contract which could reasonably be
expected to materially affect the Business or the Purchased Assets. Except as
disclosed in Schedule 4.20(b), neither Seller nor, to Seller's knowledge, any
other party is in default under any Assigned Agreements. Furthermore, except as
disclosed in Schedule 4.20(b), there are no existing disputes or claims of
default relating thereto or to any Contracts, or any facts or conditions known
to Seller which, if continued, will result in a default or claim of default
thereunder, which default could reasonably be expected to have a Material
Adverse Effect on the Seller or the Business. Except as disclosed in Schedule
4.20(b), to Seller's knowledge, no party to any Assigned Agreement intends to
cancel, withdraw, modify or amend such Assigned Agreement.
(c) Schedule 4.20(c), which Schedule will be updated as of
the Closing Date at least one Business Day prior to the Closing Date, is a true
and complete list of each customer, client or licensee of the Business for which
Seller is currently performing services, or has provided services or sold or
licensed products to since January 1, 2002 (the "Seller Customers") and, with
respect to each such Seller Customer, states what products or services were
sold, licensed or provided to and the fees charged for each such Seller Customer
through the date of this Agreement. The Seller Customer
38
Assets are accurate and complete in all material respects. Except as disclosed
in Schedule 4.20(c), Seller has no outstanding material disputes concerning its
products and services with any Seller Customers, and Seller has no actual
knowledge of any material dissatisfaction on the part of any such Seller
Customer. Except as disclosed in Schedule 4.20(c), Seller has not received any
written, or, to Seller's actual knowledge, oral information from any Seller
Customer, and has no reason to believe, that such Seller Customer shall not
continue as a customer of Purchaser after the Closing or intends to terminate or
materially modify existing Contracts with Seller.
(d) Except as disclosed in Schedule 4.20(d), there are no
material unresolved claims or problems between Seller and any of the principal
vendors, suppliers, distributors, or representatives of the Business, and none
of such Persons has advised Seller of its intention to cease doing business with
Seller, or with Purchaser following the Closing Date, whether as a result of the
transactions contemplated hereunder or otherwise.
(e) Except as disclosed in Schedule 4.20(e), each accepted
and unfilled order entered into by Seller for the sale, license or lease or
other disposition by Seller of Products was made in the ordinary course of the
Business.
(f) To Seller's knowledge, all of the Assigned Agreements
are in full force and effect and valid, binding and enforceable in accordance
with their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or similar laws affecting or relating to
creditors' rights generally, and (ii) general principles of equity.
4.21 Sale of Products; Services.
Attached hereto as Schedule 1.68 is a complete list of all products
manufactured, sold, licensed, leased or delivered by Seller in connection with
the Business during the five-year period ending on the date of this Agreement.
To Seller's knowledge, each product that has been sold, distributed or otherwise
made available by Seller to any Person: (a) conformed and complied in all
material respects with the terms and requirements of any applicable warranty or
other Contract or customer's or Seller's published specifications and with all
applicable legal requirements; and (b) was free in all material respects of any
design defects or construction defects at the time of sale. Except as disclosed
in Schedule 4.21, no product manufactured or sold by Seller since January 1,
2001, has been the subject of any recall or other similar action of any
Governmental Authority, and, to Seller's knowledge, no condition or circumstance
exists, that might (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any such recall or other similar
action relating to any such product. Except as disclosed in Schedule 4.21, to
Seller's knowledge, no product manufactured, sold, licensed, leased or delivered
by Seller in connection with the Business is subject to any guaranty, warranty,
or other indemnity beyond Seller's applicable standard terms and conditions of
sale, lease or licensing. Except as disclosed in Schedule 4.21, there is no
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand pending or, to Seller's knowledge, threatened with respect to any such
contractual commitments or express
39
warranties for replacement or repair thereof or other damages in connection
therewith. Except as disclosed in Schedule 4.21, to Seller's knowledge, all
services that have been performed by Seller were properly performed and in full
conformity with the terms and requirements of all applicable warranties and
other Contracts and with all applicable legal requirements.
4.22 I-Tech Agreement.
The Settlement and License Agreement by and between Seller and I-Tech Corp.
dated October 24, 2003 (the "I-Tech Agreement"), was at the time of execution
duly authorized and executed by Seller, sets forth the entire agreement between
Seller and I-Tech, has not been amended or modified, and is in full force and
effect. Seller has complied in all respects and otherwise discharged all
obligations under the I-Tech Agreement, including but not limited to Seller's
payment obligations. Furthermore, Seller has delivered to Purchaser copies of
all correspondence between Seller and I-Tech relevant to Seller's past, present
and future performance under the I-Tech Agreement and Seller's rights and
obligations thereunder.
4.23 Certain Transactions and Agreements.
None of the officers and directors of Seller (including Stockholder), and, to
the knowledge of Seller, none of the Employees or affiliates of Seller or any
member of the immediate families of such officers, directors, Employees or
affiliates, has any direct ownership interest in any firm or corporation that
competes with, or does business with, or has any Contract with, the Business
(except with respect to any interest in less than one percent (1%) of the stock
of any corporation whose stock is publicly traded). None of said officers,
directors, Employees, affiliates or family members has any interest in any of
the Purchased Assets or any property that is used in or pertains to the
Business.
4.24 No Brokers.
Seller is not obligated for the payment of any fees or expenses of any
investment banker, broker, finder or similar party in connection with the
origin, negotiation or execution of this Agreement and the Ancillary Agreements
or in connection with the transactions contemplated hereby and thereby.
Purchaser shall not incur any Liability, either directly or indirectly, to any
such investment banker, broker, finder or similar party as a result of any
Contract entered into by Seller relating to this Agreement, any of the Ancillary
Agreements, the transactions contemplated hereby and thereby or any act or
omission of Seller, any of its employees, officers, directors, stockholders,
agents or affiliates.
4.25 Restrictions on Business.
Except as set forth on Schedule 4.25, there is no agreement, judgment,
injunction, order or decree binding on Seller or Stockholder that has or could
reasonably be expected to have the effect of prohibiting or impairing any
current business practice of Seller or the conduct of the Business by Seller as
currently being conducted, other than agreements,
40
which if enforced would not have a Material Adverse Effect on the Business as
currently conducted.
4.26 Fairness of Consideration.
Seller's Board of Directors has determined that the consideration received by
Seller pursuant to this Agreement (including Purchaser's assumption of the
Assumed Liabilities) represents fair and reasonably equivalent consideration for
the Purchased Assets and title thereto to be transferred to Purchaser at the
Closing under this Agreement.
4.27 No Other Negotiations.
During the period from February 20, 2004 through and including the date of
this Agreement, neither Seller nor any of its officers, directors, stockholders,
employees, affiliates, attorneys, financial advisors or other agents or
representatives has, directly or indirectly, solicited, initiated, sought,
facilitated, encouraged, entertained, discussed, supported, or negotiated any
Acquisition Proposal.
4.28 Investment Representations.
Seller is an "accredited investor" within the meaning of the Securities Act.
Seller is aware that the Purchaser Securities issued or issuable pursuant to
this Agreement have not been registered under the Securities Act or any
applicable state securities laws, and agrees that the Purchaser Securities will
not be offered or sold in the absence of registration under the Securities Act
and any applicable state securities laws or an exemption from the registration
requirements of the Securities Act and any applicable state securities laws,
which shall be accompanied by an opinion of counsel to Seller satisfactory to
Purchaser and its counsel that registration of such securities is not required.
Seller agrees not to transfer the Purchaser Securities in violation of the
provisions of any applicable federal or state securities laws. In this
connection, Seller represents that it is familiar with Rule 144 and Rule 145
promulgated by the SEC pursuant to the Securities Act, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act. Seller understands that the offering and sale of the Purchaser Securities
is intended to be exempt from registration under the Securities Act, by virtue
of the private placement exemption provided by Rule 506 of Regulation D
promulgated under the Securities Act and/or Section 4(2) of the Securities Act,
based, in part, upon the representations, warranties and agreements contained in
this Agreement, and Purchaser may rely on such representations, warranties and
agreements in connection therewith. Seller is acquiring the Purchaser Securities
for its own account and for investment, and not with a view to the distribution
thereof or with any present intention of distributing or selling any of the
Purchaser Securities except in compliance with the Securities Act. Seller
represents that by reason of its business and financial experience, and the
business and financial experience of those persons, if any, retained by Seller
to advise it with respect to its investment in the Purchaser Securities, Seller
together with such advisors have knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits and
risk of the
41
prospective investment. The financial condition and investments of Seller are
such that Seller is in a financial position to hold the Purchaser Securities for
an indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment in the Purchaser Securities. Seller has
carefully examined this Agreement and all exhibits and schedules thereto and the
Purchaser SEC Filings. Seller acknowledges that Purchaser has made available to
Seller all documents and information that Seller has requested relating to
Purchaser and has provided answers to all of Seller's questions concerning
Purchaser and/or the Purchaser Securities. In evaluating the suitability of the
acquisition of the Purchaser Securities hereunder, Seller has not relied upon
any representations or other information (whether oral or written) other than as
set forth in the Purchaser SEC Reports or as contained herein..
4.29 Accuracy of Material Facts; Copies of Materials.
Except as set forth in Schedule 4.29(a), no representation, warranty or
covenant of Seller contained in this Agreement, any Exhibit or Schedule hereto
or in any certificate furnished or to be furnished by or on behalf of Seller
pursuant hereto contains or shall contain any untrue statement of a material
fact or omits to state material facts necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which they are made. Except as disclosed on Schedule 4.29(b), Seller has
delivered to Purchaser true and complete copies of each contract, agreement,
license, lease and similar document (or, if oral summaries of same) referred to
in any Schedule hereto or included in the Purchased Assets.
4.30 Warranty Disclaimer.
SELLER, STOCKHOLDER AND PURCHASER AGREE THAT EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS, SELLER AND STOCKHOLDER HAVE NOT
MADE AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, AS TO THE BUSINESS, THE PURCHASED
ASSETS, THE ASSUMED LIABILITIES, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY
OTHER MATTER PERTAINING TO ANY OF THE FOREGOING. EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, SELLER AND STOCKHOLDER EXPRESSLY DISCLAIM AND MAKE NO
REPRESENTATION OR WARRANTY TO PURCHASER (1) AS TO MERCHANTABILITY, SUITABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY, WITH RESPECT TO ANY OF THE
TANGIBLE ASSETS BEING SO TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP
THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT (OR ANY
OTHER REPRESENTATION OR WARRANTY REFERRED TO IN SECTION 2-312 OF THE CALIFORNIA
UNIFORM COMMERCIAL CODE OR THE UNIFORM COMMERCIAL CODE OF ANY OTHER APPLICABLE
JURISDICTION OR IN ANY STATUTE APPLICABLE TO REAL PROPERTY), (2) WITH RESPECT TO
ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE AVAILABLE
TO PURCHASER, (3) WITH RESPECT TO THE VALIDITY OR PATENTABILITY OF
42
INTELLECTUAL PROPERTY, (4) WITH RESPECT TO THE SCOPE OF INTELLECTUAL PROPERTY,
(5) WITH RESPECT TO ANY WARRANTY AGAINST NONINFRINGEMENT OF THIRD PARTY RIGHTS,
INCLUDING INTELLECTUAL PROPERTY RIGHTS, OR (6) WITH RESPECT TO ANY OTHER
INFORMATION OR DOCUMENTS MADE AVAILABLE TO PURCHASER EXCEPT, IN THE CASE OF
CLAUSES (4), (5) AND (6) ONLY, AS EXPRESSLY COVERED BY A REPRESENTATION OR
WARRANTY CONTAINED IN SECTIONS 4.1 THROUGH 4.29 HEREOF. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING AND, EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, THE ASSETS ARE BEING SOLD, CONVEYED, TRANSFERRED, ASSIGNED AND
DELIVERED AND THE ASSUMED LIABILITIES ARE BEING ASSUMED "AS IS" AND "WHERE IS".
ANY COST ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS, INCLUDING BUT NOT LIMITED
TO THOSE CONTAINED OR REFERRED TO IN THE SCHEDULES HERETO, ARE NOT, AND SHALL
NOT BE DEEMED TO BE, REPRESENTATIONS OR WARRANTIES OF SELLER AND STOCKHOLDER.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby jointly and severally represent and warrant to Seller
and Stockholder as follows:
5.1 Organization.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Purchaser has the requisite
corporate power to own, lease and operate its properties and to conduct its
business as it is currently being conducted. Purchaser is duly qualified or
licensed to do business as a foreign corporation in each jurisdiction in which
failure to be so qualified or licensed would have a Material Adverse Effect on
Purchaser.
5.2 Purchaser Capital Structure.
(a) The authorized capital stock of Purchaser consists of
500,000,000 shares of Purchaser Common Stock and 5,000,000 shares of Preferred
Stock, $0.001 par value ("Purchaser Preferred Stock"), 500,000 shares of which
are designated Series RP Preferred Stock. The shares of Series RP Preferred
Stock are issuable upon the exercise of rights attached to shares of Purchaser
Common Stock pursuant to the Rights Agreement dated as of September 25, 2002
between Purchaser and American Stock Transfer & Trust Company. As of June 30,
2004, (i) 222,850,320 shares of Purchaser Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(ii) 71,244,248 shares of Purchaser Common Stock were reserved for issuance
pursuant to Purchaser's stock option plans, and employee stock purchase plan,
(iii) an aggregate of 58,647,020 shares of Purchaser Common Stock were reserved
for future issuance upon conversion of Purchaser's 5-1/4% convertible
subordinated notes
43
due 2008 and Purchaser's 2-1/2% convertible subordinated notes due 2010; and
(iv) 937,185 shares of Purchaser Common Stock were reserved for future issuance
upon exercise of warrants at a weighted average price of USD 1.57 per share of
Purchaser Common Stock. As of the date hereof, no shares of Purchaser Preferred
Stock are issued or outstanding.
(b) Except for this Agreement, the Ancillary Agreements and
the shares of Purchaser Common Stock reserved for issuance in connection with
this Agreement and as set forth in this Section 5.2 or as reserved for future
grants of options under Purchaser's stock option plans or Purchaser's employee
stock purchase plan, there are (i) no equity securities of any class of
Purchaser, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) no outstanding
subscriptions, options, warrants, puts, calls, rights or other commitments or
agreements of any character to which Purchaser is a party or by which it is
bound obligating Purchaser to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any equity
securities of Purchaser.
(c) The shares of Purchaser Common Stock to be issued in
connection with this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and nonassessable
and will not be subject to any restriction on transfer under Purchaser's
Certificate of Incorporation or Bylaws.
5.3 Authorization.
This Agreement and all of the Ancillary Agreements to which Purchaser is or
will be a party have been, or upon their execution and delivery hereunder will
have been, duly and validly executed by Purchaser and constitute, or will
constitute, valid and binding agreements of Purchaser, enforceable against
Purchaser in accordance with their respective terms. Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which Purchaser is or will be a party and, at the time
of the Closing will have the requisite corporate power and authority to carry
out the transactions contemplated by this Agreement and the Ancillary
Agreements. The execution, delivery and performance by Purchaser of the
Agreement and the Ancillary Agreements have been duly and validly approved and
authorized by Purchaser's Board of Directors.
5.4 No Conflicts; Consents.
The execution and delivery by Purchaser of this Agreement and the Ancillary
Agreements to which Purchaser is or will be a party do not, and the consummation
of the transactions contemplated hereby and compliance by Purchaser with the
provisions hereof and thereof will not, contravene, conflict with, result in a
breach of, constitute a default (with or without notice or lapse of time, or
both) under or violation of, or result in the creation of any Encumbrance
pursuant to, (i) any provision of the Certificate of Incorporation or Bylaws of
Purchaser, (ii) any judgment, order, rule, law or regulation of any court or
Governmental Authority, foreign or domestic, applicable to Purchaser, or (iii)
any provision of any agreement, instrument or understanding to which Purchaser
is a
44
party or by which Purchaser is bound. No consent, approval, order or
authorization of, or registration, declaration or filing with, any third party
or any governmental authority is required to be obtained on the part of
Purchaser to permit the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements, except for (i) the filing of a report on
Form 8-K with the SEC, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws, and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not prevent or materially alter or delay any of the transactions
contemplated by this Agreement or be reasonably likely to have a Material
Adverse Effect on Purchaser.
5.5 SEC Filings.
(a) Purchaser has timely filed and made available to Seller
all forms, reports and documents required to be filed by Purchaser with the SEC
since April 30, 2003, other than registration statements on Form S-8
(collectively, the "Purchaser SEC Reports"). Each of the Purchaser SEC Reports
(i) at the time it was filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time it was filed (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Purchaser SEC Report or necessary in
order to make the statements in such Purchaser SEC Report, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) contained in the Purchaser SEC
Reports, including any Purchaser SEC Reports filed after the date of this
Agreement until the Closing, complied or will comply as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was or will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q promulgated by the SEC) and presented fairly or will
present fairly, in all material respects, the consolidated financial position of
Purchaser and its subsidiaries as of the respective dates, and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
5.6 Absence of Certain Changes or Events.
Since May 1, 2003, (i) Purchaser has not suffered any event or occurrence
that has had a Material Adverse Effect on Purchaser and (ii) there have been no
material changes in Purchaser's accounting policies or practices.
5.7 Litigation and Claims.
45
There are no claims, actions, suits, proceedings or, to Purchaser's
knowledge, investigations in progress or pending before any Governmental
Authority, against Purchaser that relate to the Business or any of the Purchased
Assets, nor, to Purchaser's knowledge, any threat thereof, which if resolved
adversely to Purchaser, would be reasonably expected to have a Material Adverse
Effect on Purchaser's financial condition or materially impair its ability to
carry out and perform its obligations hereunder.
5.8 Brokers.
Seller shall not incur any Liability, either directly or indirectly, to any
investment banker, broker, finder or similar party as a result of any Contract
entered into by Purchaser relating to this Agreement, any of the Ancillary
Agreements, the transactions contemplated hereby and thereby or any act or
omission of Purchaser, any of its employees, officers, directors, stockholders,
agents or affiliates.
5.9 Accuracy of Material Facts.
No representation, warranty or covenant of Purchaser contained in this
Agreement, any Exhibit or Schedule hereto or in any certificate furnished or to
be furnished by or on behalf of Purchaser pursuant hereto contains or shall
contain any untrue statement of a material fact or omits to state material facts
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which they are made.
ARTICLE VI.
COVENANTS OF SELLER AND STOCKHOLDER
6.1 Advice of Changes.
Seller and Stockholder will promptly notify Purchaser in writing of any event
occurring subsequent to the date of this Agreement and prior to the Closing Date
that would render any representation or warranty of Seller or Stockholder
contained in this Agreement, if made on or as of the date of that event or the
Closing Date untrue or inaccurate in any material respect, and shall promptly
thereafter amend or add any schedule hereto to reflect such event. Any such
disclosure after the date hereof and prior to the Closing Date shall not be
deemed to amend or add any schedule hereto unless an amended or additional
schedule is delivered to Purchaser promptly, but in no event later than three
Business Days prior to the Closing except with respect to events occurring less
than three days prior to Closing in which case the amended or additional
schedule shall be delivered within one business day and in any event at or prior
to the Closing. Notwithstanding the foregoing, in no event shall Seller be
permitted to add or amend a schedule prior to Closing pursuant to this Section
6.1 in order to satisfy the condition set forth in Section 9.3(a).
6.2 Conduct of Business.
During the period on and from the date of this Agreement to the Closing,
Seller and Stockholder will use commercially reasonable efforts to maintain and
preserve intact (i)
46
the rights and privileges pertinent to the Business, and (ii) Seller's
relationships with its consultants, independent contractors, licensors,
suppliers, distributors and other customers and all others with whom it deals,
all in accordance with the ordinary and usual course of the Business. Except as
provided in Schedule 6.2, during the period on and from the date of this
Agreement to the Closing, neither Seller nor Stockholder will, without the prior
written consent of Purchaser:
(i) encumber or permit to be encumbered any of the
Purchased Assets;
(ii) dispose of any of the Purchased Assets;
(iii) waive or release any right or claim relating to
any Purchased Assets;
(iv) enter into any transaction not described in the
preceding clauses of this Section 6.2 with respect to any
Purchased Asset outside of the ordinary course of business
consistent with past practice, including any capital
expenditure commitment involving more than Ten Thousand
Dollars ($10,000) with respect to the Business where the
expenditure is likely to occur, in whole or in part, after the
Closing;
(v) amend Seller's certificate of incorporation or
bylaws in any way;
(vi) permit its corporate existence or any
Governmental Permit to be suspended, lapsed, revoked or
modified in any material respect;
(vii) amend in any material respect or terminate any
Assigned Agreement except (A) in the ordinary course of
business consistent with past practice, (B) with prompt notice
to Purchaser and (C) where the effect of such amendment or
termination would not have and could not reasonably be
expected to have a Material Adverse Effect on the Business,
any Purchased Asset or on the prospects for consummating the
transactions contemplated by this Agreement;
(viii) increase any benefits payable, termination pay
policies or employment agreements with any director, officer
or employee of the Business or Seller;
(ix) incur any indebtedness relating to the Business
or any of the Purchased Assets, except accounts payable in the
ordinary course of business and reasonable expenses, including
legal and accounting fees, incurred in connection with the
consummation of the transactions contemplated by this
Agreement; or
(x) enter into or become bound by any lease of
personal property or other agreement in connection with the
Business outside the
47
ordinary course thereof where the aggregate scheduled payments
thereunder would exceed Ten Thousand Dollars ($10,000) or
acquire or lease any real property; or
(xi) agree to do any of the things described in the
preceding clauses of this Section 6.2.
6.3 Access to Information.
Until the earlier of (i) the date of termination of this Agreement pursuant
to Article XI (the "Expiration Date") or (ii) the Closing, Seller will allow
Purchaser and its agents reasonable access upon notice and during normal working
hours to its files, books, records, and offices relating to the Purchased Assets
and all aspects of the Business, except where prohibited by contract or
protected by privilege. Until the earlier of (i) the Expiration Date or (ii) the
Closing, Seller shall cause its accountants to cooperate with Purchaser and its
agents in making available all financial information requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants that relate to the
Business.
6.4 Regulatory Approvals.
Prior to the Closing, Seller and Stockholder will execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Authority that may be reasonably required, or that Purchaser may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Seller will use commercially reasonable efforts
to obtain all such authorizations, approvals and consents.
6.5 Satisfaction of Conditions Precedent.
Seller and Stockholder will use commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent to the Closing hereunder, and
to cause the transactions contemplated hereby to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
6.6 Exclusive Dealings.
Between the date hereof and the earlier of (i) the Closing Date or (ii) the
Expiration Date, Seller and Stockholder jointly and severally agree that neither
Seller nor Stockholder shall, directly or indirectly, alone or in concert with
others, (a) enter into any agreement, understanding or arrangement relating to
any Acquisition Proposal (as hereinafter defined); (b) consider, or engage in
any discussions or negotiations relating to, any Acquisition Proposal; (c)
provide any nonpublic information regarding Seller or its business or operations
to any party (other than to representatives of Purchaser) in connection with or
in anticipation of an Acquisition Proposal; (d) solicit or encourage the
48
submission of any Acquisition Proposal; or (e) permit any representative or
affiliate of Seller or of Stockholder to do any of the foregoing.
The term "Acquisition Proposal," as used herein, refers to any proposal, plan,
agreement, understanding or arrangement contemplating (i) any merger,
consolidation, reorganization, recapitalization or similar transaction involving
Seller or any of its affiliates, (ii) any transfer or issuance of any capital
stock or other securities of Seller or any of its affiliates, or (iii) any
transfer of any material asset of Seller or any of its affiliates.
6.7 Books and Records.
If, in order properly to prepare documents required to be filed with
Governmental Authorities (including Tax authorities) or its financial
statements, it is necessary that any party hereto or any successors be furnished
with additional information relating to the Purchased Assets, the Assumed
Liabilities, or the Business, and such information is in the possession of any
other party hereto, such party agrees to use commercially reasonable efforts to
promptly furnish such information to the party needing such information, at the
cost and expense of the party being furnished such information. From and after
the date of this Agreement and continuing beyond the Closing, Seller and
Stockholder shall cooperate with Purchaser and provide to Purchaser at
Purchaser's expense all financial information that may be required to enable
Purchaser to comply with all applicable laws, rules and regulations, and any
governmental filing requirements, with respect to reporting and reflecting the
transactions contemplated by this Agreement.
6.8 Discharge of Excluded Liabilities.
Seller and Stockholder shall pay, perform and discharge and indemnify and
hold Purchaser and its affiliates harmless from the Excluded Liabilities in
accordance with Section 12.2(a)(ii) including, without limitation, any and all
of Seller's obligations to Employees, including expenses and other amounts
arising from any Contracts, claims, suits, and other Liabilities of any nature
whatsoever, whether known or unknown, accrued or not accrued, fixed or
contingent, directly or indirectly, with respect to the employment, compensation
or termination of employment by Seller of any employees, including without
limitation the Employees and the New Purchaser Employees, whether in connection
with the transactions contemplated hereby or otherwise.
6.9 Stockholder Proxies and Consents.
The Stockholder agrees that, during the period from the date of this
Agreement through the Closing or, if sooner to occur, the Expiration Date, the
Stockholder shall not cause or permit any transfer to be effected of (i) any
securities of Seller beneficially owned by the Stockholder as of the date hereof
or (ii) any additional securities of Seller of which the Stockholder acquires
ownership during the period from the date of this Agreement through the
Expiration Date (collectively, the "Founder Shares").
6.10 Other Obligations of Seller.
49
Seller and Stockholder shall jointly and severally take all of the following
actions prior to Closing:
(a) Seller shall cause the adoption, without subsequent modification or
amendment, of the 2004 Data Transit Severance Plan in the form included in
Schedule 4.16(c) and shall cause such plan to be implemented in all respects;
such implementation to include the effectuation of a formal commitment by Seller
to pay severance compensation equal to 8 weeks of salary to any Seller employee
that does not receive a job offer from Purchaser.
(b) Seller shall implement, without subsequent modification or
amendment, the Data Transit Corp. Amended 2001 Incentive Compensation Plan in
the form previously provided to Purchaser and shall commit to pay to the
participants of such plan in a manner based upon previous awards of benefits
under such plan as previously disclosed to Purchaser, which commitments may,
subject to the plan's terms, obligate Seller to make cash distributions to
participants in an aggregate amount up to $2,158,000.
(c) So that Seller may assign same to Purchaser as provided in this
Agreement, Stockholder shall assign to Seller by execution of documentation and
other actions required in connection therewith, in each case in a manner
reasonably satisfactory to Purchaser, all of Stockholder's issued patents,
provisional patents and patent applications.
(d) Seller shall deliver to Purchaser its current unaudited financial
statements as soon as practicable. Such financial statements shall conform to
the requirements of Section 4.6 relative to the Seller Unaudited Financial
Statements.
(e) So that Seller may assign same to Purchaser as provided in this
Agreement, Stockholder shall assign to Seller by execution of documentation and
other actions required in connection therewith, in each case in a manner
reasonably satisfactory to Purchaser, all assets and other rights to or
otherwise associated with the "BusProbes" business formerly conducted by
Stockholder.
(f) Seller shall terminate its current written agreements with its
distributors and manufacturer's representatives in accordance with the terms
thereof, which have been disclosed to Purchaser.
(g) Seller shall inventory and identify by location its tooling that is
held by Eclipse Metal and other suppliers in a written report delivered at or
before Closing to Purchaser.
(h) Beginning on the date of this Agreement and continuing through
Closing, (i) Seller shall cease all deliveries of any Products to Customers and
any other actions (including invoicing Customers for any Products) that could
constitute consummation of sales or otherwise cause revenues to be recognized,
provided that if Closing does not occur within 10 Business Days following the
date hereof, Seller may resume Product deliveries, so long as the Current
Customer Backlog updated to Closing continues to exceed $350,000 and (ii) Seller
shall cease any inventory returns, provided that if Closing
50
does not occur within 10 Business days following the date hereof, Seller may
resume inventory returns, so long as the book value of inventory at any such
time does not decrease below the book value at the date hereof as a result of
any returns.
(i) Contemporaneously with the execution hereof, Seller shall purchase
from Purchaser eight (8) Xgig Analyzers (version 1.6) for 4 Gig Fibre Channel
for an aggregate purchase price of $350,000 and the obligation for such purchase
shall remain an Excluded Liability.
ARTICLE VII.
COVENANTS OF PURCHASER
7.1 Advice of Changes.
Purchaser will promptly notify Seller in writing of any event occurring
subsequent to the date of this Agreement and prior to the Closing Date that
would render any representation or warranty of Purchaser contained in this
Agreement, if made on or as of the date of that event or the Closing Date untrue
or inaccurate in any material respect.
7.2 Regulatory Approvals.
Prior to the Closing, Purchaser will execute and file, or join in the
execution and filing, of any application or other document that may be necessary
in order to obtain the authorization, approval or consent of any Governmental
Authority that may be reasonably required in connection with the consummation of
the transactions contemplated by this Agreement. Purchaser will use commercially
reasonable efforts to obtain all such authorizations, approvals and consents.
7.3 Satisfaction of Conditions Precedent.
Purchaser will use commercially reasonable efforts to satisfy or cause to be
satisfied all the conditions precedent to the Closing hereunder, and to cause
the transactions contemplated hereby to be consummated, and, without limiting
the generality of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices to, third
parties which may be necessary or reasonably required on its part in order to
effect the transaction contemplated hereby.
7.4 Discharge of Assumed Liabilities.
Subject to and upon the terms and conditions of this Agreement, after the
Closing, Purchaser shall pay, perform and discharge and indemnify and hold
Seller and its affiliates harmless from, the Assumed Liabilities according to
their terms.
7.5 SEC Filings.
Purchaser agrees to abide by the reporting requirements of the SEC during the
one (1) year period following Closing.
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ARTICLE VIII.
ADDITIONAL AGREEMENTS
8.1 Confidentiality.
The parties acknowledge that the Confidentiality Agreement is binding upon
the parties hereto and in full force and effect, except to the extent that the
provisions hereof supersede provisions to similar effect contained in the
Confidentiality Agreement. The terms of the Confidentiality Agreement (exclusive
of such superseded provisions) are incorporated in this Agreement by this
reference.
8.2 Publicity.
Except as may otherwise be required by law, Purchaser shall make or cause to
be made any public announcements in respect of this Agreement or the
transactions contemplated herein or otherwise communicate with any news media in
its reasonable discretion following consultation with Dale Smith. Except as may
otherwise be required by law, neither Seller nor Stockholder shall make or cause
to be made any public announcements in respect of this Agreement or the
transactions contemplated herein or otherwise communicate with any news media
without the prior written consent of Purchaser. Nothing contained in this
Section shall prevent any party at any time from furnishing any information
pursuant to the requirements of any Governmental Authority.
8.3 Restrictions on Transferability of Purchaser Securities.
The Promissory Note and certificates representing the shares of Purchaser
Common Stock issuable upon conversion thereof shall bear a legend as provided in
the Purchaser Note. The Purchaser Securities shall not be transferable in the
absence of an effective registration statement under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. In the absence of an effective registration statement under the
Securities Act, neither the Purchaser Common Stock nor any interest therein
shall be sold, transferred, assigned or otherwise disposed of, unless Purchaser
shall have previously received an opinion of counsel knowledgeable in federal
securities law, in form and substance reasonably satisfactory to Purchaser and
accompanied by such supporting documents as Purchaser may reasonably request, to
the effect that registration under the Securities Act is not required in
connection with such disposition. Purchaser shall be entitled to give stop
transfer instructions to its transfer agent with respect to the Purchaser
Securities in order to enforce the foregoing restrictions. Notwithstanding the
foregoing, Purchaser agrees that it shall not require an opinion of counsel in
connection with Rule 144 transactions except in unusual circumstances. Purchaser
shall be obligated to reissue promptly an unlegended Promissory Note or stock
certificates if Seller shall request such reissuance and shall have obtained an
opinion of counsel reasonably acceptable to Purchaser to the effect that the
securities proposed to be disposed of may lawfully be disposed of without
registration, qualification or legend.
52
8.4 Form S-3 Registration Statement.
(a) Within fourteen (14) days after the Closing Date,
Purchaser shall prepare and file with the SEC, and shall use all reasonable
efforts to cause to become effective within ninety (90) days after the Closing
Date, a registration statement (the "Registration Statement") on Form S-3 or on
such other form as is then available under the Securities Act covering the
issuance of shares of Purchaser Common Stock upon conversion of the Promissory
Note (the "Registrable Securities"); provided, however, that Seller shall
provide all such information and materials to Purchaser and take all such action
as may be required in order to permit Purchaser to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such Registration Statement. Such provision of information and materials
is a condition precedent to the obligations of Purchaser pursuant to this
Section 8.4. The offering made pursuant to such registration shall not be
underwritten.
(b) Notwithstanding Section 8.4(a), Purchaser shall be
entitled to postpone the filing or declaration of effectiveness of the
Registration Statement for a reasonable period of time up to sixty (60) calendar
days after the deadlines therefore set forth in Section 8.4(a) if Purchaser
determines that there exists material nonpublic information about Purchaser
which would be required by the Securities Act to be disclosed in the
Registration Statement, the disclosure of which, in the good faith determination
of the Board of Directors of Purchaser, would be detrimental to Purchaser.
(c) Subject to the limitations of Section 8.4(b), Purchaser
shall: (i) prepare and file the Registration Statement with the SEC in
accordance with Section 8.4(a) with respect to the Registrable Securities and
shall use all reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable after filing and to keep such Registration
Statement continuously effective until the earlier to occur of: (A) the date
that all of the Registrable Securities would be eligible for resale under Rule
144(k) or a successor provision, or (B) the date on which Seller shall have sold
all the Registrable Securities covered by such Registration Statement (the
"Registration Period"); (ii) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary during the Registration Period; and (iii) furnish
to Seller such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus) in conformity with the
requirements of the Securities Act, and such other documents Seller may
reasonably request in order to effect the offering and sale of the Registrable
Securities to be offered and sold. Prior to the filing with the SEC of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), Purchaser
will (A) provide draft copies thereof to the Seller and reasonably discuss such
documents with the Seller (and its counsel) and (B) furnish to Seller and its
legal counsel identified to the Purchaser, (i) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by the
Company, one copy of the registration statement, each prospectus, and each
amendment or supplement thereto, and (ii) such number of copies of the
prospectus and all amendments and supplements thereto and such other documents,
as Seller may reasonably request in order to facilitate the
53
disposition of the Registrable Securities. Purchaser shall promptly provide to
Seller copies of all correspondence and communications received from the SEC
regarding the registration of the Registrable Securities.
(d) All expenses incurred in connection with the
registration of the Registrable Securities pursuant to this Section 8.4,
including without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for Purchaser and expenses
of any special audits incidental to or required by such registration, shall be
borne by Purchaser, except Purchaser shall not be required to pay (i) fees of
legal counsel of Seller and (ii) underwriters' fees, discounts or commissions
relating to the Registrable Securities.
(e) Purchaser shall use its best efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as Seller reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
Purchaser shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or bylaws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8.4(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. Purchaser shall promptly notify Seller of the
receipt by Purchaser of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(f) As promptly as practicable after becoming aware of such
event or development, Purchaser shall notify Seller in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to Seller. Purchaser
shall also promptly notify Seller in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Seller by facsimile on
the same day of such effectiveness), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of
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Purchaser's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(g) In the event the number of shares available under the
Registration Statement is insufficient to cover all of the Registrable
Securities, Purchaser shall amend the Registration Statement, or file a new
Registration Statement, or both, so as to cover all of such Registrable
Securities as soon as practicable, but in any event not later than fifteen (15)
days after the necessity therefore arises. Purchaser shall use it best efforts
to cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under the Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of Registrable Securities issuable during the Registration
Period is greater than the number of shares available for resale under such
Registration Statement.
(h) Notwithstanding any other provision of this Section
8.4, Purchaser shall have the right at any time to require that Seller suspend
further open market offers and sales of Registrable Securities pursuant to the
Registration Statement whenever, and for so long as, in the reasonable judgment
of Purchaser in good faith after consultation with counsel, there is or may be
in existence material undisclosed information or events with respect to
Purchaser (the "Suspension Right"). In the event Purchaser exercises the
Suspension Right, such suspension will continue only for the period of time
reasonably necessary for disclosure to occur at a time that is not materially
detrimental to Purchaser and its stockholders or until such time as the
information or event is no longer material, each as determined in good faith by
Purchaser after consultation with counsel. Purchaser will use all reasonable
efforts to limit the length of any suspension to thirty (30) calendar days or
less.
(i) Purchaser will indemnify Seller and each of its
officers, directors and stockholders, and each person controlling Seller within
the meaning of Section 15 of the Securities Act against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, preliminary
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any registration, qualification or compliance effected
pursuant to this Section 8.4, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation or any alleged violation by Purchaser of any
rule or regulation promulgated under the Securities Act or the Exchange Act in
connection with any such registration, qualification or compliance, and
Purchaser will reimburse Seller, each of its officers and directors, and each
person controlling Seller, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, as such expenses are incurred, provided that
Purchaser will not be liable in any such case to the extent that any such claim,
loss, damage, liability or
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expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to Purchaser by Seller or controlling person and
specifically for use therein.
(j) It shall be a condition to Purchaser's obligations
hereunder to register the Registrable Securities of Seller that Seller agrees
to, and Seller hereby does agree to, (i) indemnify Purchaser, each of
Purchaser's directors and officers, and each person who controls Purchaser
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) reimburse Purchaser, its directors, officers,
persons or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as such expenses are incurred, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Purchaser by Seller
specifically for use therein.
(k) Each party entitled to indemnification under Section
8.4(i) or 8.4(j) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, however, that an Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to differing or potentially
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under Section 8.4(i) or 8.4(j) unless the failure to give
such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(l) Contribution. If the indemnification provided for in
this Section 8.4 is unavailable to or insufficient to hold harmless an
Indemnified Person under
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subsection (i) or (j) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the actions, statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Seller, Stockholder and Purchaser agree that it
would not be just and equitable if contribution pursuant to this subsection (l)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
subsection (l). The amount paid or payable by an Indemnified Party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. In no event shall Seller be required to
contribute any amount in excess of the dollar amount of the proceeds to be
received by Seller or Stockholder from the sale of Registrable Securities
pursuant to any Registration Statement under which such Registrable Securities
are to be registered under the Securities Act. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8.5 Tax Allocation.
Seller, Stockholder and Purchaser shall cooperate in the preparation of a
joint schedule (the "Allocation Schedule") allocating the Purchase Price and the
Assumed Liabilities (the "Section 1060 Purchase Price") among the Purchased
Assets and the Covenant Not to Compete. If Seller and Purchaser are able to
agree upon the Allocation Schedule within 20 Business Days following the Closing
Date, Seller and Purchaser shall each file IRS Form 8594, and all federal,
state, local and foreign Tax Returns, in accordance with the Allocation
Schedule. If Purchaser and Seller are unable to complete the Allocation Schedule
within 20 Business Days following the Closing Date, each of Seller and Purchaser
may file IRS Form 8594 and any federal, state, local and foreign Tax Returns,
allocating the Section 1060 Purchase Price among the Purchased Assets and the
Covenant Not to Compete in the manner each believes appropriate, provided such
allocation is reasonable and in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder.
8.6 Taxes and Facility Costs.
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(a) Seller and Stockholder on the one hand and Purchaser on
the other hand shall each be responsible for 50 percent of any and all Transfer
Taxes. The amount of any Transfer Taxes shall be determined by reference to the
Allocation Schedule or, if the Allocation Schedule is not agreed to as provided
herein, by reference to Purchaser's allocation of the Purchase Price among the
Purchased Assets. The party that is responsible under applicable law for
preparing and filing a Transfer Tax Return (the "Paying Party") shall prepare
and timely file such Tax Return, and shall timely remit amounts due under each
Tax Return to the appropriate Tax authority. Prior to the 24th day of the month
in which Closing occurs (or if the Closing Date is on or after the 24th day of a
month, the 24th day of the next month), the other party (the "Reimbursing
Party") shall pay to the Paying Party one-half of the amount of any Transfer
Taxes determined in accordance with the first sentence of this Section 8.6(a) by
check or wire transfer. To the extent that the amount of Transfer Taxes is later
determined as a result of an audit by a Tax authority or claim for refund to be
different than the amount shown on any Tax Return then, if the amount determined
to be due is greater, the Reimbursing Party shall promptly pay to the Paying
Party, and if the amount determined to be due is less, the Paying Party shall
promptly reimburse the Reimbursing Party, one-half of such difference. The
parties shall cooperate to the extent reasonably requested to minimize the
imposition of Transfer Taxes, including but not limited to Purchaser providing a
resale certificate with respect to the Inventory.
(b) With respect to any real or personal property Taxes (or
other similar Taxes) relating to the Purchased Assets for which Tax Returns have
been filed by Seller prior to the Closing Date, and such Tax Returns cover a
taxable period ending after the Closing (a "Straddle Period"), Purchaser shall
pay Seller at Closing the portion of any such Taxes shown to be due on such Tax
Returns attributable to any Tax period (or portion thereof) beginning
immediately after the Closing, determined on a per diem basis, and Seller shall
timely remit the full amount of such Taxes to the appropriate Tax authority.
With respect to any real or personal property Taxes (or other similar Taxes)
attributable to the Purchased Assets for which Tax Returns have not been filed
prior to the Closing Date, and such Tax Returns cover a Straddle Period,
Purchaser shall prepare and timely file, and shall timely make all payments
required with respect to, any such Tax Returns; provided, however, that Seller
will promptly reimburse Purchaser upon receipt of a copy of the filed Tax Return
to the extent any payment made by Purchaser is attributable to any Tax period
(or portion thereof) ending on or before the Closing Date, determined on a per
diem basis. To the extent that the amount of any such real or personal property
Taxes (or other similar Taxes) is later determined as a result of an audit by a
Tax authority or claim for refund to be different than the amount shown on any
such Tax Return, Purchaser shall promptly pay to Seller, or Seller shall
promptly pay to Purchaser, as applicable, one-half of any such difference.
(c) Seller and Purchaser acknowledge and agree that (i)
Seller will be responsible for and will perform all Tax withholding, payment and
reporting duties with respect to any wages and other compensation paid by Seller
to any New Purchaser Employee prior to or on the Closing, and (ii) Purchaser
will be responsible for and will perform all Tax withholding, payment and
reporting duties with respect to any wages and other compensation paid by
Purchaser to any New Purchaser Employee after the Closing.
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(d) With respect to any rent, percentage rent charges,
other charges under the Lease or utility costs associated with the Facility
under the Lease, Purchaser shall reimburse Seller at Closing the portion of such
payments previously made by Seller attributable to any period occurring after
the Closing, determined on a per diem basis.
8.7 Advance to Seller.
In the event that the Registration Statement is not effective on or before
November 1, 2004 for any reason, Purchaser shall advance the sum of $1,000,000
to Seller as an unsecured commercial loan which shall be evidenced by a
promissory note executed by Seller that shall bear simple interest at the annual
rate of 8% and that shall be repayable to Purchaser on or before 30 days
following the maturity and repayment in full of the Purchaser Note. The
$1,000,000 note shall be in a mutually acceptable customary form.
8.8 New Purchaser Employees.
(a) Prior to the Closing Date, Purchaser will make offers
(with base compensation equal to or greater than their current base compensation
as disclosed to Purchaser) of full-time employment (to be effective as of the
Closing Date) to at least 24 Employees (in addition to Dale Smith), including
the Key Business Employees, such offers to be conditioned upon the consummation
of the transactions contemplated hereby at the Closing. All obligations of
Seller or Stockholder to all Employees through the Closing Date, including any
obligations for salary, sales commissions, bonus compensation, payroll taxes,
accrued vacation, fringe benefits and severance pay, are and shall remain, the
sole obligations of Seller or Stockholder, respectively.
(b) All employment arrangements between Purchaser and any
New Purchaser Employees will be negotiated directly between Purchaser and such
employee, and Purchaser shall indemnify and hold Seller harmless from any and
all claims arising from Purchaser's negotiations with or hiring and employment
of such Employees.
(c) Purchaser shall provide terms of employment to New
Purchaser Employees, including salaries and stock options commensurate with
seniority and experience, subject to the terms of Purchaser's existing
employment policies and plans, including vesting provisions. Purchaser would
also provide such other employment benefits as Purchaser customarily makes
available to its employees.
(d) Seller will retain, and Purchaser will not assume, any
employer or employment-related obligations of Seller to the New Purchaser
Employees or any other liability of Seller related to any New Purchaser Employee
that arises or accrues on or before the Closing, including, without limitation:
(i) accrued personal time off (including sick leave); (ii) any obligation to
provide health, medical, disability, severance, life or other insurance benefits
or any stock, stock option rights, or pension savings plan or similar benefits
pursuant to any Seller employee benefit plan, plans, agreement or arrangement,
including benefits under the 2004 Data Transit Severance Plan; (iii) any
government-mandated employee or employment-related payments; (iv) workers'
compensation and disability insurance premiums (if any) paid or payable by
Seller on
59
behalf of New Purchaser Employees who are on workers' compensation or disability
leave as of the Closing; or (v) any bonuses accrued or earned by any of the New
Purchaser Employees on or prior to the Closing, including compensation to be
paid in accordance with the 2001 Amended Incentive Compensation Plan. Any
Liabilities to any of the employees of Seller resulting from Purchaser's failure
to offer employment to any such employee will be, and will remain, Seller's sole
responsibility.
(e) Notwithstanding any possible inferences to the
contrary, Purchaser and Seller do not intend for this Section 8.8 to create any
rights or obligations except as between Purchaser and Seller, and no past,
present or future employee of Seller or Purchaser shall be treated as a third
party beneficiary of this Agreement.
(f) Seller shall execute and deliver agreements and
instruments, in such form as may be reasonably satisfactory to Purchaser,
releasing those New Purchaser Employees who accept employment with Purchaser
from any obligations of such New Purchaser Employees to Seller that may first
arise after the Closing with respect to the Business under employment
agreements, confidentiality agreements, invention agreements or other similar
agreements to the extent that such obligations would restrict or inhibit such
New Purchaser Employees' performance of their duties as employees of Purchaser.
(g) Seller shall comply with all requirements and assume
all obligations under COBRA, the Health Insurance Portability and Accountability
Act of 1996, the Women's Health and Cancer Rights Act of 1998 and the Family
Medical Leave Act of 1993 with respect to the termination of any Business
Employees in connection with the transactions contemplated by this Agreement.
(h) Seller agrees to comply with the provisions of the WARN
Act and any other federal, state or local statute or regulation regarding
termination of employment in connection with the transactions contemplated by
this Agreement and to perform all obligations that might otherwise be required
by Seller with respect to the cessation of any operations of the Business or the
termination of any New Purchaser Employee in connection with the transactions
contemplated by this Agreement.
(i) Seller and Purchaser agree to cooperate fully with
respect to the actions which are necessary or reasonably desirable to accomplish
the transactions contemplated hereunder, including, without limitation, the
provision of records and information as each may reasonably request and the
making of all appropriate filings under ERISA and the Code.
8.9 NASDAQ Quotation.
Purchaser agrees to use commercially reasonable efforts (i) to continue the
quotation of Purchaser Common Stock on the NASDAQ National Market ("NNM") or any
successor market on which Purchaser Common Stock may be listed or quoted
following the Closing and (ii) to cause the shares of Purchaser Common Stock to
be issued upon
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conversion of the Promissory Note to be approved for quotation on the NNM upon
the effectiveness of the Registration Statement.
ARTICLE IX.
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligations.
The respective obligations of each party to effect the transactions to be
performed by such party at the Closing are subject to the satisfaction at or
prior to the Closing of the following conditions, any of which may be waived in
writing by each party:
(a) No order shall have been entered, and not vacated, by a
court or administrative agency of competent jurisdiction, in any action or
proceeding which enjoins, restrains or prohibits the sale of the Purchased
Assets or consummation of any other transaction contemplated hereby.
(b) All permits, authorizations, approvals and orders
required to be obtained under all applicable statutes, codes, ordinances, rules
and regulations in connection with the transactions contemplated hereby shall
have been obtained and shall be in full force and effect at the Closing Date.
(c) There shall be no litigation pending or threatened by
any regulatory body or private party in which (i) an injunction is or may be
sought against the transactions contemplated hereby, or (ii) relief is or may be
sought against any party hereto as a result of this Agreement and in which, in
the good faith judgment of the Board of Directors of either Purchaser or Seller
(relying on the advice of their respective legal counsel), such regulatory body
or private party has the probability of prevailing and such relief would have a
Material Adverse Effect upon such party.
9.2 Conditions to Obligations of Seller.
The obligations of Seller to effect the transactions to be performed by it at
the Closing are subject to the satisfaction at or prior to the Closing of the
following additional conditions, any of which may be waived in writing by
Seller:
(a) All of the representations and warranties of Purchaser
set forth in Article V hereof shall be true on and as of the Closing Date with
the same force and effect as if they had been made at the Closing (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date) except for changes contemplated by this Agreement and except to
the extent that the failure of any such representation or warranty to be true
and correct on and as of the Closing Date individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect on Purchaser,
or a Material Adverse Effect upon the consummation of the transactions
contemplated hereby, and Purchaser shall have delivered to Seller a certificate
to such effect dated the Closing Date and signed by the President or a Vice
President of Purchaser.
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(b) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by Purchaser at or prior to the
Closing shall have been duly complied with and performed in all material
respects, and Purchaser shall have delivered to Seller a certificate to such
effect dated the Closing Date and signed by the President or a Vice President of
Purchaser.
(c) Purchaser shall have offered full-time employment in
form and substance reasonably satisfactory to Purchaser (with base compensation
equal to or greater than their current base compensation as disclosed to
Purchaser) to at least 24 Employees (in addition to Dale Smith), including the
Key Business Employees, for employment by Purchaser immediately subsequent to
the Closing; Purchaser shall have interviewed an additional 15 Employees for
either employment or engagement as independent contractors of Purchaser on terms
reasonably satisfactory to Purchaser.
(d) Purchaser shall have executed and delivered the
Ancillary Agreements.
9.3 Conditions to Obligations of Purchaser.
The obligations of Purchaser to effect the transactions to be performed by it
at the Closing are subject to the satisfaction at or prior to the Closing of the
following additional conditions, any of which may be waived in writing by
Purchaser:
(a) All the representations and warranties of Seller set
forth in Article IV hereof (including the schedules modifying such
representations and warranties) shall be true on and as of the Closing Date with
the same force and effect as if they had been made at the Closing (other than
representations and warranties which by their express terms are made solely as a
specified earlier date, which shall be accurate as of such specified earlier
date) except for changes contemplated by this Agreement and except to the extent
that the failure of any such representation or warranty to be true and correct
on and as of, the Closing Date, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on the Business or the
Purchased Assets or a Material Adverse Effect upon the consummation of the
transactions contemplated hereby, and Seller shall have delivered to Purchaser a
certificate to such effect dated the Closing Date and signed by the President of
Seller. Notwithstanding the foregoing, in no event shall Seller be permitted to
add or amend a schedule prior to Closing pursuant to Section 6.1 in order to
satisfy this condition.
(b) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by Seller at or prior to the Closing
shall have been duly complied with and performed in all material respects, and
Seller shall have delivered to Purchaser a certificate to such effect dated the
Closing Date and signed by the President of Seller.
(c) Any and all governmental, corporate or contractual (and
other third party) consents, assignments or approvals required to allow the
consummation of the sale of the Purchased Assets and the other transactions
contemplated hereby, including the
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consents in writing of all persons, if any, necessary to permit Seller to assign
and transfer all of the Purchased Assets to Purchaser, free and clear of all
Encumbrances other than Permitted Encumbrances, all of which are identified on
Schedule 9.3(c), shall have been obtained and delivered to Purchaser.
(d) Seller and Stockholder shall have executed and
delivered the Ancillary Agreements.
(e) Purchaser shall have obtained a commitment in form and
substance reasonably satisfactory to Purchaser that all four (4) of the
Employees identified on Schedule 1.51 as Individual Key Employees and at least
nine (9) of the twelve (12) Employees identified on Schedule 1.51 as Group Key
Employees will accept full-time employment by Purchaser immediately subsequent
to the Closing on terms that are satisfactory to Purchaser.
(f) The Stockholders have approved the transactions
contemplated by this Agreement in the manner required by the laws of the state
of Seller's incorporation.
(g) Since December 31, 2003, there shall have been no
change to the Business that could reasonably be expected to have a Material
Adverse Effect on Purchaser's ability to conduct the Business after Closing.
(h) Stockholder shall remain the sole stockholder of Seller
and there shall be no outstanding options or any other arrangements to purchase
shares of the capital stock of Seller as of the Closing Date.
(i) Seller shall have completed in all respects the
settlement to Purchaser's satisfaction of the past litigation or any other
disputes with I-Tech such that (i) at Closing seller shall have completely
performed all monetary obligations, whether then due or not, under any agreement
with I-Tech in settlement of past litigation, (ii) there shall not be any basis
for any claims by I-Tech that (A) any settlement agreement is not at any
relevant time in full force and effect in all respects or (B) Seller is in
breach of any such settlement agreement and (iii) Seller shall have resolved all
aspects of whether it has satisfied I-Tech that Seller accurately accounted to
I-Tech concerning its May 2004 royalty obligations and has secured written
confirmation of such satisfaction from I-Tech, including confirmation that
I-Tech does not intend to exercise its audit rights concerning the May 2004
royalty calculation.
(j) Seller's Current Customer Backlog updated as of Closing
shall not be less than $350,000.
(k) Seller shall disclose the entirety of its Contracts
with Intel, and Purchaser shall be reasonably satisfied that Seller's Contracts
with Intel can be assigned to Purchaser on terms acceptable to Purchaser.
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ARTICLE X.
POST-CLOSING MATTERS
10.1 Further Assurances of Seller.
(a) Seller shall, from time to time, at the reasonable
request of Purchaser, and without further consideration, execute and deliver
such instruments of transfer, conveyance and assignment in addition to those
delivered pursuant to Section 3.2 hereof, and take such other actions as may be
reasonably necessary to assign, transfer, convey and vest in Purchaser, and to
put Purchaser in possession of, the Purchased Assets. In the event that any
subsidiary or affiliate of Seller (including Stockholder) owns or holds rights
to any of the Purchased Assets, Seller and Stockholder jointly and severally
covenant and agree to cause each such subsidiary or affiliate to take whatever
action and execute whatever documents as are necessary to implement this
Agreement and the Ancillary Agreements. From and after the date of the Closing,
Seller agrees to convey, transfer, and assign to Purchaser, free and clear of
all Encumbrances, other than Permitted Encumbrances, any tangible or intangible
rights, properties or assets then held by Seller the conveyance, transfer or
assignment of which would have been necessary for the representations and
warranties of Seller herein to be true and correct as of the date of the
Closing, or the conveyance, transfer or assignment of which was or is required
by the covenants of Seller contained in this Agreement. Purchaser will be
allowed to visually inspect and verify and confirm the condition of the
Purchased Assets before crating in accordance with generally accepted standards.
(b) If, after the Closing in order properly to utilize the
Purchased Assets or prepare documents or reports required to be filed with the
Governmental Authorities or prepare Purchaser's financial statements related to
the Business or the Purchased Assets, it is reasonably necessary that Purchaser
obtain additional information within Seller's or Stockholder's possession,
Seller shall furnish or cause its representatives to furnish such information to
Purchaser as promptly as possible. Seller shall maintain and make available the
information and records specified in this Section for a period of three (3)
years after the Closing.
(c) After the Closing, at Purchaser's request, Seller and
Stockholder will assist Purchaser, upon its request, to the extent reasonable,
in the determination of the legitimacy of any product return and warranty claim
with respect to Products. The items noted on Schedule 10.1 constitute Purchased
Assets and will be transferred after Closing upon satisfaction of the conditions
noted on Schedule 10.1.
10.2 Further Assurances of Purchaser.
Purchaser shall, from time to time at the request of Seller, and without
further consideration, execute and deliver such instruments of assumption, and
take such other action, as may be reasonably necessary to effectively confirm
the assumption by Purchaser of the Assumed Liabilities. After the Closing,
Purchaser will arrange all product returns and warranty returns for the
Products; although its actions in so doing
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will not reduce the responsibility of Seller or Stockholder with respect thereto
pursuant to the other terms of this Agreement.
10.3 Covenant not to Compete.
(a) For the three-year period beginning at Closing, each of
Seller and Stockholder covenants and agrees that he, she or it will not,
anywhere in the world, except as expressly permitted by subsection (b) of this
Section 10.3: (i) engage, directly or indirectly, as owner (other than solely as
an owner of less than 1% of a publicly traded corporation), partner,
stockholder, joint venturer, employee, consultant, licensor, or in any other
capacity whatsoever become financially interested, in any business activity
which (A) is directly competitive with, or is a contractor or subcontractor for
a business activity that is directly competitive with, the Business as currently
conducted or currently proposed to be conducted by Seller or (B) is providing or
proposes to provide services to that portion of any business that competes
directly or indirectly with the Business as currently conducted or currently
proposed to be conducted by Seller; (ii) directly or indirectly interfere with
or raid the officers, employees, consultants, agents and/or independent
contractors of Purchaser or any subsidiary, affiliate or successor of Purchaser
then engaged in the Business or any business similar to the Business or in any
manner attempt to persuade any such person to discontinue any relationship with
such entity; or (iii) directly or indirectly solicit any customer or supplier of
the Business to cease doing business with Purchaser or any subsidiary, affiliate
or successor of Purchaser then engaged in the Business or any business similar
to the Business.
(b) For purposes of this Section 10.3, Purchaser, Seller
and Stockholder mutually acknowledge that Seller and Stockholder shall retain
rental Contracts and rights thereunder with existing Customers concerning
analyzer units delivered prior to May 31, 2004 (such items constituting Excluded
Assets), on the condition that Seller shall not renew or extend any such rental
Contracts and shall not otherwise enter into any similar agreements after
Closing with any person or entity, provided that Purchaser shall honor accrued
credits against purchase price and offer equivalent products on similar terms.
Additionally, Seller shall (i) assist and otherwise cooperate with Purchaser in
replacing such Contracts with new rental or other arrangements concerning
analyzers manufactured by Purchaser, such arrangements to be between such
Customers and Purchaser as determined by Purchaser, (ii) retain in Seller's
control and custody all analyzers manufactured by Seller that shall be returned
to Seller from former rental Customers and not rent, resell or otherwise market
them in any way and (iii) upon an express written request from Purchaser signed
by the senior executive in charge of the Network Tools Division of Purchaser,
deliver to Purchaser (at Purchaser's cost) components and subcomponents of
analyzers formerly subject to the aforementioned rental Contracts as specified
in such request.
(c) Each of Seller and Stockholder agrees that the time
period provided for, and the geographical area encompassed by, the covenants
contained in this Section 10.3 are necessary and reasonable in order to protect
Purchaser in the conduct of the Business and the utilization of the assets,
tangible and intangible, including the goodwill of Seller relating to the
Business, acquired by virtue of this Agreement.
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(d) If any court having jurisdiction at any time hereafter
shall hold any provision or clause of this Section 10.3 to be unreasonable as to
its scope, territory or term, and if such court in its judgment or decree shall
declare or determine that scope, territory or term which such court deems to be
reasonable, then such scope, territory or term, as the case may be, shall be
deemed automatically to have been reduced or modified to conform to that
declared or determined by such court to be reasonable.
(e) It is expressly agreed that monetary damages would be
inadequate to compensate Purchaser for any breach by Seller or Stockholder of
their respective covenants as set forth in this Section 10.3 and, accordingly,
that in the event of any breach or threatened breach by Seller or Stockholder of
any such covenant, Purchaser will be entitled to seek and obtain preliminary and
permanent injunctive relief in any court of competent jurisdiction, in addition
to any other remedies at law or in equity to which Purchaser may be entitled.
10.4 Name Change.
Promptly after the Closing, but in no event later than three (3) Business
Days thereafter, Seller will change its name to DJ Holdings, Inc. and otherwise
cease using the "Data Transit" name or any variant thereof.
10.5 Collection of Accounts Receivable.
Effective immediately upon Closing (and expressly conditioned thereon),
Seller hereby appoints Purchaser as its sole and exclusive collection agent for
a period of six (6) months following the Closing Date to take whatever measures
Purchaser considers appropriate (in a manner consistent with Purchaser's
collection efforts concerning its accounts receivable) to collect Seller's
accounts receivable outstanding on the Closing Date, provided that Purchaser
shall not settle an account receivable for less than face value without Seller's
consent. Seller shall furnish Purchaser with the necessary information and
provide Purchaser access to Seller's books and records as reasonably necessary
to enable Purchaser to perform its duties as collection agent. Purchaser shall
remit the proceeds of its efforts to Seller promptly following collection
thereof. Neither Seller nor Stockholder (nor any other agent or representative
thereof) shall contact accounts receivable debtors during the period of
Purchaser's appointment hereunder.
10.6 Post Closing Retention.
(a) Immediately after the Closing, in addition to copies of
the Assigned Agreements delivered to Purchaser as part of the transactions
contemplated by this Agreement, Seller shall deliver to Purchaser or destroy
copies of any Purchased Assets in Seller's possession or control that are
primarily or exclusively related to the Business, whether such copies are in
paper form, on computer media or stored in another form. Except as otherwise
provided in this Agreement, and except to the extent lawfully transferable, all
Governmental Permits may be retained by Seller.
(b) Purchaser shall, at its exclusive cost and expense,
retain and preserve in good condition and readable form all items delivered
under Section 10.7 (a)
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for a period of 6 years. If Purchaser chooses not to retain and preserve any
such item for such period, Purchaser shall give Seller ninety (90) days prior
written notice prior to destroying or ceasing to preserve such item and at
Seller's request, return such item to Seller.
(c) Seller shall, at its exclusive cost and expense, retain
and preserve in good condition and readable form all Books and Records
constituting Excluded Assets for a period of 6 years. If Seller chooses not to
retain and preserve any such item for such period, Seller shall give Purchaser
ninety (90) days prior written notice prior to destroying or ceasing to preserve
such item and at Purchaser's request, deliver such item to Purchaser.
(d) In the event and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any party, each of the other parties shall cooperate with him, her or
it and his, her or its counsel in the defense or contest, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the defense or contest, all at the sole
cost and expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification hereunder).
ARTICLE XI.
TERMINATION OF AGREEMENT
11.1 Termination by Purchaser.
This Agreement may be terminated at any time before the Closing by action of
the Board of Directors of Purchaser upon written notice to Seller, specifying
the basis for such termination, if (i) Seller or Stockholder shall have breached
in any material respect any of its respective representations, warranties,
covenants or agreements contained in this Agreement, which breach (A) would
cause the conditions in Section 9.3(a) or (b) not to be satisfied and (B) shall
not have been cured within ten (10) days following receipt by Seller or
Stockholder of written notice of such breach by Purchaser or (ii) through no
fault of Purchaser, the Closing shall not have occurred on or before August 31,
2004.
11.2 Termination by Seller.
This Agreement may be terminated at any time before the Closing by action of
the Board of Directors of Seller upon written notice to Purchaser, specifying
the basis for such termination, if (i) Purchaser shall have breached in any
material respect any of its representations, warranties, covenants or agreements
contained in this Agreement, which breach (A) would cause the conditions in
Section 9.2(a) or (b) not to be satisfied and (B) shall not have been cured
within ten (10) days following receipt by Purchaser of written
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notice of such breach by Seller or (ii) through no fault of Seller, the Closing
shall not have occurred on or before August 31, 2004.
11.3 Mutual Consent.
This Agreement may be terminated at any time before the Closing, by the
mutual written consent of Purchaser and Seller, approved by their respective
Boards of Directors.
11.4 Effect of Termination.
Upon any termination of this Agreement, all parties hereto shall be relieved
of all further obligations under this Agreement, except for (i) the provisions
of Section 13.7(b), regarding the payment of certain expenses and (ii) the
continuing obligations of the parties under the Confidentiality Agreement.
ARTICLE XII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 Survival of Representations and Warranties.
The representations and warranties set forth in this Agreement shall be
deemed to have been made on the date hereof, and again as of the Closing Date
and shall survive the Closing for a period of eighteen (18) months after the
Closing. After the expiration of such eighteen (18) month period, such
representations and warranties shall expire and be of no further force and
effect unless a claim or claims with respect thereto shall have been asserted
under this Article XII prior to the expiration of such period.
12.2 Indemnification by Seller and Stockholder.
(a) Subject to the terms and conditions of this Article
XII, Seller and Stockholder jointly and severally agree to indemnify, defend and
hold harmless Purchaser, the stockholders, officers, directors, employees and
attorneys of Purchaser, all subsidiaries and affiliates of Purchaser, and the
respective officers, directors, employees and attorneys of such entities (all
such persons and entities being collectively referred to as the "Purchaser
Group") from, against, for and in respect of any and all Losses asserted
against, relating to, imposed upon or incurred by Purchaser and/or any other
member of the Purchaser Group by reason of, resulting from, based upon or
arising out of any of the following (collectively, "Indemnifiable Losses"):
(i) the breach, inaccuracy, untruth or incompleteness
of any representation or warranty of Seller contained in or made pursuant to
this Agreement, any Ancillary Agreement or any certificate or Schedule delivered
by Seller or Stockholder in connection herewith;
(ii) the breach or violation of any covenant or
agreement of Seller or Stockholder contained in or made pursuant to this
Agreement or in any Ancillary Agreement;
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(iii) any of the Excluded Liabilities;
(iv) its share of any Transfer Taxes;
(v) any Encumbrance (other than Permitted
Encumbrances) on the Purchased Assets existing at the Closing or arising as a
result of the transactions contemplated by this Agreement;
(vi) the failure of Seller to deliver the Purchased
Assets to Purchaser at the locations specified in Section 2.4 hereof, or
(vii) any breach by Seller or Stockholder of this
Article XII.
(b) Neither Seller nor Stockholder shall be required to
indemnify Purchaser and/or any other member of the Purchaser Group for any
Indemnifiable Losses arising principally from a breach of any representation or
warranty of Seller or Stockholder contained in Article IV of this Agreement
unless and until the aggregate amount of the Indemnifiable Losses exceeds
$50,000 for each event or series of events arising out of or with respect to, or
resulting from a common set of facts (the "Article IV Losses"). Notwithstanding
the foregoing, for the purposes hereof, breaches of the warranties and
representations set forth in Section 4.11 by virtue of Seller's failure to
disclose agreements concerning Seller IP Rights shall constitute a series of
events arising out of a common set of facts.
(c) Neither Seller nor Stockholder shall be required to
indemnify Purchaser and/or any other member of the Purchaser Group for any
Article IV Losses unless the aggregate amount of all Article IV Losses for which
one or more of the Purchaser Group seeks indemnification hereunder exceeds
$500,000 (the "Basket Amount"), in which event Seller shall be liable to
indemnify the Purchaser Group for all such Article IV Losses, excluding Article
IV Losses within the Basket Amount. Notwithstanding anything to the contrary
herein, Seller's and Stockholder's obligation under this Article XII to
indemnify Purchaser and/or any other member of the Purchaser Group for Article
IV Losses shall not exceed the sum of 25% of the Purchase Price plus $500,000.
(d) The provisions of Sections 12.2(a), 12.2(b) and 12.2(c)
above shall not limit, in any manner, Seller's and Stockholder's obligation to
indemnify members of the Purchaser Group for any other indemnifiable losses
including, but not necessarily limited to, any indemnifiable losses arising from
(i) fraud, willful misconduct or intentional misrepresentation on the part of
Seller or Stockholder, (ii) any of the matters described in Sections
12.2(a)(ii)-(a)(vii), or (iii) any breach of any covenant or agreement of Seller
or Stockholder to be performed by Seller or Stockholder following the Closing,
including, without limitation, Seller's and Stockholder's obligations with
respect to Defenses and Claims in Section 2.4(b), Seller's and Stockholder's
obligations with respect to Section 8.4(j), Seller's and Stockholder's
obligations to perform and discharge all Excluded Liabilities and pay any
amounts contemplated by Section 12.5, and Seller's and Stockholder's obligations
arising out of the Covenant Not to Compete and the
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Confidentiality Agreement. The provisions of Sections 12.2(b) and 12.2(c) above
shall not apply to any Indemnifiable Losses except Article IV Losses.
(e) Seller and Stockholder shall not be liable for damages
in excess of the actual damages suffered by a member of the Purchaser Group as a
result of the act, circumstance or condition for which indemnification is
sought, net of any insurance proceeds received by Purchaser.
(f) Seller and Stockholder shall have no liability or
obligation to Purchaser with respect to claims made pursuant to Section
12.2(a)(i) unless Seller and Stockholder have received notice of such claim
(describing the claim in reasonable detail, the amount thereof with reasonable
certainty and the basis thereof) within the applicable survival period set forth
in Section 12.1.
(g) Purchaser's exclusive remedy against Seller and
Stockholder for any Indemnifiable Losses hereunder shall be indemnification
under this Article XII; provided, however, that nothing contained in this
Article XII shall limit, in any manner, any remedy at law or in equity to which
Purchaser or any other member of the Purchaser Group shall be entitled against
Seller or Stockholder as a result of fraud, willful misconduct or intentional
misrepresentation by Seller or Stockholder any of their respective
representatives or agents.
12.3 Indemnification by Purchaser.
(a) Subject to the terms and conditions of this Article
XII, Purchaser agrees to indemnify, defend and hold harmless Seller, its
stockholders, officers, directors, employees and attorneys, all subsidiaries and
affiliates of Seller, and the respective officers, directors, employees and
attorneys of such entities (all such persons and entities being collectively
referred to as the "Seller Group") from, against, for and in respect of any and
all Losses asserted against, relating to, imposed upon or incurred by Seller
and/or any other member of the Seller Group by reason of, resulting from, based
upon or arising out of any of the following (collectively, "Seller Losses"):
(i) the breach, inaccuracy, untruth or incompleteness
of any representation or warranty of Purchaser contained in or made pursuant to
this Agreement, any Ancillary Agreement or any certificate or Schedule delivered
by Purchaser in connection herewith;
(ii) the breach or violation of any covenant or
agreement of Purchaser contained in or made in pursuant to this Agreement;
(iii) its share of any Transfer Taxes;
(iv) any Assumed Liability or any other liability
which arises after the Closing with respect to Purchaser's ownership or
operation of the Business;
(v) any breach by Purchaser of this Article XII.
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(b) Purchaser shall not be required to indemnify Seller
and/or any other member of the Seller Group for any Seller Losses arising
principally from a breach of any representation or warranty of Purchaser
contained in Article V of this Agreement unless and until the aggregate amount
of the Seller Losses exceeds $50,000 for each event or series of events arising
out of or with respect to, or resulting from a common set of facts (the "Article
V Losses").
(c) Purchaser shall not be required to indemnify Seller
and/or any other member of the Seller Group for any Article V Losses unless the
aggregate amount of all Article V Losses for which one or more of the Seller
Group seeks indemnification hereunder exceeds the Basket Amount, in which event
Purchaser shall be liable to indemnify the Seller Group for all Article V
Losses, excluding Article V Losses within the Basket Amount. Notwithstanding
anything to the contrary herein, Purchaser's obligations under this Article XII
for Article V Losses shall not exceed the sum of 25% of the Purchase Price plus
$500,000.
(d) The provisions of Section 12.3(a), 12.3(b) and 12.3(c)
above shall not limit, in any manner, Purchaser's obligation to indemnify
members of the Seller Group for Seller Losses arising from (i) fraud, willful
misconduct or intentional misrepresentation on the part of Purchaser, (ii) any
of the matters described in Section 12.3(a)(ii) through (a)(v), or (iii) any
breach of any covenant or agreement of Purchaser to be performed by Purchaser
following the Closing, including, without limitation, Purchaser's obligation to
perform and discharge all Assumed Liabilities and pay any amounts contemplated
by Sections 2.5 and 13.7, Purchaser's obligations with respect to Section 8.4(i)
and Purchaser's obligations arising out of the Confidentiality Agreement. The
provisions of Sections 12.3(b) and 12.3(c) above shall not apply to any Seller
Losses except Article V Losses.
(e) Purchaser shall not be liable for damages in excess of
the actual damages suffered by a member of the Seller Group as a result of the
act, circumstance or condition for which indemnification is sought, net of any
insurance proceeds received by Seller or Stockholder.
(f) Purchaser shall have no liability or obligation to
Seller or Stockholder with respect to claims made pursuant to Section 12.3(a)(i)
unless Purchaser has received notice of such claim (describing the claim in
reasonable detail, the amount thereof with reasonable certainty and the basis
thereof) within the applicable survival period set forth in Section 12.1.
(g) Seller's and Stockholder's exclusive remedy against
Purchaser for any Seller Losses hereunder shall be indemnification under this
Article XII; provided, however, that nothing contained in this Article XII shall
limit, in any manner, any remedy at law or in equity to which Seller or
Stockholder or any other member of the Seller Group shall be entitled against
Purchaser as a result of fraud, willful misconduct or intentional
misrepresentation by Purchaser or any of its representatives or agents.
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12.4 Procedures for Indemnification.
(a) As used in this Article XII, the term "Indemnitor"
means the party against whom indemnification hereunder is sought, and the term
"Indemnitee" means the party seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an
"Indemnification Claim") shall be made by Indemnitee by delivery of a written
notice to Indemnitor requesting indemnification and specifying the basis on
which indemnification is sought in reasonable detail (and shall include relevant
documentation related to the Indemnification Claim), the amount of the asserted
Indemnifiable Losses or Seller Losses, as the case may be, and, in the case of a
Third Party Claim, containing (by attachment or otherwise) such other
information as Indemnitee shall have concerning such Third Party Claim.
(c) If the Indemnification Claim involves a Third Party
Claim, the procedures set forth in Section 12.5 hereof shall be observed by
Indemnitee and Indemnitor.
(d) If the Indemnification Claim involves a matter other
than a Third Party Claim, Indemnitor shall have twenty (20) Business Days to
object to such Indemnification Claim by delivery of a written notice of such
objection to Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute a final and binding
acceptance of the Indemnification Claim by Indemnitor, and the Indemnification
Claim shall thereafter be paid by Indemnitor in accordance with Section 12.4(e)
hereof. Any dispute arising under this Article XII shall be resolved in
accordance with the provisions of Section 13.16 hereof.
(e) Upon determination of the amount of an Indemnification
Claim, whether by (i) an agreement between Indemnitor and Indemnitee, (ii) an
arbitration award, or (iii) a final judgment (after expiration of all periods
for appeal of such judgment) or other final nonappealable order, Indemnitor
shall pay the amount of such Indemnification Claim by check or wire transfer
within seven (7) Business Days of the date the Indemnitor is notified in writing
of such amount.
(f) Upon payment of any amount pursuant to any claim for
indemnification hereunder, Indemnitor shall be subrogated, to the extent of such
payment, to all of Indemnitee's rights of recovery against any third party with
respect to the matters to which such claim relates.
12.5 Defense of Third Party Claims.
Should any claim be made, or suit or proceeding (including, without
limitation, a binding arbitration or an audit by any taxing authority) be
instituted against Indemnitee which, if prosecuted successfully, would be a
matter for which Indemnitee is entitled to indemnification under this Agreement
(a "Third Party Claim"), the obligations and liabilities of the parties
hereunder with respect to such Third Party Claim shall be subject to the
following terms and conditions:
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(a) Indemnitee shall give Indemnitor written notice of any
such claim promptly after receipt by Indemnitee of notice thereof, and
Indemnitor will undertake control of the defense thereof by counsel of its own
choosing reasonably acceptable to Indemnitee. Indemnitee may participate in the
defense through its own counsel at its own expense. The assumption of the
defense of any Third Party Claim by Indemnitor shall not be an acknowledgment by
Indemnitor that such Third Party Claim is subject to indemnification under the
provisions of this Article XII and that such provisions are binding on
Indemnitor. If, however, Indemnitor fails or refuses to undertake the defense of
such Third Party Claim within seven (7) Business Days after written notice of
such claim has been delivered to Indemnitor by Indemnitee, Indemnitee shall have
the right to undertake the defense, compromise and, subject to Section 12.6,
settlement of such Third Party Claim with counsel of its own choosing. Failure
of Indemnitee to furnish written notice to Indemnitor of a Third Party Claim
shall not release Indemnitor from Indemnitor's obligations hereunder, except to
the extent Indemnitor is prejudiced by such failure.
(b) Indemnitee and Indemnitor shall cooperate with each
other in all reasonable respects in connection with the defense of any Third
Party Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
12.6 Settlement of Third Party Claims.
Unless Indemnitor has failed to fulfill its obligations under this Article
XII, no settlement by Indemnitee of a Third Party Claim shall be made without
the prior written consent by or on behalf of Indemnitor, which consent shall not
be unreasonably withheld or delayed. If Indemnitor has assumed the defense of a
Third Party Claim as contemplated by Section 12.5, no settlement of such Third
Party Claim may be made by Indemnitor without the prior written consent by or on
behalf of Indemnitee which consent shall not be unreasonably withheld or
delayed. In the event of any dispute regarding the reasonableness of a proposed
settlement, the party that will bear the larger financial loss resulting from
such settlement shall make the final determination in respect thereto, which
determination shall be final and binding on all involved parties.
ARTICLE XIII.
GENERAL
13.1 Governing Law.
It is the intention of the parties hereto that the internal laws of the State
of California (irrespective of its choice of law principles) shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
13.2 Bulk Sales.
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Purchaser hereby waives compliance with any applicable bulk sales law,
provided that Seller warrants and agrees to pay and discharge when due all
claims of creditors which could be asserted against Purchaser by reason of such
noncompliance, excluding claims for payment of Assumed Liabilities.
13.3 Assignment; Binding upon Successors and Assigns.
Neither of the parties hereto may assign any of its rights or obligations
hereunder (whether by operation of law or otherwise) without the prior written
consent of the other party; provided, however, that Purchaser may assign its
rights under this Agreement (i) to any majority-owned subsidiary of Purchaser,
provided that Purchaser guarantees the obligations of such subsidiary hereunder,
or (ii) to any successor of Purchaser through any merger or consolidation, or
purchase of all or substantially all of Purchaser's stock or all or
substantially all of Purchaser's assets. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
13.4 Severability.
If any provision of this Agreement, or the application thereof, becomes or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
shall be interpreted so as best to reasonably effect the intent of the parties
hereto. The parties further agree to replace such illegal, void or unenforceable
provision of this Agreement with a valid and enforceable provision which will
achieve, to the extent possible, the economic, business and other purposes of
the illegal, void or unenforceable provision.
13.5 Entire Agreement.
This Agreement, the Schedules hereto, the Confidentiality Agreement, the
Ancillary Agreements, the documents and instruments and other agreements among
the parties hereto referenced herein and therein, and the exhibits thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto.
13.6 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall constitute an original and all of which together shall constitute one and
the same instrument.
13.7 Expenses.
(a) The parties shall each pay their own legal, accounting
and financial advisory fees and other out-of-pocket expenses incurred incident
to the negotiation,
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preparation and carrying out of this Agreement and the transactions herein
contemplated, whether or not the transactions contemplated hereby are
consummated.
(b) Each party shall indemnify the other against, and
agrees to hold the other harmless from, all liabilities and expenses (including
reasonable attorneys' fees) in connection with any claim by any person for
compensation as a broker, finder or in any similar capacity, by reason of
services allegedly rendered to the indemnifying party in connection with the
transactions contemplated hereby.
13.8 Other Remedies.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party shall be deemed cumulative with and not exclusive of any
other remedy conferred hereby or by law on such party, and the exercise of any
one remedy shall not preclude the exercise of any other.
13.9 Amendment.
Any term or provision of this Agreement may be amended by a written
instrument signed by Purchaser and Seller.
13.10 Waiver.
Each party hereto may, by written notice to the other party: (i) waive any of
the conditions to its obligations hereunder or extend the time for the
performance of any of the obligations or actions of the other; (ii) waive any
inaccuracies in the representations of the other contained in this Agreement or
in any documents delivered pursuant to this Agreement; (iii) waive compliance
with any of the covenants of the other contained in this Agreement; or (iv)
waive or modify performance of any of the obligations of the other. Except as
specifically contemplated by this Agreement, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, condition or agreement contained
herein. Waiver of the breach of any one or more provisions of this Agreement
shall not be deemed or construed to be a waiver of other breaches or subsequent
breaches of the same provisions.
13.11 Notices.
All notices and other communications hereunder will be in writing and will be
deemed given (i) upon receipt if delivered personally (or if mailed by
registered or certified mail), (ii) the next Business Day after dispatch if sent
by overnight delivery service, (iii) upon dispatch if transmitted by facsimile
(and confirmed by a copy delivered in accordance with clause (i) or (ii)),
properly addressed to the parties at the following addresses:
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Seller or Stockholder:Data Transit, Inc.
c/o Dale Smith
612 Mindy Way
San Jose, California 95123
Facsimile No.: (408) 227-2599
with a copy to: Parsons, Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
Attention: George M. Flint III, Esq.
Facsimile No.: (801) 536-6111
Purchaser: Finisar Corporation.
1308 Moffett Park Drive
Sunnyvale, California 94089
Attention: Gabe Kralik, General Counsel
Facsimile No.: (408) 542-3885
with a copy to: Thompson & Knight LLP
333 Clay Street, Suite 3300
Houston, Texas 77002
Attention: Wilburn O. McDonald, Jr., Esq.
Facsimile No.: (713) 654-1871
Either party may change its address for such communications by giving
notice thereof to the other party in conformity with this Section.
13.12 Construction and Interpretation of Agreement.
(a) As used in this Agreement, all terms used in the
singular will be deemed to include the plural, and vice versa, as the context
may require. The words "hereof", "herein", and "hereunder" refer to this
Agreement as a whole, including the attached exhibit(s), as the same may from
time to time be amended or supplemented, and not to any subdivision in this
Agreement. When used in this Agreement, "including" means "including, without
limitation" and "discretion" means sole discretion. Unless otherwise expressly
stated, when a party's approval or consent is required under this Agreement,
such party may grant or withhold its approval or consent in its discretion.
References to "Section" or "Exhibit" will be to the applicable section or
exhibit of this Agreement. Descriptive headings are inserted for convenience
only and will not be utilized in interpreting the Agreement.
(b) This Agreement has been negotiated by the parties and
reviewed by their respective counsel and will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
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(c) Any reference to a "Material Adverse Effect" when used
in reference to (i) Seller or Purchaser, means any change, event, violation,
inaccuracy, circumstance or effect (regardless of whether such events or changes
are inconsistent with the representations or warranties made by such person in
this Agreement) that is or is reasonably likely to be, individually or in the
aggregate, materially adverse to the condition (financial or otherwise),
business, properties, assets (including intangible assets), employees,
operations or results of operations of Seller or Purchaser, as the case may be,
taken as a whole, and (ii) the Purchased Assets or the Business, means a
material diminution in the value, condition, status or ability to use the
Purchased Assets or Business.
13.13 No Rights of Set Off.
Purchaser waives and relinquishes any and all rights to set off or to apply
any monies held or indebtedness or other obligations now or hereafter owing by
Purchaser to Seller, Stockholder or any of their Affiliates against any
obligations of Seller, Stockholder or any of their Affiliates now or hereafter
existing under this Agreement or any Ancillary Agreement.
13.14 No Joint Venture.
Nothing contained in this Agreement shall be deemed or construed as creating
a joint venture or partnership between any of the parties hereto. No party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party shall have the power to control the
activities and operations of any other and their status is, and at all times,
will continue to be, that of independent contractors with respect to each other.
No party shall have any power or authority to bind or commit any other. No party
shall hold itself out as having any authority or relationship in contravention
of this Section.
13.15 Absence of Third Party Beneficiary Rights.
No provisions of this Agreement are intended, nor shall be interpreted, to
provide or create any third party beneficiary rights or any other rights of any
kind in any client, customer, affiliate, stockholder, partner of any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof shall be personal
solely between the parties to this Agreement.
13.16 DISPUTE RESOLUTION.
This Agreement shall be construed, governed by, and enforced, in accordance
with the laws of the State of California, without regard to conflicts of law
principles. Except for disputes arising under Section 10.3 of this Agreement,
all disputes or controversies arising out of or in connection with this
Agreement, its interpretation, performance, or termination, shall be submitted
initially to informal dispute resolution, in which case one representative from
each party will meet at a neutral location in San Francisco, California within
thirty (30) days of the commencement of the conflict in order to attempt in good
faith to resolve the dispute. In the event that the parties are unable to
resolve such dispute
77
within thirty (30) days following the first meeting of the parties, then the
dispute shall be submitted to non-binding mediation conducted by Action Dispute
Resolution Services located at 450 Sansome Street, Suite 1100 San Francisco, CA
94111-3319, (415) 772-0900. The parties shall share equally the costs of
mediation. Except for disputes arising under Section 10.3 hereof, if the parties
are unable to resolve the dispute, either informally or by non-binding
mediation, the parties shall submit the dispute to binding arbitration in Santa
Clara County, California under the Commercial Rules of the American Arbitration
Association. The parties shall be entitled to conduct discovery proceedings in
accordance with the Commercial Rules of the American Arbitration Association.
The costs of the arbitration, including administrative and arbitrators' fees,
shall be shared equally by the parties. Each party shall bear its own costs and
attorneys' and witnesses' fees. The arbitration award shall be final and each
party shall comply in good faith and submit itself to the jurisdiction of the
appropriate state or federal courts in Santa Clara County, California for the
sole purpose of the entry of such arbitrator's award to render effective such
arbitration decision. Notwithstanding the foregoing, judgment on the award by
the arbitrator may be entered in any court having jurisdiction. If judicial
enforcement or review of the arbitrator's decision is sought, the prevailing
party shall be entitled to costs and reasonable attorneys' fees.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
FINISAR CORPORATION
By: /s/ JERRY RAWLS
Title: CEO
DATA TRANSIT CORP.
By: /s/ DALE SMITH
Title: CEO/CTO
STOCKHOLDER
/s/ DALE SMITH
Dale T. Smith
/s/ JANIS H. SMITH
Janis H. Smith
79
EXHIBIT A
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES COMMISSION OF
ANY STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IN EFFECT WITH
RESPECT TO THE NOTE OR AN OPINION OF COUNSEL SATISFACTORY TO FINISAR CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED AS A RESULT OF AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
ADDITIONALLY, THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
TERMS AND CONDITIONS SET FORTH IN THE NOTE.
AUGUST 6, 2004 $16,270,000.00
FINISAR CORPORATION
8% INSTALLMENT NOTE DUE AUGUST 5, 2006
This 8% Installment Note (this "NOTE") is issued by Finisar
Corporation, a Delaware corporation (the "COMPANY") to Data Transit Corp.
("SELLER" and the initial "HOLDER"), pursuant to Section 3.3 of that certain
Asset Purchase Agreement, dated as of August 4, 2004, among the Company, Seller
and the other parties identified therein (the "PURCHASE AGREEMENT"). This Note
evidences a portion of the consideration owed to the Holder in connection with
the transaction evidenced by the Purchase Agreement.
FOR VALUE RECEIVED, the Company promises to pay to the Holder the
principal sum of Sixteen Million Two Hundred Seventy Thousand and no/100 Dollars
($16,270,000.00), on August 5, 2006 (the "MATURITY DATE"), or such earlier date
as this Note is required or permitted to be repaid as provided hereunder, and to
pay interest to the Holder on the Principal Amount in accordance with the
provisions hereof. The Principal Amount may be decreased as set forth in Section
2(a) below. This Note is subject to the following additional provisions.
1. Definitions. In addition to the terms defined elsewhere in this Note
(which are listed below with a cross reference to the section where the term is
defined), (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement, and (b) the following
terms have the meanings indicated:
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company thereof; (b) there is commenced
against the Company any such case or proceeding that is not dismissed
within 60 days after commencement; (c) the Company is adjudicated by a
court of competent jurisdiction insolvent or bankrupt or any order of
relief or other order approving any such case or proceeding is entered;
(d) the Company suffers any appointment of any custodian or the like
for it or any substantial part of its property that is not discharged
or stayed within 60 days; (e) under applicable bankruptcy law the
Company makes a general assignment for the benefit of creditors; (f)
the Company fails to pay, or states that it is unable to pay or is
unable to pay, its debts generally as they become due; (g) the Company
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (h) the
Company, by any act or failure to act, expressly indicates its consent
to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
1
"CLOSING PRICE" means, for any date, the price as reported by
Bloomberg L.P. determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on an
Eligible Market or any other national securities exchange, the closing
bid price per share of the Common Stock for such date (or the nearest
preceding date) on the primary Eligible Market or exchange on which the
Common Stock is then listed or quoted; (b) if prices for the Common
Stock are then quoted on the OTC Bulletin Board, the closing bid price
per share of the Common Stock for such date (or the nearest preceding
date) so quoted; (c) if prices for the Common Stock are then reported
in the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by Seller.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $0.001
par value per share, and any securities into which such common stock
may hereafter be reclassified.
"CONVERSION AND INTEREST PAYMENT AMOUNT" means, on any
Conversion Date, a dollar amount equal to the product of (a) the
Conversion Price then in effect, times (b) the Conversion Share Amount.
"CONVERSION DATE" means the First Conversion Date and each
second following Monday during the Term; provided however, if such
Monday is not a Trading Day, then the applicable Conversion Date shall
be the next Trading Day.
"CONVERSION NOTICE" means a written notice in the form
attached hereto as Exhibit A.
"CONVERSION PRICE" means, on each Conversion Date, the average
Closing Price for the three Trading Days preceding that Conversion
Date.
"CONVERSION SHARE AMOUNT" means, on each Conversion Date, a
number of Underlying Shares equal to 10% of the applicable Reference
Period Volume.
"EARN-OUT ADJUSTMENT AMOUNT" shall mean the product of (i) the
difference between 100% and the aggregate of the percentages set forth
on Schedule I attributable to the goals achieved (to the extent such
goals shall have been achieved) in accordance therewith, multiplied by
(ii) Three Million One Hundred Eighty-Eight Thousand Three Hundred
Seventy-Five and no/100 Dollars ($3,188,375).
"EARN-OUT ADJUSTMENT DATE" means the fifth Trading Day
following the delivery of the Earn-out Report unless the Seller shall
have notified the Company that it does not agree with such report in
which case such date shall be the fifth Trading Day following the date
on which the Seller and the Company shall have reached a mutual
agreement concerning the Earn-out Report or the Earn-Out Report shall
have become final by operation of Section 13.16 of the Purchase
Agreement.
"EARN-OUT MEASUREMENT PERIOD" shall mean the six (6) - month
period of time beginning on the first day of the month immediately
following the closing of the transactions contemplated by the Purchase
Agreement.
"EARN-OUT REPORT" shall mean the report prepared by the
Company reflecting in reasonable detail the extent to which the goals
described on Schedule I shall have been attained at the end of the
Earn-out Measurement Period.
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market, the Nasdaq
Small Cap Market or the OTC Bulletin Board.
2
"EQUITY CONDITIONS" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved Underlying Shares is sufficient for such issuance; (ii) the
Underlying Shares are listed or quoted (and are not suspended from
trading) on an Eligible Market and the Underlying Shares are approved
for listing on such Eligible Market upon issuance; (iii) such issuance
would be permitted in full without violating the rules or regulations
of the Eligible Market on which the Underlying Shares are listed or
quoted; (iv) no Event of Default nor any event that with the passage of
time and without being cured would constitute a Event of Default has
occurred and not been cured; (v) the firm engaged by Holder to resell
the Underlying Shares acquired by it hereunder can effect a sale of
Converted Shares without violation of any legal, regulatory or
contractual restrictions applicable to it or to Seller (including
without limitation, Regulation M); (vi) either (A) if the Converted
Shares are being sold pursuant to a registration statement, such
registration shall have been declared effective and it shall have not
expired or been terminated, suspended or otherwise become unavailable
with respect to sales of Converted Shares and the Company shall not
have exercised its "Suspension Right" (as defined in the Purchase
Agreement) with respect thereto or (B) if the Converted Shares are
being sold pursuant to Rule 144, the Rule 144 Condition shall at that
time be satisfied; and (vii) the Conversion Price is greater than or
equal to the Floor Price.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
9.
"FIRST CONVERSION DATE" means the first Monday that is at
least four (4) Trading Days subsequent to the Initial Conversion Event;
provided however, if such Monday is not a Trading Day, then the First
Conversion Date shall be the next Trading Day.
"FLOOR PRICE" means $.50 per share of Common Stock.
"INITIAL CONVERSION EVENT" means the sooner to occur of (i)
the date that a registration statement with respect to the Underlying
Shares shall have been declared effective by the Commission and (ii)
the Rule 144 Sale Date.
"ORIGINAL ISSUE DATE" means the date of the first issuance of
this Note.
"PRINCIPAL AMOUNT" means on any day the then remaining
outstanding, unpaid and unconverted principal amount of this Note.
"REFERENCE PERIOD" means for each Conversion Date the 14-day
period ending on the Sunday immediately preceding that Conversion Date;
each Reference Period shall begin on a Monday and end on a Sunday. In
determining the Reference Period for a Conversion Date, the proviso
contained in the definition of the terms "Conversion Date" and "First
Conversion Date" shall be disregarded.
"REFERENCE PERIOD VOLUME" means the total trading volume for
shares of Common Stock on the Nasdaq National Market or any other
Eligible Market during any Reference Period as reported by Bloomberg
L.P., or any successor performing similar functions.
"RULE 144" means Rule 144 promulgated by the Commission under
the Securities Act as in effect from time to time.
"RULE 144 CONDITION" means that the Holder may at that time
actually sell Underlying Shares pursuant to Rule 144; provided,
however, that if at any time the Holder may not sell Underlying Shares
pursuant to Rule 144 due to the volume or any other restrictions
thereunder then the Rule 144 Condition shall be deemed not to be
satisfied until such time as such restrictions or limitations have been
satisfied.
"RULE 144 SALE DATE" means the first date on which the Company
shall have received an opinion, which opinion and which counsel shall
be reasonably acceptable to the Holder and the
3
Company, to the effect that the Holder may sell Underlying Shares
pursuant to and in compliance with Rule 144; provided, however, that in
no event shall the Rule 144 Sale Date be a day that is earlier than one
day after the first anniversary of the Closing Date.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TERM" means the period of time beginning on the date hereof
and continuing thereafter while the Principal Amount and any interest
accrued thereon remains unpaid in whole or in part.
"TRADING DAY" means (a) any day on which the Common Stock is
listed or quoted and traded on any Eligible Market, or (b) if the
Common Stock is not then listed or quoted and traded on any Eligible
Market, then a day on which trading occurs on the Nasdaq National
Market (or any successor thereto).
"TRANSFER" means, with respect to this Note, a sale,
assignment, transfer or exchange of, the grant of a mortgage, pledge,
security interest or other encumbrance on or with respect to, or any
other disposition hereof (including, without limitation, by operation
of law).
"TRANSFER AGENT" means American Stock Transfer and Trust
Company or any successor thereto.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of the Principal Amount and in payment of accrued and
unpaid interest.
Other Defined Terms Section Where Defined
- ------------------- ------------------------
Alternate Consideration Section 12(b)
Company Opening Paragraph
Conversion Schedule Section 6(d)
Converted Shares Section 7(a)
Event of Default Section 9(a)
Event Notice Section 9(b)
Event Price Section 9(b)
Fundamental Transaction Section 12(b)
Holder Opening Paragraph
Maturity Date Second Opening Paragraph
New Note Section 5(b)
Note Opening Paragraph
Note Register Section 4
Notice of Deferral Section 6(b)
Notice of Optional Conversion Section 6(c)
Permitted Transfer Section 5(a)
4
Prepayment Notice Section 8
Prepayment Notice Date Section 8
Purchase Agreement Opening Paragraph
Seller Opening Paragraph
2. Principal Amount; Adjustment.
(a) The Principal Amount shall be reduced on the Earn-out
Adjustment Date by an amount equal to the Earn-out Adjustment Amount
unless the Earn-out Adjustment Amount is equal to $0 in which case
there shall be no such reduction.
(b) The Company hereby waives and relinquishes any and all
rights to set off any amount due or payable by it hereunder against any
obligations of the Seller or any of its Affiliates now or hereafter
existing or arising under the Purchase Agreement, any Ancillary
Agreement or otherwise.
(c) The Principal Amount shall be due and payable in cash on
the Maturity Date.
3. Interest.
(a) The Company shall pay interest to the Holder on the
Principal Amount at the rate of 8% per annum, payable in Common Stock
on Conversion Dates as the Principal Amount is converted as provided in
Sections 6 and 7. Between the Original Issue Date and the Earn-out
Adjustment Date, no interest shall accrue on the portion of the
Principal Amount equal to Three Million One Hundred Eighty-Eight
Thousand Three Hundred Seventy-Five and no/100 Dollars ($3,188,375).
(b) Interest shall be calculated on the basis of a 365-day
year and shall accrue daily commencing on the Original Issue Date.
Interest paid in Underlying Shares shall be rounded up to the nearest
whole share and otherwise paid as provided in Sections 6 and 7.
(c) Notwithstanding the foregoing, the Company may not pay the
interest in Common Stock unless, at such time, the Equity Conditions
are satisfied with respect to such Common Stock.
4. Note Register. The Company shall register this Note upon records to
be maintained by the Company for that purpose (the "NOTE REGISTER") in the name
of each record holder thereof from time to time. The Company may deem and treat
the registered Holder of this Note as the absolute owner hereof for the purpose
of any conversion hereof or any payment of interest hereon, and for all other
purposes, absent actual notice to the contrary.
5. Registration of Permitted Transfers and Exchanges.
(a) No Holder shall Transfer all or any portion of this Note
without the prior written consent of the Company (which consent may be
withheld at the discretion of the Company), except (i) a Transfer to a
spouse, children (natural or adopted), stepchildren, grandchildren or
descendants or a trust for the benefit of any of them, or an entity or
foundation owned by a Holder, a spouse, children (natural or adopted),
stepchildren, grandchildren or descendants; or (ii) a Transfer by any
Holder to an Affiliate of such Holder (any such Transfer, a "PERMITTED
TRANSFER").
5
(b) The Company shall register the Permitted Transfer of any
portion of this Note in the Note Register upon surrender of this Note
to the Company at its address for notice set forth herein. Upon any
such Permitted Transfer, a new note, in substantially the form of this
Note (any such new note, a "NEW NOTE"), evidencing the portion of this
Note so transferred shall be issued to the transferee (each, a
"Holder") and a New Note evidencing the remaining portion of this Note
not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Note by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and
obligations of a holder of a Note. No service charge or other fee will
be imposed in connection with any such registration of Permitted
Transfer.
(c) Each New Note shall have the following legend affixed:
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES COMMISSION
OF ANY STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT. THIS NOTE MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT IN EFFECT WITH
RESPECT TO THE NOTE OR AN OPINION OF COUNSEL SATISFACTORY TO
FINISAR CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED AS
A RESULT OF AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. ADDITIONALLY, THIS NOTE IS SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET
FORTH IN THE NOTE.
6. Conversion of the Principal Amount and Payment of Interest in
Underlying Shares.
(a) Mandatory Conversion of Principal Amount and Payment of
Interest. Subject to limitations set forth in this Section 6 and in
accordance with the procedures set forth in Section 7, following the
Initial Conversion Event, this Note shall be payable and convertible on
the Conversion Dates in installments of Underlying Shares, each of
which shall equal the Conversion and Interest Payment Amount. The
Conversion and Interest Payment Amount on each Conversion Date will be
applied first to payment of accrued and unpaid interest and then to
conversion of the Principal Amount. Subject to the limitations
expressed in the first sentence of this subsection 6(a), the Conversion
and Interest Payment Amount shall automatically convert into and be
payable with Underlying Shares on each Conversion Date (in each case
based on the Conversion Share Amount and Conversion Price applicable to
such Conversion Date). The Principal Amount shall not convert into
Underlying Shares, and interest shall not be paid in the form of
Underlying Shares, except in each case as provided in this Section 6.
(b) Deferred Conversion. Upon delivery by the Holder or the
Holder's agent of a Notice of Deferral to the Company in the form of
Exhibit B attached hereto (a "NOTICE OF DEFERRAL") at least two Trading
Days before a Conversion Date by virtue of delivery of an Extension
Notice under the Plan, there shall be no conversion under subsection
6(a) on the next Conversion Date and there shall be no further
conversions under subsection 6(a) until the next following Conversion
Date; provided that a Notice of Deferral shall not be effective if
there was no conversion pursuant to subsection 6(a) on either of the
two then most recent preceding Conversion Dates by virtue of a Notice
of Deferral; except that this limitation shall not apply to a Notice of
Deferral attributable solely to an Extension of a Selling Period
pursuant to the provisions of Section 2 of the Plan, which Notice of
Deferral shall be effective irrespective of (i) whether or not a
conversion occurred on either of such preceding Conversion Dates and
(ii) the date on which
6
such Notice of Deferral was delivered during the Reference Period for
that Conversion Date. The term "Plan" is defined the Stock Resale
Agreement. The terms "Extension" and "Selling Period" are defined in
the form of Plan attached to the Stock Resale Agreement. For example,
subject to the foregoing provisos, if September 20, 2004 were a
Conversion Date, then, if a Notice of Deferral were delivered prior to
the close of business on September 15, 2004, (i) the next Conversion
Date would be October 4, 2004 and not September 20, 2004 and (ii) the
Reference Period with respect to such Conversion Date would begin on
September 20, 2004 and end on October 3, 2004.
(c) Conversion Schedule. On each Conversion Date, the Company
shall deliver a Conversion Notice to the Holder and the Transfer Agent,
instructing the Transfer Agent to issue the Converted Shares to the
Holder at the address specified in writing by the Holder to the Company
from time to time together with a schedule in the form of Schedule II
attached hereto (the "CONVERSION SCHEDULE").
(d) Conversion Restrictions.
(i) Notwithstanding anything to the contrary
contained herein, this Note shall not be convertible to the
extent that such conversion or exercise would result in the
Holder owning more than 4.99% of the outstanding shares of the
Common Stock of the Issuer at the date of conversion, other
than in connection with a Fundamental Transaction as
contemplated in Section 12(b).
(ii) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that
may be acquired by the Holder upon any conversion of, or
payment of interest on, this Note (or otherwise in respect
hereof) shall be limited to the extent necessary to insure
that the voting power represented by the Underlying Shares
into which this Note may be converted or with which interest
may be paid (together with all Underlying Shares into which
this Note shall theretofore have been converted and with which
interest shall theretofore have been paid) will not exceed
19.9% of the voting power represented by all of the issued and
outstanding shares of Common Stock of the Company before such
conversion.
(iii) Notwithstanding anything contained in this
Section 6 to the contrary, from and after such time as the
Principal Amount shall have been reduced to $3,188,375 there
shall be no further conversions or interest payments until
such time as the Earn-out Adjustment Amount shall have been
calculated at which time conversions and interest payments
shall resume based on the Principal Amount of this Note as
established hereunder.
(iv) If a conversion or payment of interest hereunder
may not be effected in full due to the application of this
Section 6(d), the Company shall honor and effect such
conversion and interest payment to the extent permissible
hereunder and shall promptly deliver to the Holder a
Conversion Schedule indicating the Principal Amount which has
not been converted.
(e) Equity Conditions. Notwithstanding anything contained in
this Section 6 to the contrary, if the Equity Conditions are not
satisfied on any Conversion Date, then there shall be no conversion or
interest payment on such date and the next Conversion Date on which a
conversion under subsection 6(a) occurs shall be no earlier than five
trading days after the date on which the Equity Conditions are next
satisfied; provided that, if the Floor Price shall exceed the
Conversion Price on two consecutive Conversion Dates during the Term,
item (vii) of the Equity Conditions shall thereafter not be considered
in determining whether the Equity Conditions shall have been satisfied.
(f) Option to pay in Cash. Notwithstanding anything contained
in this Section 6 to the contrary, the Company may pay cash in lieu of
issuing Underlying Shares on conversion of the
7
Principal Amount or payment of accrued interest thereon on any
Conversion Date without advance notice, so long as such cash payment is
greater than or equal to the applicable Conversion and Interest Payment
Amount.
7. Mechanics of Conversion.
(a) The number of Underlying Shares issuable on each
Conversion Date as provided in Section 6 shall equal the Conversion and
Interest Payment Amount, divided by the Conversion Price on that
Conversion Date (for each conversion, the "CONVERTED SHARES").
(b) Upon each conversion of this Note, the Company shall
promptly (but in no event later than the second Trading Day following
each Conversion Notice) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder a certificate
representing the Converted Shares issuable upon such conversion,
bearing the following legend, if applicable:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO FINISAR
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT.
(c) Notwithstanding subsection (b) above, the Company shall
cause its legal counsel to consult with the Company's transfer agent
with a view to causing the certificates representing Converted Shares
to be issued without restrictive legends in accordance with applicable
laws and regulations. The Holder agrees, at the Company's expense, to
cooperate with the Company in this regard and to execute certificates,
questionnaires and any other documents reasonably requested by the
Company's legal counsel for such purpose.
(d) The Holder shall be deemed to have become holder of record
of such Converted Shares as of the Conversion Date.
(e) The Holder shall not deliver the original Note upon a
conversion hereunder, except upon the final conversion resulting in
payment of the Principal Amount and accrued interest in full, at which
time Holder shall deliver this Note marked "Cancelled -- Paid in Full."
Rather, execution and delivery of the Conversion Notice shall have the
same effect as a prepayment of a portion of the Principal Amount to the
extent converted by the issuance of Conversion and Interest Payment
Amounts as provided in Section 6.
8. Prepayments. At any time following the Original Issue Date and prior
to the Maturity Date, upon delivery of a written notice to the Holder (a
"PREPAYMENT NOTICE" and the date such notice is delivered by the Company, the
"PREPAYMENT NOTICE DATE"), the Company shall be entitled to prepay in cash all
or any part of the Principal Amount (together with the accrued and unpaid
interest in the portion so prepaid). Once delivered, the Company shall not be
entitled to rescind a Prepayment Notice. The prepayment shall be due on the 5th
Trading Day immediately following the Prepayment Notice Date.
9. Events of Default.
(a) "EVENT OF DEFAULT" means any default by the Company in the
payment or conversion (free of any claim of subordination) of the
Principal Amount or interest thereon, as and when the same becomes due
and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or prepayment or otherwise).
(b) At any time or times following the occurrence of an Event
of Default, the Holder shall have the option to elect, by notice to the
Company (an "EVENT NOTICE"), to require the Company to
8
repurchase all or any portion of the Principal Amount, at a repurchase
price equal to the balance thereof, plus all accrued but unpaid
interest thereon, through the date of payment. The aggregate amount
payable pursuant to the preceding sentence is referred to as the "EVENT
PRICE." The Company shall pay the aggregate Event Price to the Holder
no later than the third Trading Day following the date of delivery of
the Event Notice, and upon receipt thereof the Holder shall deliver the
original Note.
(c) Upon the occurrence of any Bankruptcy Event, all of the
Principal Amount and accrued but unpaid interest thereon shall
immediately become due and payable in full in cash, without any further
action by the Holder, and the Company shall immediately be obligated to
repurchase this Note at the Event Price pursuant to the preceding
paragraph as if the Holder had delivered an Event Notice immediately
prior to the occurrence of such Bankruptcy Event.
(d) In connection with any Event of Default, the Holder need
not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to it
under applicable law. Any such declaration may be rescinded and
annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereto.
10. Charges, Taxes and Expenses. Issuance of certificates for Converted
Shares shall be made without charge to the Holder for any issue or transfer tax,
withholding tax, transfer agent fee or other incidental tax or expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificates for Converted Shares or this Note in a
name other than that of the Holder. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Note or receiving Converted Shares in respect hereof (including receiving the
Converted Shares in full or partial payment of the purchase price under the
Purchase Agreement).
11. Reservation of Underlying Shares. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Underlying Shares as required hereunder, the
number of Underlying Shares which are then issuable and deliverable upon the
conversion of (and otherwise in respect of) this entire Note (taking into
account the adjustments contemplated by Section 12), free from preemptive rights
or any other contingent purchase rights of persons other than the Holder. The
Company covenants that all Underlying Shares so issuable and deliverable shall,
upon issuance in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable. The Company covenants that,
once the Registration Statement becomes effective, it shall keep the
Registration Statement effective as agreed in the Purchase Agreement.
12. Certain Adjustments. Certain provisions of this Note are subject to
adjustment from time to time as set forth in this Section 12.
(a) Stock Dividends and Splits. If the Company, (i) pays or
declares a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of
Common Stock, (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case an
equitable adjustment shall be made such that (A) the Floor Price shall
be proportionately adjusted to reflect such event, (B) the Conversion
Share Amount, if such event shall occur during a Reference Period,
shall be proportionately adjusted to reflect such event and (C) the
Conversion Price shall be proportionately and equitably adjusted if,
and only if, the effective date for such event is Conversion Date or
one of the three Trading Days to be used for the determination of the
Conversion Price. Any adjustment made pursuant to this paragraph shall
become effective immediately after the agreed determination of the
Company and the Holder.
9
(b) Fundamental Transactions. If, at any time while this Note
is outstanding, (i) the Company effects any merger or consolidation of
the Company with or into another Person, (ii) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (iii) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, (iv) the Company shall,
by dividend or otherwise, distribute to all holders of its Common Stock
shares of any class of capital stock of the Company (other than any
dividends, distributions and other transactions to which Section 12(a)
applies and ordinary dividends and distributions paid exclusively in
cash) or evidences of its indebtedness or other assets, including
securities, or (v) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 12(a)
above) (in any such case, a "FUNDAMENTAL TRANSACTION"), then upon any
subsequent conversion of this Note, the Holder shall have the right to
receive, for each Underlying Share that would have been issuable upon
such conversion absent such Fundamental Transaction, the same kind and
amount of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder
of one share of Common Stock (the "ALTERNATE CONSIDERATION"). For
purposes of any such conversion, the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any conversion of
this Note following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction must issue
to the Holder a new note consistent with the foregoing provisions and
evidencing the Holder's right to convert such note into Alternate
Consideration and deliver an undertaking pursuant to which it will
assume the obligation to comply with the provisions of Sections 8.3,
8.4 and 8.9 and Article XIII of the Purchase Agreement with respect to
such Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms (i)
requiring any such successor or surviving entity to comply with the
provisions of this paragraph (b), (ii) providing that the issuance
price of such Alternate Consideration shall at the time of issuance be
based on the principles upon which the Underlying Shares are priced
hereunder and (iii) insuring that this Note (or any such replacement
security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. Notwithstanding the foregoing,
if the Alternate Consideration is cash or is not freely saleable by
Holder without restriction under the Securities Act then upon the
consummation of such transaction the Holder may elect to convert the
Principal Amount and receive cash in connection with such Fundamental
Transaction or to have the then Principal Amount (together with all
accrued but unpaid interest thereon) paid to it in full in cash in
connection with such Fundamental Transaction.
(c) Calculations. All calculations under this Section 12 shall
be made to the nearest cent or the nearest 1/100th of a share, as
applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(d) Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 12, the Company at its expense will
promptly compute such adjustment in accordance with the terms hereof
and prepare a certificate describing in reasonable detail such
adjustment and the transactions giving rise thereto, including all
facts upon which such adjustment is based. Upon written request, the
Company will promptly deliver a copy of each such certificate to the
Holder.
10
(e) Notice of Corporate Events. If the Company (i) authorizes
or approves, enters into any agreement contemplating or solicits
stockholder approval for any transaction of the type described by the
last sentence of Section 12(b) or (ii) authorizes the voluntary
dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the
material terms and conditions of such transaction, at least 10 calendar
days prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the
practical opportunity to convert this Note prior to such time so as to
participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein
shall not affect the validity of the corporate action required to be
described in such notice.
13. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Underlying Shares on conversion of this Note. If
any fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon conversion of this Note, the number of Underlying
Shares to be issued will be rounded up to the nearest whole share.
14. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Conversion Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (Sunnyvale,
California time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (Sunnyvale, California time) on any Trading Day, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be:
(i) if to the Company, to 1308 Moffett Park Drive, Sunnyvale, California 94089,
facsimile: (408) 542-3885, attention Chief Financial Officer, or such other
address or facsimile number as the Company may provide to the Holder in
accordance with this Section or (ii) if to the Holder, to the address or
facsimile number appearing on the Company's stockholder records or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
15. Miscellaneous.
(a) This Note shall be binding on and inure to the benefit of
the Holder and the Company and their respective permitted successors
and assigns.
(b) Subject to Section 15(a), above, nothing in this Note
shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause
under this Note. This Note shall inure to the sole and exclusive
benefit of the Company and the Holder.
(c) GOVERNING LAW. THE CORPORATE LAWS OF THE STATE OF DELAWARE
SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW THEREOF.
(d) The headings herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.
(e) In case any one or more of the provisions of this Note
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Note shall
not in any way be affected or impaired thereby and the parties will
attempt in good faith to agree upon a valid and enforceable provision
which shall be a commercially
11
reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Note.
(f) No provision of this Note may be waived or amended except
in a written instrument signed, in the case of an amendment, by the
Company and the Holder or, in the case of a waiver, by the Holder. No
waiver of any default with respect to any provision, condition or
requirement of this Note shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay
or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right.
(g) In view of the factors involved in the transactions
contemplated by this Note, and in particular Sections 6 and 7, the
Holder would not have an adequate remedy at law for money damages in
the event that this Note has not been performed in accordance with its
terms. Holder therefore shall be entitled to specific enforcement of
the terms hereof in addition to any other remedy to which it may be
entitled, at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
12
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.
FINISAR CORPORATION
By: ____________________________
Name: Jerry S. Rawls
Title: President and Chief Executive Officer
13
EXHIBIT A
CONVERSION NOTICE
(To be delivered by the Company on each Conversion Date)
The undersigned hereby confirms that the Principal Amount indicated below
converts into shares of Common Stock of the Company, as of the date written
below. If shares are to be issued in the name of a Person other than the Holder
listed below, the Holder will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any. All terms
used in this notice shall have the meanings set forth in the Note.
Conversion calculations:
___________________________________________________
Conversion Date
___________________________________________________
Principal amount of Note owned prior to conversion
___________________________________________________
Principal amount of Note to be Converted
___________________________________________________
Principal amount of Note remaining after Conversion
___________________________________________________
Amount of Interest to be paid on Conversion Date
___________________________________________________
Number of Shares of Common Stock to be Issued
___________________________________________________
Applicable Conversion Price
FINISAR CORPORATION
By:________________________________________________
Name:
Title:
14
By accepting the delivery of this Conversion Notice the Holder represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the restrictions set forth in Section 6(d) of the Note.
15
EXHIBIT B
NOTICE OF DEFERRAL
(To be delivered by the Holder or the Holder's Agent)
The undersigned hereby elects to defer conversion of the 8% Installment Note due
August 5, 2006 (the "Note") pursuant to Section 6(b) thereof.
Date of Notice of Deferral: __________________
Deferred Conversion Date: __________________
If this Notice of Deferral is attributable solely to an Extension of a Selling
Period pursuant to the provisions of Section 2 of the Plan, the Holder or the
Holder's agent must attach a copy of the applicable Notice of Extension by the
Holder's nationally recognized securities brokerage firm as required under the
Plan. If such Notice of Extension is not attached, then this Notice of Deferral
shall be considered not attributable solely to an Extension of a Selling period
pursuant to the provisions of Section 2 of the Plan.
All terms used in this notice shall have the meanings set forth in the Note.
[Holder or Holder's Agent]
By:_____________________________________
Name:
Title:
16
SCHEDULE I
CALCULATION OF EARN-OUT ADJUSTMENT AMOUNT
This Schedule I determines the basis of the Earn-out Report concerning the
amount, if any, of the Earn-out Adjustment Amount.
One of the Company's objectives in the transactions contemplated by the Purchase
Agreement is to acquire a skilled and motivated workforce capable of developing
and marketing products. Another of the Company's objectives is the integration
of the acquired workforce into the Company's existing workforce, and to
effectively use the combined workforce in the Company's business operations.
Therefore the value of the acquisition will be measured in part by the Company's
attainment of these objectives by completing the goals described below.
The Company shall make commercially reasonable efforts to maximize attainment of
the goals as described in this Schedule I.
Except as otherwise provided in this Schedule I, capitalized terms used herein
shall have the meanings ascribed to them in the 8% Installment Note to which
this Schedule I is attached (the "Note") or the Purchase Agreement, as
applicable.
Within ten (10) Business Days following the expiration of the Earn-out
Measurement Period, the Company shall deliver to Seller the Earn-out Report
accompanied by the certification of the then most senior executive in charge of
the Company's Network Tools Division with respect to its accuracy. The Earn-out
Report shall set forth in reasonable detail a determination whether the goals
described in Items (a) through (d) of this Schedule I shall have been attained,
including sufficient supporting schedules and data, together with the resulting
Earn-out Adjustment Amount. The Company agrees to keep books and records in
sufficient detail to be able to accurately determine such matters. In the event
of a disagreement with respect to the adjustment of the Principal Amount of the
Note pursuant to Section 2(a) thereof, the provisions of Section 13.16 of the
Purchase Agreement shall apply. The Principal Amount shall be adjusted as
provided in Section 2 of the Note as follows:
(a) Engineering integration goals - Applicable to 16.66% of
the aggregate goals. The Earn-out Report shall set forth in reasonable detail
the basis for the determination whether the following goals have been attained
by the Company:
1) Prior to the end of the Earn-out Measurement
Period, a BusDoctor 108 Plus 3G SAS/SATA, BusDoctor
252 Plus 3G SAS/SATA, and PacketMaker 3G product
shall be manufactured by and shipped from the
Company.
2) Prior to the end of the Earn-out Measurement
Period, conduct a feasibility analysis for
PacketMaker(TM) utilizing the the Company's XGig
chassis. The feasibility analysis includes a report
detailing the obstacles and benefits.
3) Prior to the end of the Earn-out Measurement
Period, deliver a comprehensive detailed report
describing the Organization of all Seller Technology
Assets and Documentation describing Seller Technology
Assets in electronic form on Seller's computer
equipment.
4) Prior to the end of the Earn-out Measurement
Period, create a comprehensive Seller personnel
knowledge matrix concerning Seller Technology Assets.
If all of the four (4) above-listed engineering integration goals shall
have been attained at the end of the Earn-out Measurement Period,
16.66% of the aggregate goals shall be considered to have been
achieved. If one or more of the four (4) aforementioned goals shall not
have been attained,
17
then, for each goal not attained, the aforementioned 16.66%
attributable to the goals set forth in this Section (a) shall be
reduced by 25%.
(b) Manufacturing integration goals - Applicable to 16.67%
of the aggregate goals - the following are equally weighted goals. The Earn-out
Report shall set forth in reasonable detail the basis for the determination
whether the following goals have been attained by the Company:
1) Within the first 3 months following the beginning
of the Earn-out Measurement Period, (A) all Products
in the categories of BusDoctor 108 Plus 3G SAS/SATA,
BusDoctor 252 Plus 3G SAS/SATA, and PacketMaker 3G
products shall have been manufactured and tested by
the Company, using where possible, seller provided
inventory and sub-assemblies; and (B) all Seller
drawings and test procedures shall have been under
the Company ECO control.
2) Prior to the end of the Earn-out Measurement
Period, all Products being sold by the Company shall
have (A) all drawings and test procedures conforming
to the Company standards; all drawings and test
procedures under the Company ECO control; and (B) all
Bills of Materials and part numbers conforming to the
Company standards utilizing the Company part numbers
and Bills of Materials database.
If both of the above-listed manufacturing integration goals shall have
been attained at the end of the Earn-out Measurement Period, 16.67% of
the aggregate goals shall be considered to have been achieved. If one
or more of the two (2) aforementioned goals shall not have been
attained, then, for each goal not attained, the aforementioned 16.67%
attributable to the goals set forth in this Section (b) shall be
reduced by 50%.
(c) Employee retention goals - Applicable to 16.67% of the
aggregate goals -
"Category One Employees" shall mean Individual Key
Employees, as defined in Schedule 1.51 to the
Purchase Agreement.
"Category Two Employees" shall mean Group Key
Employees as defined in Schedule 1.51 to the Purchase
Agreement.
Should fewer than two Category One Employees resign
from the Company before the end of the Earn-out
Measurement Period AND should fewer than four
Category Two Employees resign before the end of
Earn-out Measurement Period, the percentage of the
16.67% of the Deferred Purchase Price payable
pursuant to this Subsection (c) shall be 100%.
Should fewer than three Category One Employees resign
before the end of Earn-out Measurement Period AND
should fewer than five Category Two Employees resign
before the end of Earn-out Measurement Period, the
percentage of the 16.67% of the Deferred Purchase
Price payable pursuant to this Subsection (c) shall
be 50%.
Should three or more Category One Employees resign
before the end of Earn-out Measurement Period OR
should five or more Category Two Employees resign
before the end of Earn-out Measurement Period, the
percentage of the 16.67% of the Deferred Purchase
Price payable pursuant to this Subsection (c) shall
be 0%.
The aggregate goals attained attributable to this Subsection (c) shall
equal the product of 16.67% multiplied by the applicable percentage
provided above, which shall depend on the results of employee retention
specified herein. If the applicable percentage is 100% due to the
actual employee retention, 16.67% of the aggregate goals shall be
considered to have been achieved.
18
(d) MBO goals - Applicable to 50% of the aggregate goals -
The Earn-out Report shall set forth in reasonable detail the basis for the
determination whether the following goal has been attained -
Prior to the end of the Earn-out Measurement Period, the acquired
workforce shall have performed the following equally weighted tasks:
1) Visit each Business manufacturer's representative
and distributor to effect orderly and efficient
transition;
2) Visit the location of the user of the Products at
each of the top 20 (in 2003 sales volume) Business
customers to effect orderly and efficient transition;
3) Comprehensive technical visit (at least three days
in duration) to Medusa Laboratories facility in
Austin, Texas, followed by a reasonably detailed
report recommending how Medusa Laboratories' services
and technologies might be more effectively used to
increase revenues of the Business;
4) Seven technical sales training sessions (each of
which will be at least two days in duration) for the
Company's sales force and key customers, three in
North America, two each in Asia and Europe; and
5) Comprehensive technical visit (at least five days
in duration) to the Company's software development
team in Brazil, followed by a reasonably detailed
report recommending how such team's services and
technologies might be more effectively used to
develop software in future Business products.
If all of the five (5) above-listed goals shall have been attained at
the end of the Earn-out Measurement Period, 50% of the aggregate goals
shall have achieved. If any of the five (5) aforementioned goals shall
not have been attained, then, for each goal not attained, the
aforementioned 50% attributable to the goals set forth in this Section
(d) shall be reduced by 20% (i.e. from 50% to 40%).
19
SCHEDULE II
CONVERSION SCHEDULE
8% Installment Note due August 5, 2006 in the original principal amount of
$16,270,000 issued by Finisar Corporation. This Conversion Schedule reflects
conversions made under the above referenced Note through the date hereof.
Dated: ___________
AGGREGATE PRINCIPAL
AMOUNT REMAINING
SUBSEQUENT TO
DATE OF CONVERSION AMOUNT OF CONVERSION CONVERSION APPLICABLE CONVERSION PRICE
- ------------------ -------------------- ------------------- ----------------------------
20
EXHIBIT I
STOCK RESALE AGREEMENT
STOCK RESALE AGREEMENT (the "Agreement") made as of this 6th day of
August, 2004, by and between Finisar Corporation, a Delaware corporation (the
"Company"), and Data Transit Corp. ("Stockholder").
WHEREAS, pursuant to an Asset Purchase Agreement dated as of August 4,
2004 (the "Asset Purchase Agreement") by and among the Company, Stockholder,
Dale T. Smith and Janis H. Smith, the Company is acquiring substantially all of
Stockholder's assets on the terms and subject to the conditions expressed in the
Asset Purchase Agreement (the "Purchase");
WHEREAS, as part of the consideration paid by the Company under the
Asset Purchase Agreement, the Company has delivered that certain $16,270,000 8%
Installment Note payable to Stockholder (the "Note"); and
WHEREAS, a condition to the consummation of the Purchase and the other
transactions contemplated by the Asset Purchase Agreement, the parties have
agreed to, among other things, restrict the ability of the Stockholder to sell
or otherwise transfer any shares of Company Common Stock acquired by Stockholder
as a result of the conversion of the Note (the "Shares") as set forth herein.
NOW THEREFORE, in consideration of the mutual promises and obligations
set forth herein, the parties agree as follows:
I. TRANSFER RESTRICTIONS
1.1 TRANSFER OF SHARES. Stockholder hereby agrees and covenants to the
Company that Stockholder shall not, directly or indirectly sell, offer to sell,
contract to sell, grant any option to purchase, or otherwise transfer or dispose
of (in each case, a "Transfer"), any of the Shares except in accordance with the
provisions hereof as follows:
(a) Upon each conversion of the Note, Stockholder shall not Transfer
any of the Converted Shares, except pursuant to a current prospectus under an
effective registration statement or an exemption from registration under the
Securities Act and other applicable securities laws and regulations (including,
if applicable, Rule 144) and a Rule 10b5-1 Sales Plan in substantially the same
form as Exhibit A attached hereto and incorporated herein for all purposes (the
"Plan"). The Plan is currently by and between Stockholder and Merrill, Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and shall continue to be
by and between Stockholder and Merrill Lynch or other nationally recognized
securities brokerage firm that is reasonably acceptable to the Company (the
"Firm"), so long as the Plan complies in all respects with the provisions of
Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended,
and any restrictions
1
or requirements set forth under applicable law and the terms in the Plan
regarding the timing, manner and volume of sales of Converted Shares and other
financial aspects shall not materially change during the Term hereof.
(b) On each Conversion Date under the Note, the Company will deliver to
the Firm a Conversion Notice. Upon receipt by the Firm of the Conversion Notice,
Stockholder shall be deemed to have instructed the Firm to sell the Converted
Shares determined as of such Conversion Date (subject to all applicable
securities laws and the limitations set out in the Plan) within the two-week
period beginning on such Conversion Date except as extended by delivery of a
"Deferral Notice" as provided in the Note and the Plan. For this purpose,
Stockholder has initially engaged the Firm as part of the Plan to execute such
Transfers and will continue to engage such firm or any other nationally
recognized securities brokerage firm selected by Stockholder that is reasonably
acceptable to the Company.
(c) Stockholder shall not enter into any offsetting, corresponding or
hedging transaction concerning the Shares.
(d) In order to enforce the covenants in this Section 1, the
Stockholder acknowledges and agrees that the Company may impose stop transfer
instructions with respect to the Shares.
1.2 REGISTRATION RIGHTS. The Company has granted Seller registration
rights as provided in Section 8.4 of the Asset Purchaser Agreement.
II. GENERAL PROVISIONS
2.1 NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by same-day courier, overnight delivery service or confirmed
facsimile, provided that if delivered on a date that is not a business day or
after 5:00 p.m. on a business day (in each case at the place of delivery), such
notice shall be deemed delivered on the next succeeding business day, if such
notice is delivered to the party to be notified at such party's address or
facsimile number specified in the Asset Purchase Agreement.
2.2 NO WAIVER. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
2.3 STOCKHOLDER UNDERTAKING. Stockholder hereby agrees to take any
additional action and execute any additional documents reasonably necessary in
order to carry out or effect one or more of the obligations or restrictions
imposed on either Stockholder or the Shares pursuant to the express provisions
of this Agreement.
2.4 ENTIRE AGREEMENT. This Agreement and the Asset Purchase Agreement
(together with all the annexes or exhibits thereto and other agreements
delivered in
2
connection therewith) set forth the entire agreement between the parties hereto
with respect to the matters provided herein and therein and supersede all prior
and contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties with respect to such subject matter.
2.5 CAPITALIZED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Note.
2.6 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
2.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors and
assigns and the Stockholder and the Stockholder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
2.8 SPECIFIC PERFORMANCE. Each party hereto acknowledges that, in view
of the uniqueness of the transactions contemplated by this Agreement, the other
party would not have an adequate remedy at law for money damages in the event
that this Agreement has not been performed in accordance with its terms. Each
party therefore agrees that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
2.9 AMENDMENT AND WAIVER. This Agreement shall not be amended nor any
Section hereof waived without the written consent of the Company and the
Stockholder.
2.10 TERM. The term of this Agreement shall begin on the date first
above written and continue until such time that (i) the Note has been entirely
converted into Shares and (ii) Stockholder, together with its affiliates (as
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended), has Transferred more than 90% of the Shares into which the Note has
been converted (the "Term"). Following the Term, this Agreement shall terminate
and be of no further force or effect.
2.11 GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties have executed this Stock Resale
Agreement on the day and year first above written.
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STOCKHOLDER:
DATA TRANSIT CORP.
By:___________________________
Title:_________________________
COMPANY:
FINISAR CORPORATION
By:___________________________
Title:_________________________
4
EXHIBIT A
Client's name: Data Transit Corp.
Issuer's name: Finisar Corporation
Type of securities: Common Stock
Account number:__________
RULE 10b5-1 SALES PLAN AND CLIENT REPRESENTATIONS
Data Transit Corp., a Delaware corporation ("Data Transit"), as of the
date below, establishes this Sales Plan ("the Plan") in order to sell shares of
the Issuer's common stock pursuant to the requirements of Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
1. Data Transit requests that Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") execute the Plan as follows:
Data Transit has arranged with Finisar Corporation ("the Issuer")
for the Issuer periodically to provide written notice to Merrill
Lynch and Data Transit that shares have been issued to Data Transit
upon each conversion of an 8% Installment Note (the "Note") made by
the Issuer and payable to Data Transit ("Conversion Notice"), which
Conversion Notice will specify the number of shares issued to Data
Transit upon such conversion. Starting on the date of receipt of
each such Conversion Notice and subject to applicable regulations,
Merrill Lynch will sell at least 80% of the number of shares
specified in such Conversion Notice as having been issued upon such
conversion (the remaining 20% of such shares are referred to herein
as "Carryover Shares") utilizing the principles of best execution in
(i) block trades (in which a broker-dealer may resell a portion of
the block, as principal, in order to facilitate the transaction);
(ii) purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or (iii) ordinary brokerage
transactions and transactions in which a broker solicits purchasers
on the principal exchange or market on which the shares are traded
(the "Exchange") during the period (each a "Selling Period")
beginning on such date and ending on the Friday of the week
following the week during which such Conversion Notice was delivered
to Merrill Lynch. Data Transit has arranged with the Issuer that
Merrill Lynch, in its sole discretion (without any influence by Data
Transit), may deliver a notice ("Extension Notice") to the Issuer
during
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any Selling Period that such Selling Period shall not end on the
aforementioned Friday but instead shall end on the Friday of the
third week following the week during which such Conversion Notice
was delivered to Merrill Lynch, as long as the Extension Notice is
delivered at least two (2) trading days before the end of the then
current Selling Period. Such extension of the Selling Period shall
be hereinafter referred to as an "Extension". No more than one such
Extension Notice may be delivered by Merrill Lynch to the Issuer
during any three (3) consecutive Selling Periods, except concerning
an Extension arising due to suspensions as provided in Section 2,
which shall not be limited. No Conversion Notice shall be issued
during a Selling Period or an Extension. Except as provided in
Section 2, all such shares issued upon each conversion are to be
sold during such Selling Periods as it may be extended in accordance
with these provisions; provided that any Carryover Shares are not
required to be sold during such Selling Periods, but must be sold
during the next succeeding Selling Period, and no Extension shall be
required in such event.
For example, if Merrill Lynch were to receive a Conversion Notice on
Monday, September 13, 2004 that a portion of the Installment Note
had been converted and as a result 500,000 shares of the Issuer's
common stock had been issued to Data Transit, then Merrill Lynch
would during the Selling Period beginning on Monday, September 13,
2004 and ending on the close of business on Friday, September 24,
2004 sell such 500,000 shares. At any time during that Selling
Period Merrill Lynch (at least two (2) trading days prior to the end
thereof) could deliver an Extension Notice to extend the September
24, 2004 date to October 8, 2004, except that a notice delivered
pursuant to Section 2 hereof may be delivered on any day of the
Selling Period to which it related. Up to 100,000 of such shares
could be carried over and sold during the next succeeding Selling
Period even if no Extension Notice had been sent.
Sales of the Issuer shares resulting from conversion of the Note shall continue
until all of the shares underlying the Note have been issued and sold.
2. SUSPENSION
Merrill Lynch may suspend sales allocated under this Plan for any of the
following reasons:
a. a day specified by the Plan is not a day on which the shares trade
regular way on the Exchange;
b. trading of the shares on the Exchange is suspended for any reason;
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c. there has been a material reduction in the trading volume of the
shares relative to the volume occurring during the Reference Period
(as defined in the Note);
d. Merrill Lynch cannot effect a sale of shares due to any legal,
regulatory or contractual restrictions applicable to it or any legal
or regulatory restrictions applicable to Data Transit (including
without limitation, Regulation M); or
e. if the shares are being sold pursuant to a registration statement,
the termination, expiration, suspension or unavailability of the
registration statement;
then, notwithstanding the limitations on Extensions set forth in Section 1, (i)
Merrill Lynch will use its reasonable efforts to minimize the length and effects
of any suspension under 2(c), and (ii) shares designated under the Plan for sale
during the period when sales under the Plan are suspended will be sold as soon
as possible thereafter. If sales are suspended on two days on which trading
occurs on the Nasdaq National Market in any Selling Period, an Extension will
result, thereby extending the Selling Period then in effect as provided in
Section 1 above.
3. TERMINATION
The Plan shall end on the earliest of:
a. the completion of all sales contemplated in Section 1 of the Plan;
b. Data Transit's or Merrill Lynch's reasonable determination that:
(i) the Plan does not comply with Rule 10b5-1 or other
applicable securities laws;
(ii) Data Transit has not, or Merrill Lynch has not, complied
with the Plan, Rule 10b5-1 or other applicable
securities laws;
(iii) Data Transit has made misstatements in Data Transit's
Client Representations to Merrill Lynch;
(iv) the filing of a bankruptcy petition by the Issuer; or
(v) receipt by Merrill Lynch of written notice of
termination from Data Transit pursuant to Section 12
below.
4. At the sole discretion of Merrill Lynch, (i) shares allocated under the
Plan for sale may be sold in bulk or in smaller increments, depending upon
market demand and conditions and (ii) subject to the limitations set forth in
Section 1 above, it may elect or not elect during any Selling Period to deliver
an Extension Notice.
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5. In the event of a stock split or reverse stock split, the share quantity and
dollar amount at which shares are sold will be automatically adjusted
proportionately.
6. In the event of a reincorporation or other corporate reorganization resulting
in an automatic share-for-share exchange of new shares for the type of shares
subject to the Plan, then the new shares will automatically replace the type of
shares originally specified in the Plan.
7. Compliance with Rule 144 and Rule 145. The following provisions apply only to
the extent applicable.
a. Data Transit understands and agrees that if Data Transit is an
affiliate or control person for purposes of Rule 144 under the
Securities Act of 1933, as amended (the ""Securities Act"),"),
or if the securities subject to the Plan are restricted
securities subject to limitations under Rule 144 or eligible
for resale under Rule 145, then all sales of securities under
the Plan will be in accordance with the applicable provisions
of Rule 144. Data Transit requests and authorizes Merrill
Lynch to complete and file on Data Transit's behalf the Forms
144 (pre-signed on its behalf) necessary to effect the Plan,
if any.
b. If appropriate, Data Transit understands and agrees that upon
Data Transit's prompt signature and delivery to Merrill Lynch
of Form 144, Merrill Lynch will make one Form 144 filing at
the beginning of each three-month period, commencing with the
date of the first sale made in connection with the Plan, and
that each Form 144 shall state the following: "This proposed
sale is made pursuant to a plan intended to comply with Rule
10b5-1(c), previously adopted on [insert plan adoption date],
when Data Transit was not aware of material nonpublic
information".
c. Merrill Lynch will conduct sales pursuant to Rule 144 or Rule
145 if appropriate, including applying Rule 144 volume
limitations as if the sales under the Plan were the only sales
subject to the volume limitations.
d. Data Transit agrees not to take any action or to cause any
other person or entity to take any action that would require
Data Transit to aggregate sales of securities pursuant to Rule
144; and not to take any action that would cause the sales of
securities under the Plan not to comply with Rule 144 or Rule
145.
8. Indemnification.
a. Data Transit agrees to indemnify and hold harmless Merrill
Lynch from and against all claims, losses, damages and
liabilities arising out of inquires and/or proceedings
resulting from assertions that:
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(i) the Plan or sales made under the Plan do not
comply with Rule 10b5-1 or with state securities
laws or regulations prohibiting trading while in
possession of material nonpublic information and
(ii) Merrill Lynch has not executed any sales pursuant
to the provisions of the Plan.
b. This indemnification will survive termination of the Plan.
9. In consideration of Merrill Lynch accepting orders to sell securities under
this Plan Data Transit makes the following representations, warranties and
covenants:
a. Data Transit established the Plan in good faith, in compliance
with the requirements of Rule 10b5-1, and at a time when Data
Transit was not aware of material nonpublic information about
the Issuer, whose securities are the subject of the Plan.
b. Data Transit has consulted with legal counsel and other
advisors in connection with Data Transit's decision to enter
into the Plan and has confirmed that the Plan meets the
criteria set forth in Rule 10b5-1.
c. Data Transit owns or has the right to acquire all shares that
are subject to the Plan free and clear of liens or
encumbrances of any kind.
d. Except as provided in the Plan and while the Plan is in
effect, Data Transit confirms that:
(i) Data Transit will not engage in offsetting or
hedging transactions in violation of Rule 10b5-1; and
(ii) Data Transit will notify Merrill Lynch in advance
of any sales or purchases of, or derivative transactions
on, any of the Issuer's securities by it.
e. Data Transit further confirms Data Transit's understanding
that while this Plan is in effect, Data Transit may not
disclose to the persons at Merrill Lynch effecting sales under
the Plan for Data Transit any information concerning the
Issuer that might influence the execution of the Plan nor will
it otherwise attempt to influence execution of the Plan,
including without limitation the decision whether to deliver
an Extension Notice.
f. Compliance with insider trading policies.
(i) The Plan does not violate the Issuer's insider
trading policies.
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(ii) Data Transit has informed the Issuer of the
existence and provisions of the Plan, and, if necessary
under the Issuer's insider-trading policies, authorized
representatives of the Issuer have approved the Plan and
have been provided with a copy of the Plan.
g. Data Transit agrees to make or cause to be made all necessary
filings, including Rule 144 filings, filings pursuant to
Section 13 and Section 16 of the Exchange Act, and any other
filings necessary pursuant to the Securities Act and/or the
Exchange Act.
h. Delivery requirements
(i) Prior to the date of execution of any sales specified
under the Plan, Data Transit agrees to have delivered
into the custody of Merrill Lynch certificates
representing that number of securities that may be sold
pursuant to the Plan (or other appropriate evidence
thereof), together with all transfer documents and other
authorizations required for Merrill Lynch to effect
settlement of sales of such securities on Data Transit's
behalf.
(ii) Data Transit agrees that Merrill Lynch's obligation to
execute sales under the Plan is conditioned on the
satisfaction of the foregoing delivery requirements.
i. Data Transit agrees to inform Merrill Lynch as soon as
possible of (a) any subsequent restrictions imposed on Data
Transit due to changes in the securities (or other) laws or of
any contractual restrictions imposed on the Issuer that would
prevent Merrill Lynch or Data Transit from complying with the
Plan and (b) the occurrence of any event as set forth in the
Plan that would cause the Plan to end or be suspended under
Section 2 or Section 3 of the Plan.
10. The Plan may be modified or amended only upon:
(i) the written agreement of Data Transit and Merrill Lynch
with prompt written notice to the Issuer and
(ii) the receipt by Merrill Lynch of a certificate that Data
Transit has signed to the effect that the
representations, warranties and covenants contained in
Data Transit's Client Representations, dated the date
hereof, are true as of the date of such certificate.
11. The Plan may be signed in counterparts, each of which will be an original.
12. The Plan , including the representations, warranties and covenants in
Section 9, constitute the entire agreement between Data Transit and Merrill
Lynch and supersede any prior agreements or understandings regarding the Plan.
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13. All notices given by the parties under the Plan will be as follows:
a. If to Merrill Lynch:
Managing Director and Administrative Manager
Merrill Lynch, Pierce, Fenner & Smith, Inc.
[branch office address]
b. If to Data Transit: [client address].
IF DATA TRANSIT IS SUBJECT TO THE REPORTING REQUIREMENTS OF SECTION 16 OF THE
EXCHANGE ACT, COMPLETE THE FOLLOWING SECTION 13 TO HAVE TRANSACTION INFORMATION
FOR OPEN MARKET TRANSACTIONS UNDER THE PLAN FORWARDED TO A DESIGNATED THIRD
PARTY.
14. Data Transit authorizes Merrill Lynch to transmit transaction information
via fax and/or email for open window and transactions under the Plan (sales and
purchases) to:
a. Name:___________________ b. Name:______________________
Title:__________________ Title:_____________________
Organization:___________ Organization:______________
Fax:____________________ Fax Number:________________
Tel.:___________________ Tel.:______________________
e-mail:_________________ e-mail:____________________
Reasonable efforts will be made to transmit transaction information for
open market transactions under the Plan (purchase or sale) by the close of
business on the day of the purchase or sale, but no later than the close of
business on the first trading day following the purchase or sale. Data Transit
acknowledges that Merrill Lynch: (1) has no obligation to confirm receipt of any
email or faxed information by the designated contact and (2) has no
responsibility or liability for filing a Form 4 with the SEC or for compliance
with Section 16 of the Securities Exchange Act of 1934. If any of the above
contact information changes, or Data Transit would like to terminate this
authorization, Data Transit will promptly notify Merrill Lynch in writing. Data
Transit further authorizes Merrill Lynch to transmit transaction information to
a third party service provider who will make the information available to Data
Transit's designated representative(s) listed above.
15. This Plan will be governed by and construed in accordance with the internal
laws of the State of New York.
Data Transit Corp.
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By: ____________________________
Name:
Title:
Date:
Acknowledged and Agreed this___
day of ________, 2004:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: ____________________________
Name:
Title:
8
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "First Amendment")
is entered into by and among FINISAR CORPORATION, a Delaware corporation
("Purchaser"), DATA TRANSIT CORP., a Delaware corporation ("Seller"), and DALE
T. SMITH and JANIS H. SMITH, individual residents of San Jose, California
(collectively "Stockholder"). For the purposes of this First Amendment, all
capitalized terms used herein and not otherwise defined shall have the same
meaning as ascribed to them in the Original Agreement.
WITNESSETH
WHEREAS, Purchaser and Seller have entered into that certain Asset
Purchase Agreement dated effective August 4, 2004 (the "Original Agreement"),
for the purposes and consideration therein expressed, pursuant to which
Purchaser purchased substantially all the assets of Seller related to the
Business, excluding cash and certain other assets as more particularly provided
therein, and Purchaser agreed to assume certain of the liabilities of Seller
related to the Business on the terms and conditions set forth therein;
WHEREAS, the Closing the sale of the Purchased Assets, subject to the
terms and conditions of the Original Agreement occurred on August 6, 2004;
WHEREAS, Purchaser and Seller desire to amend the Original Agreement to
reflect the extension of the number of days after Closing within which Purchaser
shall prepare and file with the SEC a Registration Statement on Form S-3 from 14
days to 28 days;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
I.
The Original Agreement is hereby amended as follows: the reference to
"fourteen (14) days" in the first sentence of Section 8.4(a) shall be replaced
with a reference to "twenty-eight (28) days."
II.
All other provisions contained in the Original Agreement are hereby
ratified and remain in full force and effect except to the extent set forth in
this First Amendment.
EXECUTED AND DELIVERED effective as of August 20, 2004.
FINISAR CORPORATION
By: /s/ JERRY S. RAWLS
Title: CEO
DATA TRANSIT CORP.
By: DALE SMITH
Title: CEO/CTO
STOCKHOLDER
/s/ DALE T. SMITH
Dale T. Smith
/s/ JANIS H. SMITH
Janis H. Smith
2
SECOND AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Second
Amendment") is entered into by and among FINISAR CORPORATION, a Delaware
corporation ("Purchaser"), DATA TRANSIT CORP., a Delaware corporation
("Seller"), and DALE T. SMITH and JANIS H. SMITH, individual residents of San
Jose, California (collectively "Stockholder"). For the purposes of this Second
Amendment, all capitalized terms used herein and not otherwise defined shall
have the same meaning as ascribed to them in the Original Agreement.
WITNESSETH
WHEREAS, Purchaser and Seller have entered into that certain Asset
Purchase Agreement dated effective August 4, 2004 (the "Original Agreement"),
for the purposes and consideration therein expressed, pursuant to which
Purchaser purchased substantially all the assets of Seller related to the
Business, excluding cash and certain other assets as more particularly provided
therein, and Purchaser agreed to assume certain of the liabilities of Seller
related to the Business on the terms and conditions set forth therein;
WHEREAS, the Closing the sale of the Purchased Assets, subject to the
terms and conditions of the Original Agreement occurred on August 6, 2004;
WHEREAS, Purchaser and Seller have entered into the First Amendment to
Asset Purchase Agreement ("First Amendment") dated August 20, 2004, under which
the Original Agreement was amended to extend of the number of days after Closing
within which Purchaser shall prepare and file with the SEC a Registration
Statement on Form S-3 from 14 days to 28 days;
WHEREAS, Purchaser and Seller now desire to amend the Original Agreement
to reflect the extension of the number of days after Closing within which
Purchaser shall prepare and file with the SEC a Registration Statement on Form
S-3 from 28 days to 49 days;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
I.
The Original Agreement is hereby amended as follows: the reference to
"twenty-eight (28) days" in the first sentence of Section 8.4(a) shall be
replaced with a reference to "forty-nine (49) days."
II.
All other provisions contained in the Original Agreement are hereby
ratified and remain in full force and effect except to the extent set forth in
this Second Amendment.
EXECUTED AND DELIVERED effective as of September 9, 2004.
FINISAR CORPORATION
By: /s/ S. K. WORKMAN
Title: CFO
DATA TRANSIT CORP.
By: /s/ DALE SMITH
Title: CEO/CTO
STOCKHOLDER
/s/ DALE T. SMITH
Dale T. Smith
/s/ JANIS H. SMITH
Janis H. Smith
2
THIRD AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Third Amendment"),
dated December 10, 2004 is entered into by and among FINISAR CORPORATION, a
Delaware corporation ("Purchaser"), DATA TRANSIT CORP., a Delaware corporation
("Seller"), and DALE T. SMITH and JANIS H. SMITH, individual residents of San
Jose, California (collectively "Stockholder"). For the purposes of this Third
Amendment, all capitalized terms used herein and not otherwise defined shall
have the same meaning as ascribed to them in the Amended Agreement (as
hereinafter defined).
WITNESSETH
WHEREAS, Purchaser, Seller and Stockholder have entered into that certain
Asset Purchase Agreement dated effective August 4, 2004 (the "Original
Agreement"), which was amended on August 20, 2004 upon the execution of the
First Amendment to Asset Purchase Agreement (the "First Amendment") and on
September 9, 2004 upon the execution of the Second Amendment to Asset Purchase
Agreement (the "Second Amendment") (the Original Agreement, as amended by the
First Amendment and Second Amendment, shall hereinafter be referred to as the
"Amended Agreement"), for the purposes and consideration therein expressed,
pursuant to which Purchaser purchased substantially all the assets of Seller
related to the Business, excluding cash and certain other assets as more
particularly provided therein, and Purchaser agreed to assume certain of the
liabilities of Seller related to the Business on the terms and conditions set
forth therein;
WHEREAS, the Closing the sale of the Purchased Assets, subject to the
terms and conditions of the Amended Agreement occurred on August 6, 2004;
WHEREAS, Purchaser and Seller desire to amend the Amended Agreement in
order to reflect the changes hereinafter addressed;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Amended Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
I.
Section 8.4 of the Amended Agreement is hereby amended as follows: the
first sentence of Section 8.4(a) shall be replaced with the following sentence:
"On or before February 28, 2005, Purchaser shall prepare and file with the SEC,
and shall use all reasonable efforts to cause to become effective on or before
March 31, 2005, a registration statement (the "Registration Statement") on Form
S-3 or on such other form as is then available under the Securities Act covering
the issuance of shares of Purchaser
Common Stock upon conversion of the Promissory Note (the "Registrable
Securities"); provided, however, that Seller shall provide all such information
and materials to Purchaser and take all such action as may be required in order
to permit Purchaser to comply with all applicable requirements of the SEC and to
obtain any desired acceleration of the effective date of such Registration
Statement."
II.
The Parties agree that Purchaser shall advance the sum of $1,000,000 to
Seller on or before December 17, 2004 in discharge of its obligations arising
pursuant to Section 8.7 of the Amended Agreement. The Parties also agree to
comply with the other provisions of Section 8.7.
III.
The Parties agree that the Engineering Integration Goals, Manufacturing
Integration Goals and MBO Goals set forth in Schedule I of the Promissory Note
have been achieved as of November 15, 2004; therefore 83.33% of the aggregate
goals relative to the determination of the Earn-Out Adjustment Amount (as such
term is defined in the Promissory Note) have been achieved as of such date.
IV.
All other provisions contained in the Amended Agreement are hereby
ratified and remain in full force and effect except to the extent set forth in
this Third Amendment.
EXECUTED AND DELIVERED effective as of December 10, 2004.
FINISAR CORPORATION
By: /s/ S. K. WORKMAN
Title: CFO
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DATA TRANSIT CORP.
By: /s/ DALE SMITH
Title: CEO/CTO
STOCKHOLDER
/s/ DALE T. SMITH
Dale T. Smith
/s/ JANIS H. SMITH
Janis H. Smith
3