EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and between
MARVELL TECHNOLOGY GROUP LTD.,
MARVELL INTERNATIONAL LTD.,
and
QLOGIC CORPORATION
Dated as of August 29, 2005
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES......... 1
1.1 Transfer of Assets.............................................. 1
1.2 Assets Not Transferred.......................................... 3
1.3 Assumption of Certain Liabilities............................... 3
1.4 Non-Assumption of Other Liabilities............................. 4
1.5 Prorations...................................................... 6
1.6 Risk of Loss.................................................... 6
1.7 Certain Provisions Regarding Assignments........................ 6
ARTICLE II CLOSING AND PURCHASE PRICE.................................... 7
2.1 Time and Place of Closing....................................... 7
2.2 Payment on Closing Date......................................... 7
2.3 Closing Deliveries.............................................. 7
2.4 Tax Allocation.................................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..................... 9
3.1 Organization; Standing and Power................................ 9
3.2 Authority; Non-Contravention; Necessary Consents................ 9
3.3 Title to and Sufficiency of Assets.............................. 10
3.4 Financial Statements............................................ 11
3.5 Taxes........................................................... 12
3.6 Intellectual Property........................................... 12
3.7 Compliance; Permits............................................. 15
3.8 Litigation...................................................... 16
3.9 Environmental Matters........................................... 16
3.10 Contracts....................................................... 17
3.11 Brokers' and Finders' Fees...................................... 19
3.12 Condition of Assets; Limited Warranties......................... 19
3.13 Customers; Suppliers............................................ 19
3.14 Employee Benefit Plans and Employment Agreements................ 20
3.15 Employment and Labor Matters.................................... 21
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3.16 Investor Representations........................................ 22
3.17 Disclosure...................................................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER....................... 23
4.1 Organization; Standing and Power................................ 24
4.2 Authority; Non-Contravention; Necessary Consents................ 24
4.3 Brokers' and Finders' Fees...................................... 25
4.4 Available Funds................................................. 25
4.5 Buyer Common Stock.............................................. 25
4.6 SEC Documents; Financial Statements............................. 25
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME............................ 25
5.1 Conduct of the Business by Seller............................... 25
ARTICLE VI PRE-CLOSING AND POST-CLOSING COVENANTS........................ 27
6.1 Confidentiality; Access to Information.......................... 27
6.2 Public Disclosure............................................... 27
6.3 Regulatory Filings; Reasonable Best Efforts..................... 27
6.4 Notification of Certain Matters................................. 28
6.5 Third-Party Consents............................................ 29
6.6 Employee Matters................................................ 29
6.7 Insurance Matters............................................... 30
6.8 Noncompetition Agreement........................................ 30
6.9 Additional Services............................................. 30
6.10 Restrictions on Resale of Buyer Common Stock.................... 31
6.11 Net Inventory Adjustment........................................ 31
6.12 Supplement to Disclosure Letter................................. 33
6.13 Tax Covenants................................................... 33
6.14 Post-Closing Cooperation; Access and Assistance................. 34
6.15 Release of Liens................................................ 35
6.16 Cooperation with Warranty Claims................................ 35
6.17 SEC Approval of Financial Statements............................ 35
6.18 Additional Financial Statements................................. 35
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ARTICLE VII CONDITIONS OF PURCHASE....................................... 35
7.1 Conditions to the Obligations of Each Party to Effect the
Purchase........................................................ 35
7.2 Additional Conditions to the Obligations of Buyer............... 36
7.3 Additional Conditions to the Obligations of Seller.............. 37
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER........................... 37
8.1 Termination..................................................... 37
8.2 Notice of Termination; Effect of Termination.................... 39
ARTICLE IX INDEMNIFICATION; ESCROW....................................... 39
9.1 Indemnification by Seller....................................... 39
9.2 Indemnification by Buyer........................................ 39
9.3 Inter-Party Claims.............................................. 40
9.4 Third Party Claims.............................................. 41
9.5 Limitations and Requirements.................................... 42
9.6 Calculation and Mitigation of Damages........................... 43
9.7 Termination of Indemnification.................................. 44
9.8 Escrow Fund..................................................... 44
ARTICLE X GENERAL PROVISIONS............................................. 45
10.1 Survival of Representations and Warranties...................... 45
10.2 Amendment....................................................... 46
10.3 Extension; Waiver............................................... 46
10.4 Notices......................................................... 46
10.5 Counterparts.................................................... 47
10.6 Entire Agreement; Third-Party Beneficiaries..................... 47
10.7 Severability.................................................... 47
10.8 Other Remedies; Specific Performance............................ 47
10.9 Governing Law; Jurisdiction..................................... 48
10.10 Rules of Construction........................................... 48
10.11 Assignment...................................................... 48
10.12 Fees and Expenses............................................... 48
ARTICLE XI DEFINITIONS................................................... 48
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11.1 Rules of Construction........................................... 48
11.2 Defined Terms................................................... 49
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of August 29, 2005, by and between QLOGIC CORPORATION, a Delaware corporation
("SELLER"), and MARVELL TECHNOLOGY GROUP LTD., a corporation organized under the
laws of Bermuda ("MARVELL TECHNOLOGY") and MARVELL INTERNATIONAL LTD., a
corporation organized under the laws of Bermuda ("MARVELL INTERNATIONAL" and,
collectively with Marvell Technology, "BUYER"). Capitalized terms used in this
Agreement without definition are defined in Article XI.
RECITALS
A. Seller conducts, among other businesses, a business consisting of the
design, manufacturing, marketing and sale of hard disk and tape drive
controllers and related products (the "BUSINESS").
B. On and subject to the terms and conditions of this Agreement, Buyer
desires to purchase the Assets from Seller and is willing to assume certain
associated obligations and liabilities, and Seller desires to sell the Assets to
Buyer, subject to the assumption of such associated obligations and liabilities.
C. The respective Boards of Directors of Buyer and Seller have approved and
declared advisable this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 TRANSFER OF ASSETS. Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date, Seller shall sell, assign, convey,
transfer and deliver to Buyer free and clear of any Liens other than Permitted
Liens, and Buyer shall purchase and acquire from Seller, all of Seller's right,
title and interest in and to all of the following property and assets, real,
personal or mixed, tangible and intangible, wherever located (the "ASSETS"):
(a) Real Property Leasehold Interest. The real property leasehold
interest in the facility at which the Business is principally conducted,
located at Suites 100 and 250, 26880 Aliso Viejo Parkway, Aliso Viejo, CA
92656, including the leasehold improvements therein, and all rights
appurtenant thereto (the "LEASED PROPERTY");
(b) Personal Property. The fixed assets, equipment, and other tangible
personal property that is described in Schedule 1.1(b);
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(c) Inventory. All supplies, materials, and other inventories of raw
materials, work-in-progress and finished goods of Seller (wherever located)
to which Seller holds title that are used or held for use in the conduct of
the Business (collectively, "INVENTORY");
(d) Transferred Intellectual Property. (i) Other than the Patents,
Seller name and logo trademarks, and the non-Patent Intellectual Property
listed on Schedule 1.1(d)(i) to be licensed by Seller to Buyer after the
Closing pursuant to the IP and Technology License Agreement, the
Intellectual Property owned by Seller and used in the conduct of the
Business; and (ii) the Patents listed on Schedule 1.1(d)(ii), and any
reexaminations, extensions, reissues, continuation applications, divisional
applications and any foreign patent applications relating to the Patents
listed on Schedule 1.1(d)(ii), subject to the rights of Seller to receive a
license back from Buyer of such Patents after the Closing pursuant to the
Transferred Patent License Agreement (collectively, the "TRANSFERRED
INTELLECTUAL PROPERTY");
(e) Technology. All Technology owned by Seller and used in the conduct
of the Business (the "TRANSFERRED TECHNOLOGY") provided that such
Transferred Technology and the Transferred Intellectual Property shall, as
mutually agreed and to the extent reasonably possible, be made available to
Buyer for downloading through a secure FTP site or otherwise
electronically;
(f) Assigned Contracts (other than Purchase Orders). The rights
arising after the Closing of Seller under the contracts listed on Schedule
1.1(f) and all contracts (other than purchase orders) entered into in the
ordinary course of the Business, consistent with past practice, after the
date hereof through the Closing Date (the "ASSIGNED CONTRACTS");
(g) Purchase Orders. All rights under the purchase orders of the
Business that are outstanding as of the Closing Date (the "PURCHASE
ORDERS");
(h) Books and Records. All sales and business records, service
records, books of account, ledgers, general, financial and accounting
records, personnel records, files, invoices, inventory records,
engineering, maintenance, operating and production records, cost and
pricing information, business plans, catalogs, quality control records,
blueprints, research and development files, records, patent disclosures,
patent life histories, litigation files, subscribers' and suppliers' lists,
other distribution lists, billing records, sales and promotional
literature, manuals, subscriber and supplier correspondence (in all cases,
in any form or medium), of Seller primarily relating to the Assets, the
Assumed Liabilities or otherwise to the Business, subject to Seller
retaining copies or originals of the same, if and as disclosed to Buyer and
consented to by Buyer (which consent shall not be unreasonably withheld);
(i) Goodwill. All of Seller's customer relationships, supplier
relationships and goodwill generated by or associated with the Business or
the operation or conduct of the Business or in connection with any Asset,
including the exclusive right to represent oneself as the successor of the
Business;
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(j) Permits. All assignable or transferable Permits associated with
the Leased Property or otherwise exclusively related to the Business, and
all pending applications or renewals thereof of Seller; and
(k) Non-Disclosure Obligations. To the extent assignable, all
non-disclosure, confidentiality and similar obligations owed to Seller to
the extent related to the Business.
The Assets shall include all assets of the type described in Sections
1.1(b)-(c), (e)-(f) and (h)-(k) that are acquired by Seller with respect to the
Business between the date hereof and the Closing Date and shall exclude any such
assets that are disposed of, sold or consumed after the date hereof in the
ordinary course of business.
1.2 ASSETS NOT TRANSFERRED. Other than the Assets, all assets, rights and
properties of Seller are specifically excluded from the Assets and shall be
retained by Seller (the "EXCLUDED ASSETS"), including, without limitation:
(a) Cash. All cash, cash equivalents and securities owned or otherwise
held by Seller, including, bank deposits, investments in so-called "money
market" funds, commercial paper funds, certificates of deposit, Treasury
bills and accrued interest thereon;
(b) Bank Accounts. All bank and other depository accounts of Seller;
(c) Accounts Receivable. Any trade accounts receivable and other
rights to payment owed Seller relating to the Business and any other
account or note receivable of Seller, together with, in each case, the full
benefit of any security interest of Seller therein (collectively, the
"ACCOUNTS RECEIVABLE"), and any claim, remedy or other right related to the
foregoing;
(d) Employee Records. All personnel, employee compensation, medical
and benefits and labor relations records relating to employees or past
employees of Seller; provided, however, copies of all such materials
relating to the Transferred Employees shall be delivered to Buyer; and
(e) Tax Items. All losses, loss carryforwards and rights to receive
refunds, credits and loss carryforwards with respect to any and all Taxes
of Seller that constitute Excluded Liabilities.
1.3 ASSUMPTION OF CERTAIN LIABILITIES. On the Closing Date, Buyer shall
execute and deliver to Seller the Assignment and Assumption Agreement, pursuant
to which Seller shall convey, assign, and transfer to Buyer, and Buyer shall
assume and agree to pay, perform and discharge when due, only the following
Liabilities (collectively, the "ASSUMED LIABILITIES"):
(a) all Liabilities with respect to the Purchase Orders or the
Assigned Contracts to be performed by the Business on or after the Closing
Date;
(b) the Liabilities arising after the Closing under the terms of the
Assigned Contracts, but only to the extent that such Liabilities relate to
the period from and after
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the Closing, provided that the Assumed Liabilities shall not include any
Liability for breaches by Seller of such Assigned Contracts occurring prior
to the Closing;
(c) the Liabilities with respect to the Transferred Employees assumed
by Buyer pursuant to Section 6.6 hereof;
(d) the Liabilities assumed by Buyer pursuant to (i) the final
sentence of Section 6.3(a) and (ii) Section 6.13 hereof;
(e) all Liabilities for warranty claims arising in respect of products
of the Business shipped or sold after the Closing; and
(f) any Liabilities arising in connection with the ownership of the
Assets and/or the conduct of the Business after the Closing.
1.4 NON-ASSUMPTION OF OTHER LIABILITIES. Other than the Assumed
Liabilities, Buyer is not assuming, and shall not be deemed to have assumed, any
liabilities or obligations of any kind or nature (whether absolute, contingent,
accrued or otherwise) of Seller or any of its Affiliates. All such liabilities
or obligations described in this Section 1.4 (other than the Assumed
Liabilities) are collectively referred to herein as the "EXCLUDED LIABILITIES."
All Liabilities of Seller or any of its Affiliates of or relating to the
Business or otherwise (other than the Assumed Liabilities) shall be retained by
and shall be the responsibility of Seller (or the applicable Affiliate(s) of
Seller). The Excluded Liabilities shall include, but are not limited to, the
following:
(a) any Liability, except as expressly set forth in Section 1.3,
arising out of the ownership of the Assets and/or the conduct of the
Business prior to the Closing;
(b) any Liability to the extent arising out of the operation or
conduct by Seller or any Affiliate of Seller of any business other than the
Business;
(c) any Liability (A) arising out of any actual or alleged breach of,
or nonperformance under, any contract of Seller prior to the Closing, or
(B) arising on any contract of Seller either required to be listed under
any Section of the Seller Disclosure Letter hereto and not so listed or
entered into in violation or breach of this Agreement;
(d) any Liability of Seller or any Affiliate of Seller arising out of
(A) any third-party charge, complaint, suit, action (including regulatory
action), hearing, investigation, claim, demand, proceeding (including under
any alternative dispute resolution procedure) or other litigation
("PROCEEDING") pending as of the Closing, (B) any Proceeding filed or
otherwise asserted after the Closing to the extent based upon or arising
out of the ownership of the Assets and/or the conduct of the Business prior
to the Closing, or (C) any actual or alleged violation by Seller or any
Affiliate of Seller of any Legal Requirement prior to or on account of the
Closing;
(e) any account payable of Seller or any Affiliate of Seller
(collectively, the "ACCOUNTS PAYABLE");
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(f) all Liabilities and obligations for warranty claims arising in
respect of products of the Business shipped or sold prior to the Closing
(provided that Buyer shall have the obligations set forth in Section 6.16),
including those listed on Schedule 1.4(f);
(g) any Liability to the extent that it relates to, or arises out of,
any Excluded Asset, or that arises out of the distribution to, or ownership
or operation by, Seller or any Affiliate of Seller or any other Person of
any Excluded Asset, or that arises out of the realization by Seller or any
Affiliate of Seller of the benefits of any Excluded Asset;
(h) except as otherwise provided in Section 6.13 hereof, any Liability
for Taxes whether or not accrued, assessed or currently due and payable,
(A) of Seller or any Affiliate of Seller or any Affiliated Group in which
Seller or any Affiliate of Seller or any predecessor of any of them is or
has been a member (the "SELLER AFFILIATED GROUP") (whether or not related
to the Business or the Assets) and including without limitation any
Liability for the unpaid Taxes of any other Person under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
Law), as a transferee or successor, by contract or otherwise, (B) relating
to the operation or ownership of the Business or the Assets for any Tax
period (or portion thereof) ending at or prior to the Closing or (C) all
taxes on the income of Seller as a result of the sale of the Assets
pursuant to this Agreement;
(i) any indebtedness of Seller or Liabilities relating to guarantees
of such indebtedness of Seller;
(j) any Liability to any third party to the extent relating to or
arising out of infringement or misappropriation prior to the Closing of
Intellectual Property or Technology in connection with the operation or
conduct of the Business by Seller or any Affiliate of Seller prior to the
Closing;
(k) any Liability in respect of claims to the extent arising out of
(i) any injury, disease, disability or any similar condition that exists or
occurs on or prior to the Closing Date or (ii) exposure or alleged exposure
on or prior to the Closing Date to any materials or chemicals, including
Hazardous Substances, in each case in the work place of Seller or the
Business, by any Person (including any Transferred Employee or any other
employee heretofore employed in the Business);
(l) any Liability to the extent that it relates to or arises out of
the employment or the termination of the employment prior to Closing of any
employee or former employee of Seller or any Affiliate of Seller or the
Business, including as a result of transactions contemplated by this
Agreement, provided that Buyer shall have the obligations set forth in
Section 6.6;
(m) except as otherwise provided in Section 6.6, any Liabilities of
Seller or any Affiliate of Seller to or with respect to any employees of
Seller or the Business and obligations and Liabilities under or with
respect to the Employee Plans or any other employee benefit or severance
plans, programs, policies, arrangements or contracts of Seller;
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(n) any Pre-Closing Environmental Liability;
(o) the Liabilities of Seller pursuant to (i) the final sentence of
Section 6.3(a) and (ii) Section 6.13 hereof;
(p) any Liabilities of Seller or any Affiliate of Seller under or with
respect to any contract of Seller other than a Purchase Order or Assigned
Contract;
(q) any Liability for any Accrued Compensation, 401(k) Match, or PTO
Amount; and
(r) all other Liabilities of Seller or any Affiliate of Seller other
than the Assumed Liabilities.
1.5 PRORATIONS. The parties agree that all of the items listed below
relating to the Business and the Assets shall be prorated as of the Closing,
with Seller liable to the extent such items relate to any time period up to the
Closing and Buyer liable to the extent such items relate to periods subsequent
to the Closing:
(a) the amount of any fees and charges which in any case are payable
periodically by Seller with respect to any of the Assigned Contracts
(including the lease with respect to the Leased Property);
(b) the amount of any fees or charges which in any case are payable
periodically by Seller with respect to any of the Transferable Permits; and
(c) the amount of any other fees or charges which in any case are
payable periodically by Seller with respect to the premises of the
Business, such as utilities, office services, and similar items.
Seller agrees to furnish Buyer with such documents and other records as Buyer
reasonably requests in order to confirm all adjustment and proration
calculations made pursuant to this Section 1.5. Final payments with respect to
prorations contemplated by this Section 1.5 that are not ascertainable on or
before the Closing shall be settled between the parties as soon as practicable
after such prorations are ascertainable.
1.6 RISK OF LOSS. The parties agree that until Closing, Seller shall bear
the risk of loss or damage to the Assets from fire, casualty or any other
occurrence.
1.7 CERTAIN PROVISIONS REGARDING ASSIGNMENTS. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an agreement
to assign the Assigned Contract referenced in Schedule 1.7 if an attempted
assignment thereof, without the consent of a third party, would constitute a
breach or other contravention of the rights of such third party, would be
ineffective with respect to any party to an agreement concerning such Assigned
Contract, or would in any way adversely affect the rights of Seller or, upon
transfer, Buyer under such Assigned Contract. If any transfer or assignment by
Seller to, or any assumption by Buyer of, any interest in, or Liability under,
the Assigned Contract referenced in Schedule 1.7 requires the consent of a third
party, then such assignment or assumption shall be
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made subject to such consent being obtained. If such consent is not obtained
prior to the Closing, Seller and Buyer shall use commercially reasonable efforts
to cooperate (at their own expense) to ensure that Buyer shall, following the
Closing, obtain the economic and other (i) benefits and (ii) obligations under
the Assigned Contract referenced on Schedule 1.7 with respect to which the
consent has not been obtained. The parties acknowledge that this Section 1.7
does not in any way modify the provisions of Sections 6.5, 6.14, and 7.2(f).
ARTICLE II
CLOSING AND PURCHASE PRICE
2.1 TIME AND PLACE OF CLOSING. The Closing (as defined below) shall take
place at 7:00 a.m., California time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or valid
waiver of the conditions set forth in Article VII, at the offices of O'Melveny &
Myers LLP, 610 Newport Center Drive, Suite 1700, Newport Beach, California
92660. The consummation of the transactions contemplated hereby is herein
referred to as the "CLOSING," and the date on which such Closing occurs is
hereinafter referred to as the "CLOSING DATE."
2.2 PAYMENT ON CLOSING DATE. Subject to the terms and conditions of this
Agreement, Buyer agrees to acquire the Assets from Seller, to assume the Assumed
Liabilities and, at the Closing, (i) to pay to Seller an amount in cash equal to
$180,000,000 (representing 80% of the Purchase Price); and (ii) to deliver to
Seller a number of shares of Buyer Common Stock having an aggregate fair market
value of $45,000,000 (representing 20% of the Purchase Price), with each share
of Buyer Common Stock being valued at the Issuance Price, $12,000,000 of which
value (the "ESCROW FUND") shall be deposited into an escrow account with the
Escrow Agent pursuant to the Escrow Agreement; provided further, that none of
the amounts referenced in clauses (i) or (ii) shall be reduced by any
withholding.
2.3 CLOSING DELIVERIES.
(a) Buyer's Closing Deliveries. At the Closing, Buyer shall deliver or
cause to be delivered to Seller (or the Escrow Agent, as applicable) the
following, against the delivery by Seller of the documents specified in
Section 2.3(b) below:
(i) by wire transfer of immediately available funds to the
account or accounts of Seller designated in writing by Seller prior to
the Closing Date, the cash portion of the Purchase Price;
(ii) the portion of the Purchase Price comprised of shares of
Buyer Common Stock pursuant to Section 2.2 (other than the Escrow
Fund), and to the Escrow Agent for deposit in the escrow account as
designated in writing by the Escrow Agent prior to the Closing Date,
the Escrow Fund;
(iii) the Transition Services Agreement substantially in the form
of Schedule 2.3(a)(iii) hereto (the "TRANSITION SERVICES AGREEMENT"),
duly executed by Buyer;
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(iv) the Bill of Sale substantially in the form of Schedule
2.3(a)(iv) hereto (the "BILL OF SALE"), duly executed by Buyer;
(v) the Assignment and Assumption Agreement substantially in the
form of Schedule 2.3(a)(v) hereto (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT"), duly executed by Buyer;
(vi) the Registration Rights Agreement in favor of Seller
substantially in the form of Schedule 2.3(a)(vi) hereto (the
"REGISTRATION RIGHTS AGREEMENT"), duly executed by Buyer;
(vii) the License Agreement substantially in the form of Schedule
2.3(a)(vii) hereto, duly executed by Buyer (the "IP AND TECHNOLOGY
LICENSE AGREEMENT");
(viii) the License Agreement substantially in the form of
Schedule 2.3(a)(viii) hereto, duly executed by Buyer (the "RETAINED
PATENT LICENSE AGREEMENT");
(ix) the License Agreement substantially in the form of Schedule
2.3(a)(ix) hereto, duly executed by Buyer (the "TRANSFERRED PATENT
LICENSE AGREEMENT");
(x) California Resale Certificate (relating to Inventory) in the
form required by the State of California Board of Equalization, duly
executed by Buyer; and
(xi) the letter agreement substantially in the form of Schedule
2.3(a)(xi) hereto, duly executed by Buyer (the "NONASSERTION LETTER
AGREEMENT").
(b) Seller's Closing Deliveries. At the Closing, Seller shall deliver
or cause to be delivered to Buyer the following documents, against the
deliveries by Buyer pursuant to Section 2.3(a) above:
(i) the Transition Services Agreement, duly executed by Seller;
(ii) the Bill of Sale, duly executed by Seller;
(iii) the Assignment and Assumption Agreement, duly executed by
Seller;
(iv) the Registration Rights Agreement, duly executed by Seller;
(v) the IP and Technology License Agreement, duly executed by
Seller;
(vi) the Retained Patent License Agreement, duly executed by
Seller;
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(vii) the Transferred Patent License Agreement, duly executed by
Seller
(viii) any records, tangible assets, licenses, policies,
contracts, plans, leases or other instruments owned by or pertaining
to the Business that are in the possession of Seller;
(ix) a certification of non-foreign status dated the Closing Date
in form and substance satisfactory to Buyer and conforming to the
requirements of Income Tax Regulations section 1.1445-2(b)(2)(i); and
(x) the Nonassertion Letter Agreement, duly executed by Seller.
2.4 TAX ALLOCATION. Prior to the Closing, Buyer and Seller and their
respective Affiliates shall negotiate in good faith with each other to agree
upon the allocation of the Purchase Price (such Purchase Price Allocation to be
attached hereto as Schedule 2.4, and which Schedule shall reflect the different
entities buying the Assets on behalf of Buyer) to the Assets, and shall file a
Form 8594 with their applicable Tax Returns with respect to the transactions
contemplated hereby similar to that set forth in Schedule 2.4, except to the
extent that modifications are necessary to reflect changes in the Assets between
the date hereof and the Closing Date. Each party shall file all necessary Tax
Returns and other forms (including Form 8594) to report the transactions
contemplated herein for U.S. federal, state, provincial, territorial, local and
non-United States income Tax purposes in accordance with such allocation, and
shall not take any position inconsistent with such Purchase Price Allocation.
For United States federal income tax purposes, any adjustment to the Purchase
Price for the Assets shall be allocated as provided in Treasury Regulation
Section 1.1060-1, and, in the event of such adjustment, Buyer and Seller agree
to timely revise and amend Form 8594 in accordance with applicable regulations
and instructions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer, except as otherwise set forth in
writing in appropriately corresponding sections of the disclosure letter
supplied by Seller to Buyer dated as of the date hereof (the "SELLER DISCLOSURE
LETTER"), as follows:
3.1 ORGANIZATION; STANDING AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has the requisite corporate power and authority to own, lease
and operate the Assets that it owns and to carry on that portion of the Business
it conducts as now being conducted, except where the failure of Seller to be so
organized, existing and in good standing would not have a Material Adverse
Effect on the Business. Seller is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the Business or the
ownership or leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure to so qualify or to be in good
standing would not have a Material Adverse Effect on the Business.
3.2 AUTHORITY; NON-CONTRAVENTION; NECESSARY CONSENTS.
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(a) Authority. Seller has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Seller and no
other corporate proceedings on the part of Seller are necessary to
authorize the execution and delivery of this Agreement or to consummate the
other transactions contemplated hereby. This Agreement has been duly
executed and delivered by Seller and, assuming due execution and delivery
by Buyer, constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except to the
extent such enforcement may be limited by bankruptcy, insolvency,
moratorium and other similar laws relating to or affecting creditors'
rights generally or general equitable principles.
(b) Non-Contravention. The execution and delivery of this Agreement by
Seller does not, and performance of this Agreement by Seller shall not: (i)
conflict with or violate the certificate of incorporation or bylaws of
Seller, (ii) (A) conflict with or violate any Legal Requirement or any
judgment, order, or decree ("JUDGMENT") applicable to Seller or by which
Seller or any of its properties is bound or affected, or (B) except as set
forth on Section 3.2(b) of the Seller Disclosure Letter, result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
materially impair Seller's rights or materially alter the rights or
obligations of any third party under, or give to others any rights of
termination, material amendment, material acceleration or cancellation of,
any Contract to which Seller is a party or by which any of its properties
or assets is bound and which relates to the Business or the Assets, or
(iii) result in the creation of a Lien on any of the Assets.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, arbitral entity, administrative agency
or commission or other governmental authority or instrumentality, or any
quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority (a
"GOVERNMENTAL ENTITY") is required to be obtained or made by Seller in
connection with the execution, performance and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for
such consents, approvals, orders, authorizations, registrations,
declarations and filings, if any, as may be required under applicable
federal, foreign and state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), or any foreign laws regulating competition, antitrust, investment or
exchange controls (collectively, the "NECESSARY CONSENTS").
3.3 TITLE TO AND SUFFICIENCY OF ASSETS. Seller has good and valid title to,
and is the lawful owner of, all of the Assets, free and clear of any Lien other
than Permitted Liens. Subject to obtaining all applicable Consents, (a) Seller
has the full right to sell, convey, transfer, assign and deliver the Assets to
Buyer and (b) at the Closing, Seller shall convey to Buyer good and valid title
to all of the Assets, free and clear of any Lien (other than Permitted Liens).
Except (i) as provided on Section 3.3 of the Seller Disclosure Letter, (ii) for
generally available desktop
10
software used in the conduct of the Business pursuant to licenses, which
licenses are referenced on Section 3.3 of the Seller Disclosure Letter, and
(iii) for the assets to which Buyer shall have access as provided in the
Transition Services Agreement or a license pursuant to the Retained Patent
License Agreement or the IP and Technology License Agreement, the Assets (x) are
sufficient for the operation or conduct of the Business by Buyer immediately
following the Closing substantially in the same manner as operated and conducted
on the date of the statement of net assets to be sold included in the Financial
Statements and as conducted on the date hereof by Seller and (y) constitute all
of the assets, tangible and intangible, of any nature whatsoever, necessary to
operate the Business in substantially the same manner as conducted on the date
hereof by Seller.
3.4 FINANCIAL STATEMENTS.
(a) Attached as Section 3.4(a) of the Seller Disclosure Letter is an
audited statement of net assets to be sold and a statement of direct
revenues and direct operating expenses for the year ended April 3, 2005
(collectively, the "FINANCIAL STATEMENTS"). The Financial Statements were
prepared in accordance with Seller's books and records and United States
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the period involved and fairly present in all material
respects, the net assets to be sold and the direct revenues and direct
operating expenses of the Business for the applicable period covered
thereby.
(b) Since the date of the statement of net assets to be sold included
in the Financial Statements, there has not been any Material Adverse Effect
on the Business. Except as set forth in Section 3.4(b) of the Seller
Disclosure Letter, since the date of the statement of net assets to be sold
included in the Financial Statements, Seller has caused the Business to be
conducted in the ordinary course and in substantially the same manner as
previously conducted (including with respect to work-force reductions,
sales practices (including promotions, discounts and concessions),
maintenance and repair expenditures, capital expenditures, environmental
expenditures and inventory levels) and has made commercially reasonable
efforts consistent with past practices to preserve the relationships of the
Business with material suppliers and customers.
(c) Inventory. Each item of Inventory constituting Assets, whether
reflected on the statement of net assets to be sold included in the
Financial Statements or subsequently procured or produced, (a) is in good,
usable and, as to finished products, marketable condition (as of the
Closing Date) in the ordinary course of business and (b) is properly stated
on the books and records of the Business at the lesser of cost and fair
market value, with adequate obsolescence reserves, all as determined in
accordance with GAAP. The quantities, type and quality of the Inventory
constituting Assets is sufficient for the conduct of the Business by Buyer
following the Closing in substantially the same manner as conducted on the
date of the statement of net assets to be sold included in the Financial
Statements and as currently conducted by Seller. Except as set forth in
Section 3.4(c) of the Seller Disclosure Letter, since the date of the
statement of net assets to be sold included in the Financial Statements,
there have not been any write-downs of the value of, or establishment of
any reserves against, any Inventory of the Business.
11
3.5 TAXES.
(a) For the purposes of this Agreement, the term "TAX" or,
collectively, "TAXES," shall mean any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value
added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts and the term
"TAX RETURN" shall mean all material federal, state, local and foreign
returns, estimates, information statements and reports relating to Taxes,
including any amendment thereof.
(b) All Tax Returns required to be filed on or prior to the Closing
Date by Seller with respect to any Tax that, if not paid, might result in a
Lien upon any of the Assets, have been or will be filed prior to the
Closing Date, are complete and accurate in all material respects, and all
Taxes due or claimed to be due pursuant thereto have been or will be paid
prior to the Closing Date.
(c) There are no Liens or other security interests upon any property
or assets of Seller for Taxes affecting the Business or the Assets, except
for Liens for Taxes not yet due and payable.
(d) None of the Assets: (1) is property that is required to be treated
as being owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Code; or (2) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(e) Seller is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Code and Income
Tax Regulations).
3.6 INTELLECTUAL PROPERTY.
(a) Generally.
(i) Section 3.6(a)(i) of the Seller Disclosure Letter sets forth
a complete and accurate list, together with registration or
application numbers, jurisdictions and filing or issuance dates, as
applicable, of all Patents owned by Seller and used by Seller in the
conduct or operation of the Business.
(ii) The Copyrights used in or related to the Business are listed
on Schedule 3.6(a)(ii).
(iii) None of the Transferred Intellectual Property is subject to
any license agreement other than the Transferred Patent License
Agreement.
(b) Trademarks.
12
(i) Except as set forth in Section 3.6(b) of the Seller
Disclosure Letter, all Trademarks that are part of the Transferred
Intellectual Property ("SELLER TRADEMARKS") for which an application
for trademark registration has been filed are currently in compliance
with all legal requirements, other than any requirement that, if not
satisfied, would not result in a cancellation or abandonment of any
such registration. No registered Seller Trademark has been or is now
involved in any opposition, abandonment or cancellation Proceeding in
the United States Patent and Trademark Office or any foreign trademark
office. To Seller's Knowledge, there has been no prior use of any
Seller Trademark by any third party that confers upon said third party
superior rights in any such Trademark.
(ii) Except as set forth in Section 3.6(b) of the Seller
Disclosure Letter, Seller is the owner of all right, title and
interest in and to all of Seller Trademarks, in each case free and
clear of any and all Liens or other adverse claims or interests (other
than Permitted Liens) of any kind or nature, and Seller has not
received any written claim or written notice challenging Seller's
complete and exclusive ownership of Seller Trademarks and all
associated goodwill or suggesting that any other Person has any claim
of legal or beneficial ownership with respect thereto, nor is Seller
aware of any basis for any of the foregoing. There is no agreement,
decree, arbitral award, or other provision or contingency which
obligates Buyer to grant licenses in future Seller Trademarks.
(c) Patents.
(i) All Patents that are part of the Transferred Intellectual
Property ("SELLER PATENTS") are currently in compliance with legal
requirements for payment of filing, examination, annuity and
maintenance fees and proofs of working or use other than any
requirement that, if not satisfied, would not result in a revocation
or lapse of the Seller Patent in question. Seller has not failed to
disclose material prior art or information in connection with the
prosecution of any Seller Patent that was known to Seller at the time
of such prosecution and that would result in the abandonment,
cancellation, or invalidity of any of the Seller Patents. No Seller
Patent has a non-extendable deadline less than one week after the
Closing Date.
(ii) No Seller Patent has been or is now involved in any
interference, reissue, reexamination or opposition Proceeding in the
United States Patent and Trademark Office or any foreign patent office
and, to Seller's Knowledge, no such action has been threatened.
(iii) Seller is the owner of all right, title and interest in and
to all of the Seller Patents, in each case free and clear of any and
all Liens, covenants, conditions and restrictions or other adverse
claims or interests of any kind or nature (other than Permitted
Liens). Except as set forth in Section 3.6(c)(iii) of the Seller
Disclosure Letter, Seller has not received any written claim or
written notice challenging Seller's ownership of Seller Patents or
suggesting that any
13
other Person has any claim of legal or beneficial ownership with
respect thereto, nor is Seller aware of any basis for any of the
foregoing. There is no agreement, decree, arbitral award or other
provision or contingency which obligates Seller to grant licenses in
future Seller Patents.
(d) Trade Secrets.
(i) Seller has taken commercially reasonable steps to protect its
rights in all Trade Secrets.
(ii) Without limiting the generality of Section 3.6(d)(i), each
former or current member of management or personnel of the Business,
including all former and current employees, agents, consultants and
independent contractors who have contributed to or participated in the
creation, conception, reduction to practice, or development of the
Transferred Intellectual Property or Transferred Technology
(collectively, "PERSONNEL") has executed and delivered to Seller a
proprietary information agreement restricting such Person's right to
disclose proprietary information of Seller.
(e) Ownership; Sufficiency of Transferred Intellectual Property.
Seller owns or possesses adequate licenses or other rights to use, free and
clear of Liens (other than Permitted Liens), orders, arbitration awards and
contingent licenses arising from termination provisions (or other causes)
in agreements between Seller and any other Person, all of the Transferred
Technology and Transferred Intellectual Property. Except (i) as provided on
Section 3.6(e) of the Seller Disclosure Letter, (ii) for generally
available desktop software used in the conduct of the Business pursuant to
licenses (as referenced on Section 3.3 of the Seller Disclosure Letter),
and (iii) for the assets to which Buyer shall have access as provided in
the Transition Services Agreement or a license pursuant to the Retained
Patent License Agreement or the IP and Technology License Agreement, the
Transferred Intellectual Property and Transferred Technology constitutes
all the Intellectual Property and Technology used in the operation of the
Business as currently conducted and is all such Intellectual Property
necessary to operate the Business after the Closing in substantially the
same manner as the Business has been operated by Seller during the six (6)
months prior to the Closing.
(f) No Infringement by Seller. Except as set forth on Section 3.6(f)
of the Seller Disclosure Letter, the Transferred Intellectual Property and
the Transferred Technology, and all related products and services used,
marketed, sold or licensed by Seller in the conduct of the Business, do not
infringe upon, violate or constitute the unauthorized use of any rights
owned or controlled by any third party, including any Intellectual Property
of any third party. Except as set forth in Section 3.6(f) of the Seller
Disclosure Letter, no litigation is now, or since January 1, 2003 has been,
pending and no notice or other claim has been received by Seller, with
respect to the Transferred Technology or the Business, (A) alleging that
any of Seller has engaged in any activity or conduct that infringes upon,
violates or constitutes the unauthorized use of the Intellectual Property
of any third party, including any contamination or misappropriation
14
of trade secrets claims, or (B) challenging the ownership, use, validity or
enforceability of any Intellectual Property owned or exclusively licensed
by or to Seller.
(g) No Infringement by Third Parties. To Seller's Knowledge, no third
party is misappropriating, infringing, diluting or violating any of the
Transferred Intellectual Property and no claims for any of the foregoing
have been brought against any third party by Seller. Seller has taken
commercially reasonable steps to protect the Transferred Intellectual
Property.
(h) Assignment. The execution, delivery and performance by Seller of
this Agreement and the related agreements to which Seller is a party, and
the consummation of the transactions contemplated hereby and thereby, will
not result in the loss or impairment of, or give rise to any right of any
third party to terminate, any of Seller's rights to own any of the
Transferred Intellectual Property, nor require the consent of any
Governmental Entity or third party in respect of any such Transferred
Intellectual Property.
(i) Technology. The Transferred Technology was: (i) developed by
employees of Seller within the scope of their employment; (ii) developed by
independent contractors who have assigned their rights to Seller pursuant
to written agreements; or (iii) otherwise acquired by Seller from a third
party who assigned the Technology to Seller. To Seller's Knowledge, none of
the current officers and employees of Seller has any patents issued or
applications pending for any method, device, process, design or invention
of any kind now used or needed by Seller in the furtherance of the
Business, which patents or applications have not been assigned to Seller,
with such assignment duly recorded in the United States Patent and
Trademark Office and foreign patent office, as applicable.
(j) Royalties and Licenses. Seller has no obligation to compensate or
account to any Person for the use of any of the Transferred Intellectual
Property.
(k) Export Control. Seller has obtained all approvals necessary for
exporting from any country in which Seller's products of the Business are
developed and exported, including the Transferred Technology, in accordance
with all applicable export control regulations and importing the products
and Transferred Technology into any country in which the products and
Transferred Technology are now sold or licensed for use, and all such
export and import approvals throughout the world are valid, current,
outstanding and in full force and effect.
3.7 COMPLIANCE; PERMITS.
(a) Compliance. Except as set forth on Section 3.7(a) of the Seller
Disclosure Letter, Seller has not received any written notice that it is in
violation of any Legal Requirement applicable to it or by which it or any
of its properties is bound and relating to the Business or the Assets. No
material investigation or review by any Governmental Entity is pending or,
to the Knowledge of Seller, has been threatened in a writing
15
delivered to Seller, against Seller related to the Business. There is no
judgment, injunction, order or decree binding upon Seller related to the
Business.
(b) Permits. Seller holds, to the extent legally required, all
material Permits that are required for the operation of the Business, as
currently conducted (collectively, "BUSINESS PERMITS"). As of the date
hereof, no suspension or cancellation of any of the Business Permits is
pending or, to the Knowledge of Seller, threatened. Seller has received no
written notice that it is not in compliance in all material respects with
the terms of the applicable Business Permits.
3.8 LITIGATION. Except as set forth in Section 3.8 of the Seller Disclosure
Letter, there is no Proceeding pending, or, to Seller's Knowledge, threatened
against Seller with respect to the Business or against or affecting any of the
Assets before any court or any other Governmental Entity that (a) involves
potential liability to Seller of more than $75,000, (b) presents in large degree
the same legal and factual issues as other actions or claims against Seller and,
together with such actions and claims, relates to or involves potential
liability of more than $75,000 against Seller, (c) seeks any injunctive relief
or (d) relates to or otherwise may give rise to any legal restraint on or
prohibition against the transactions contemplated by this Agreement. To Seller's
Knowledge, Seller is not a party or subject to or in default under any Judgment
applicable to the conduct of the Business or any Asset or Assumed Liability.
There is no Proceeding by Seller pending, or which Seller intends to initiate,
against any other Person arising out of the conduct of the Business which
involves an amount greater than $75,000. Seller has not entered into any
agreement to settle or compromise any Proceeding pending or threatened against
it in relation to its operation of the Business which has involved any
obligation other than the payment of money and for which it has any continuing
obligation. There are no Proceedings pending, or, to Seller's Knowledge,
threatened, by or against Seller with respect to this Agreement or the
agreements contemplated hereby, or in connection with the transactions
contemplated hereby or thereby.
3.9 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. No underground storage tanks and no substance
that has been designated by any Governmental Entity or by applicable Legal
Requirement to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment, including PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as
amended, and the regulations promulgated pursuant to said laws, but
excluding office and janitorial supplies (a "HAZARDOUS MATERIAL"), are
present in violation of applicable Legal Requirements in, on or under the
Leased Property as a result of the actions of Seller, or, to the Knowledge
of Seller, as a result of any actions of any third party.
(b) Hazardous Materials Activities. Seller has not, in connection with
the Business, transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in
violation of or in a manner which would
16
reasonably be expected to result in liability pursuant to, any Legal
Requirement in effect on or before the Closing Date. Seller, in connection
with the Business, has not disposed of, transported, sold, used, released,
exposed its employees or others to or manufactured any product containing a
Hazardous Material (collectively, "HAZARDOUS MATERIALS ACTIVITIES") in
violation of or in a manner which would reasonably be expected to result in
liability pursuant to any Legal Requirement.
(c) Generally. Seller, with respect to the Business, has at all times
during the last three (3) years been and currently is in compliance in all
material respects with all Environmental Laws. Seller currently holds all
material Environmental Permits required for the operation of the Business
and the use and occupancy of the Leased Property and is in compliance in
all material respects with all terms and conditions of all material
Environmental Permits. Seller is not subject to nor has received written
notice of any pending or, to Seller's Knowledge, threatened Environmental
Claim from any Governmental Entity or third party. To Seller's Knowledge,
there are no facts or circumstance that could involve Seller (or after
Closing, Buyer) in any Environmental Claim related to the Business.
3.10 CONTRACTS.
(a) Material Contracts. For purposes of this Agreement, "SELLER
MATERIAL CONTRACT" shall mean, other than purchase orders entered into in
the ordinary course of business:
(i) any contracts to which Seller is a party with respect to the
Business that would be "material contracts" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC) of the Business if
the Business were a separate SEC reporting company;
(ii) any contract containing any covenant expressly restricting
the right of Seller to engage in any line of business or compete with
any Person in any line of business which would be binding on Buyer as
the successor in interest to Seller in the Business;
(iii) any contract, or group of contracts with a Person (or group
of affiliated Persons), the termination or breach of which would have
a Material Adverse Effect on the Business;
(iv) indentures, credit agreements, security agreements,
mortgages, guarantees, promissory notes and contracts relating to or
evidencing indebtedness for borrowed money of Seller (excluding any
leases involving aggregate annual payments of less than $100,000 per
lease) which would be binding on Buyer as successor in interest to
Seller in the Business or result in a Lien on any of the Assets;
(v) any legal entity in the nature of a partnership or joint
venture, or a material strategic alliance, in each case relating to
the Assets or the Business;
17
(vi) any contract which would reasonably be expected to prohibit
or materially delay the consummation of the transactions contemplated
by this Agreement;
(vii) any contract that involves the purchase or lease of
personal property with any supplier or for the furnishing of services
to Seller in connection with the Business with payments greater than
$100,000 per year, other than purchase orders in the ordinary course
of business and other than contracts or agreements that are terminable
by Seller within 90 days or less;
(viii) any employment agreement or employment contract with an
employee of the Business that cannot be terminated upon reasonable
notice, or pay in lieu of reasonable notice, as required by applicable
Legal Requirements;
(ix) any collective bargaining agreement, letter of intent,
letter of understanding or other contract with any labor organization,
union or other employee association relating to the Business;
(x) (A) any continuing contract (including a purchase order of
Seller) for the future purchase of materials, supplies or equipment or
(B) any management, service, consulting or other similar contract, in
any such case relating to the Business or the Assets and that has an
aggregate future Liability to Seller or the Business in excess of
$100,000;
(xi) any license, sublicense, option or other contract relating,
in whole or in part, to any Transferred Intellectual Property or any
Transferred Technology (including any license or other contract under
which Seller granted the right to use any Transferred Intellectual
Property or any Transferred Technology);
(xii) any contract (A) for the sale of any Asset (other than
licenses and sales of Seller's products in the ordinary course of
business), (B) for the grant of any preferential rights to purchase
any Asset, (C) for the grant of any exclusive right to use any Asset,
or (D) requiring the consent of any party to the transfer of any
Asset;
(xiii) any contract with any Governmental Entity relating to the
Assets or the Business; and
(xiv) any contract (other than a purchase order or a sales order)
relating to the Assets or the Business that has an aggregate future
Liability to Seller in excess of $100,000 and extends for a term more
than ninety (90) days from the date of this Agreement.
(b) Schedule. Section 3.10(b) of the Seller Disclosure Letter sets
forth a list of all Seller Material Contracts to which Seller is a party or
by which it is bound by as of the date hereof.
18
(c) No Breach. All Seller Material Contracts that are Assigned
Contracts are valid and in full force and effect and are enforceable in all
material respects against Seller and, to Seller's Knowledge, the other
party thereto, in accordance with their terms, except to the extent such
enforcement may be limited by bankruptcy, insolvency, moratorium and other
similar laws relating to or affecting creditors' rights generally or
general equitable principles. Except as set forth in Section 3.10(c) of the
Seller Disclosure Letter, Seller has performed in all material respects all
material obligations required to be performed by it to date under all
Seller Material Contracts that are Assigned Contracts, there are no
material Liabilities accrued under any Seller Material Contract that is an
Assigned Contract with respect to any period prior to the Closing (other
than those that will be discharged, paid or performed prior to the
Closing), and Seller is not (with or without the lapse of time or the
giving of notice, or both) in material breach or material default in any
respect thereunder and, to Seller's Knowledge, no other party to any Seller
Material Contract that is an Assigned Contract is (with or without the
lapse of time or the giving of notice, or both) in material breach or
material default in any respect thereunder. Seller has not received any
written notice of the intention of any party to terminate any Seller
Material Contract that is an Assigned Contract. Except as set forth on
Section 3.10(c) of the Seller Disclosure Letter, complete and correct
copies of all Seller Material Contracts that are Assigned Contracts have
been delivered to Buyer by Seller.
3.11 BROKERS' AND FINDERS' FEES. Except for fees payable to Morgan Stanley,
Seller has not incurred, nor shall it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.12 CONDITION OF ASSETS; LIMITED WARRANTIES.
(a) Except as set forth on Section 3.12 of the Seller Disclosure
Letter and for personal property currently undergoing repair or maintenance
in the ordinary course of the Business, each material item of tangible
personal property included in the Assets is in all material respects in
good working order (normal wear and tear and depreciation excepted) and has
been maintained in all material respects in accordance with generally
accepted industry practice.
(b) Except as otherwise expressly provided in this Agreement, Seller
makes no other representations or warranties whatsoever to Buyer, express,
implied or statutory, concerning the Assets, the Assumed Liabilities or the
Business, including any representation or warranty as to value, quality,
quantity, condition, merchantability, design, suitability, usability,
salability, obsolescence, working order, compliance with law, validity or
enforceability. BUYER SPECIFICALLY ACKNOWLEDGES THAT NO WARRANTIES Of
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE ARE MADE OR SHOULD BE
IMPLIED IN THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
3.13 CUSTOMERS; SUPPLIERS.
19
(a) Except for the customers named in Section 3.13(a) of the Seller
Disclosure Letter, the Business does not have any customer from whom it
received more than 5% of its revenue during its most recent full fiscal
year. Except as set forth in Section 3.13(a) of the Seller Disclosure
Letter, since the date of the statement of net assets to be sold included
in the Financial Statements, there has not been, to Seller's Knowledge, any
material adverse change in Seller's relationship with any customer named in
Section 3.13(a) of the Seller Disclosure Letter. Except as set forth on
Section 3.13(a) of the Seller Disclosure Letter, during the two years prior
to the date hereof, Seller has not received any written or oral customer
complaint concerning the Business, other than complaints that, individually
or in the aggregate, have not had and would not reasonably be expected to
have a Material Adverse Effect on the Business.
(b) Except for the suppliers named in Section 3.13(b) of the Seller
Disclosure Letter, the Business has not purchased, from any single
supplier, goods or services for which the aggregate purchase price exceeds
20% of the total value of goods and services purchased by the Business
during its most recent full fiscal year. Except as set forth in Section
3.13(b) of the Seller Disclosure Letter, since the date of the statement of
net assets to be sold included in the Financial Statements there has not
been, to Seller's Knowledge, any material adverse change in Seller's
relationship with any supplier named in Section 3.13(b) of the Seller
Disclosure Letter.
(c) Except as set forth in Section 3.13(c) of the Seller Disclosure
Letter, Seller has not entered into any written agreements that would
adversely effect or limit or restrict Buyer's ability to distribute or sell
the products of the Business in any jurisdiction.
3.14 EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS.
(a) Seller does not have any employment contract with any officer or
employee or any other consultant or person that may be a Transferred
Employee. Except as set forth in Section 3.14(a) of the Seller Disclosure
Letter, Seller and its Affiliates do not have any deferred compensation,
pension, retirement, health, profit sharing, incentive bonus, stock
purchase, stock option, hospitalization, insurance, severance, workers'
compensation, supplemental unemployment benefits, vacation benefits,
disability benefits, or any other employee pension benefit (as defined in
ERISA or otherwise) or welfare benefit obligation, or any other employee
benefit of any kind whatsoever whether under a plan or agreement, covering
any of their current or former employees or consultants of the Business
("EMPLOYEE PLANS").
(b) Each Employee Plan has been maintained, funded, operated and
administered in compliance in all material respects with all applicable
laws and regulations, including but not limited to, ERISA, the Code, and
the Health Insurance Portability and Accountability Act of 1996. Each
Employee Plan that is intended to be qualified under Section 401(a) of the
Code and each trust forming a part thereof that is intended to be exempt
from taxation under Section 501(a) of the Code has received a favorable
determination letter from the IRS as to its qualification and tax-exempt
status and nothing has occurred since the date of such determination letter
that would reasonably be expected to adversely affect the qualification of
such Employee Plan or the
20
tax-exempt status of such related trust. No Employee Plan is a plan subject
to Section 302 or Title IV of ERISA, nor a "multiemployer plan" as defined
in Section 3(37) of ERISA and 414(f) of the Code, nor a "multiple employer
plan" as described in Section 4063(a) of ERISA and 413 of the Code, and
neither Seller nor any Person which, together with Seller, would be (or
would have ever been) treated as a single employer under Section 4001 of
ERISA or Section 414 of the Code has ever contributed or had an obligation
to contribute to any such plans.
(c) Except as set forth in Section 3.14(c) of the Seller Disclosure
Letter, no current or former director, officer, consultant or other
employee of the Business will become entitled to any retirement, severance
or similar benefit or enhanced or accelerated benefit (including any
acceleration of vesting or lapse of repurchase rights or obligations with
respect to any employee stock option or other benefit under any stock
option plan or compensation plan or arrangement of Seller) as a result of
the transactions contemplated hereby or any termination of employment or
service in connection therewith (except as required under COBRA or as may
be required under Section 411(d)(3) of the Code).
(d) No Employee Plan provides post-retirement health and medical, life
or other welfare benefits for retired employees of the Business (other than
benefit coverage mandated by applicable statute, including benefits
provided pursuant to COBRA).
3.15 EMPLOYMENT AND LABOR MATTERS.
(a) (i) There is no, and during the past two (2) years there has not
been any, labor strike, lockout, slowdown, or other labor dispute pending,
or, to Seller's Knowledge, threatened with respect to the employees of the
Business, (ii) there are no union claims or demands to represent, or
organizational campaigns in progress with respect to, the employees of the
Business; (iii) there is no collective bargaining or similar agreement or
any arrangement with any labor organization, or work rules or practices
agreed to with any labor organization or employee association, applicable
to employees of the Business; (iv) none of the employees of the Business
are represented by any labor organization; (v) Seller is not nor has at any
time since January 1, 2003 has Seller been engaged in any unfair labor
practice in connection with the conduct of the Business; (vi) Seller is and
has at all times since January 1, 2003 with respect to the Business been in
compliance in all material respects with all applicable Laws respecting
labor, employment standards, human rights, fair employment practices, work
place safety and health, terms and conditions of employment, classification
of employees and wages and hours; (vii) Seller is not delinquent in any
material respect in any material payments to any of the employees of the
Business for any wages, salaries, commissions, bonuses, fees or other
direct compensation due with respect to any services performed for it to
the date hereof or amounts required to be reimbursed to such employees;
(viii) Seller has, in all material respects, withheld all amounts required
by Legal Requirements or by agreement to be withheld from the wages,
salaries, commissions, bonuses, fees and any other payments to employees of
the Business, (ix) there are no Proceedings, formal or informal grievances,
complaints or charges with respect to employment or labor matters relating
to the Business (including, without limitation, charges of employment
discrimination, retaliation or unfair labor practices) pending or, to
Seller's Knowledge, threatened in any
21
judicial, regulatory or administrative forum, or under any dispute
resolution procedure; (x) none of Seller's employment policies or practices
with respect to the Business is currently being or has since January 1,
2003 been audited or investigated; (xi) Seller is not subject to any
consent decree, order of any court, tribunal, arbitration or Government
Authority or settlement thereof in respect of any labor or employment
matters with respect to the Business; (xii) there are no written employment
contracts applicable to employees of the Business other than those set
forth in or attached to Section 3.15(a) of the Seller Disclosure Letter,
true and correct copies of which have been previously delivered to Buyer;
and (xiii) to Seller's Knowledge, no employees of the Business are in
material violation of any material term of any employment contract,
non-disclosure agreement, noncompetition agreement or any restrictive
covenant to a former employer relating to the right of any such person to
be employed by or provide service to Seller or to the use by Seller of
trade secrets or proprietary information of others.
(b) Section 3.15(b) of the Seller Disclosure Letter sets forth the
name of each employee of the Business as of the date hereof that Seller
intends as of the date hereof to transfer to Buyer in connection with the
transactions contemplated hereby (the "BUSINESS EMPLOYEES"), their
respective titles or positions, dates of hire, regular work location,
current annual compensation (salary, bonus and otherwise), current rate of
accrual of paid time off, and a description of their status (i.e., whether
active or on leave of absence) as of the date of this Agreement. To the
extent any employee listed on Section 3.15(b) of the Seller Disclosure
Letter is on leave of absence, Section 3.15(b) of the Seller Disclosure
Letter further describes the type of leave, the date it commenced and the
expected duration of leave. Except as set forth on Section 3.15(b) of the
Seller Disclosure Letter, there are no Business Employees on layoff, and
there are no individuals not currently listed as Business Employees on
Section 3.15(b) of the Seller Disclosure Letter with recall or preferential
rehire rights and no Business Employees listed on Section 3.15(b) of the
Seller Disclosure Letter have any such rights.
(c) There is no policy, plan or program of paying severance pay or any
form of severance compensation in connection with the termination of any
employee of the Business. To Seller's Knowledge, the transfer of the Assets
in connection with the transactions contemplated by this Agreement will not
adversely affect the authority of any employee of the Business to work in
the United States or any other country. Except as set forth on Section
3.15(c) of the Seller Disclosure Letter, no employee of the Business is, to
Seller's Knowledge, a party to or bound by any contract or subject to any
judgment that may materially interfere with the use of such Person's best
efforts to promote the interests of the Business.
(d) There are no Contingent Workers employed or used with respect to
the Business.
3.16 INVESTOR REPRESENTATIONS.
(a) Seller has received (via EDGAR) and reviewed a copy of Buyer's
Annual Report on Form 10-K for the year ended January 29, 2005, Buyer's
Quarterly Reports on
22
Form 10-Q for the three months ended April 30, 2005, Buyer's 2005 Annual
Report to Stockholders and Buyer's Proxy Statement for the 2005 annual
stockholder meeting.
(b) Seller is an "accredited investor" (as defined in Rule 501 of
Regulation D promulgated under the Securities Act) and has such knowledge
and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Buyer Common Stock.
(c) Seller is obtaining the Buyer Common Stock for its own account,
for investment purposes, and not for distribution, assignment or resale to
others; provided, however, that nothing contained herein shall prevent
Seller from transferring such securities pursuant to the exercise of rights
under the Registration Rights Agreement. No other Person (other than Buyer)
has any direct or indirect beneficial interest in the Buyer Common Stock
being transferred to Seller hereunder.
(d) Seller understands that the sale of the Buyer Common Stock by
Buyer (except as contemplated by the Registration Rights Agreement) has not
been and will not be registered under the Securities Act, or any state
securities laws, will be conducted in reliance on the exemption for
nonpublic offerings provided by Section 4(2) of the Act and Regulation D
promulgated thereunder and analogous state securities law provisions, and
will be subject to the restrictions contained in Rules 144 and 145 under
the Securities Act. Seller further understands that the Buyer Common Stock
must be held indefinitely by Seller unless such Buyer Common Stock is
subsequently registered under the Securities Act and applicable state
securities laws or an exemption from such registration is available. Seller
further understands that except as expressly provided in the Registration
Rights Agreement, Buyer is under no obligation to register such securities
on Seller's behalf or to assist it in complying with any exemption from
registration and that such securities may not be sold pursuant to Rule 144
or Rule 145 promulgated by the SEC pursuant to the Securities Act unless
all of the conditions of such rules are met. Seller understands that the
shares of Buyer Common Stock delivered hereunder are restricted by the
provisions of, and shall bear the legend specified in, Section 6.10, except
as otherwise provided therein.
3.17 DISCLOSURE. No representation or warranty of Seller contained in this
Agreement or in any related agreement contemplated hereby and entered into by
Seller, and no statement of Seller contained in any certificate furnished by or
on behalf of Seller to Buyer pursuant to Section 7.2 of this Agreement or any
Schedule hereto or the Seller Disclosure Letter, contains any untrue statement
of a material fact, or omits to state any material fact necessary, in light of
the circumstances under which it was made, in order to make the statements
herein or therein, taken as a whole, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, except as otherwise set forth in
writing in appropriately corresponding sections of the disclosure letter
supplied by Buyer dated as of the date hereof (the "BUYER DISCLOSURE LETTER"),
as follows:
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4.1 ORGANIZATION; STANDING AND POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Bermuda.
Buyer has the requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing would
not have a Material Adverse Effect on Buyer.
4.2 AUTHORITY; NON-CONTRAVENTION; NECESSARY CONSENTS.
(a) Authority. Buyer has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly
authorized by all necessary corporate action on the part of Buyer and no
other corporate proceedings on the part of Buyer are necessary to authorize
the execution and delivery of this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and, assuming due execution and delivery by Seller,
constitutes the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except to the extent such enforcement
may be limited by bankruptcy, insolvency, moratorium and other similar laws
relating to or affecting creditors' rights generally or general equitable
principles.
(b) Non-Contravention. The execution and delivery of this Agreement by
Buyer does not, and performance of this Agreement by Buyer will not: (i)
conflict with or violate Buyer's Certificate of Incorporation or Bylaws,
(ii) conflict with or violate any material Legal Requirement applicable to
Buyer or by which Buyer or any of its properties is bound or affected, or
(iii) result in any material breach of or constitute a material default (or
an event that with notice or lapse of time or both would become a material
default) under, or impair Buyer's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a
material Lien on any of the material properties or assets of Buyer pursuant
to, any material contract to which Buyer is a party or by which Buyer or
any of its properties are bound or affected, in each case, except as would
not have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated hereby.
(c) Necessary Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity is
required to be obtained or made by Buyer in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the Necessary Consents and (ii) such
other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not be material to Buyer or Seller or
materially adversely affect the ability of the parties hereto to consummate
the transactions contemplated hereby within the time frame in which such
transactions would otherwise be consummated in the absence of the need for
such consent, approval, order, authorization, registration, declaration or
filings.
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4.3 BROKERS' AND FINDERS' FEES. Except for fees payable to Credit Suisse
First Boston, Buyer has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
4.4 AVAILABLE FUNDS. Buyer has all funds necessary to satisfy all of
Buyer's obligations under this Agreement.
4.5 BUYER COMMON STOCK. The Buyer Common Stock to be delivered to Seller
pursuant to Sections 2.2 and 2.3(a) by Buyer will be duly authorized and will,
when issued in accordance with the terms of this Agreement, be validly issued
and outstanding, fully paid and nonassessable and the issuance of such shares
will not be subject to any preemptive or similar rights.
4.6 SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 2003, Buyer has
filed with the SEC all forms, reports, statements, schedules and other documents
(including all exhibits and other information incorporated therein), required to
be filed by Buyer with the SEC under the Securities Act, the Exchange Act, and
the rules promulgated by the SEC thereunder (the "BUYER SEC DOCUMENTS"). As of
their respective filing dates, the Buyer SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Buyer SEC Documents and none of the Buyer SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Buyer included in the Buyer SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Buyer and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF THE BUSINESS BY SELLER.
(a) Ordinary Course. During the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Closing Date (except (i) as contemplated by this
Agreement, (ii) as disclosed in Section 5.1 of the Seller Disclosure
Letter, or (iii) to the extent that Buyer shall otherwise consent in
writing (which consent shall not be unreasonably withheld, delayed or
conditioned)), Seller shall carry on the Business in all material respects,
in the ordinary course, consistent with past practice, and shall use its
commercially reasonable efforts to preserve intact the Business, its
current business organization and its relationships with third parties and
to keep
25
available the services of its officers and employees, including payment of
all Taxes that become due as they become due.
(b) Maintenance of Assets. Seller shall maintain the Assets in a state
of repair and condition that complies with Legal Requirements and is
consistent with the requirements and normal conduct of Seller's business in
the ordinary course, consistent with past practice.
(c) Limitations. In addition, without limiting the generality of
Section 5.1(a), except as permitted by the terms of this Agreement, without
the prior written consent of Buyer (which consent shall not be unreasonably
delayed, withheld or conditioned), during the period from the date hereof
and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Closing Date, Seller shall not do any of the
following:
(i) Transfer any of the Assets except for any transfer in the
ordinary course of business, consistent with past practice;
(ii) Permit or allow any Asset to become subject to any license
or other Lien (other than Permitted Liens);
(iii) Fail to maintain the Assets, in the aggregate, in a
condition comparable to their current condition, reasonable wear, tear
and depreciation excepted, and except for Assets disposed of, sold or
consumed in the ordinary course of business, consistent with past
practice;
(iv) Terminate or materially amend any Assigned Contract except
in the ordinary course of business, consistent with past practice;
(v) Reduce or discount any prices of products of the Business;
(vi) Enter into any license, option or other contract relating or
pertaining to Transferred Intellectual Property or Transferred
Technology that would constitute Assets;
(vii) Enter into any joint ventures, strategic partnerships or
alliances that pertain or relate to the Business; or
(viii) Agree to or make any commitment to take any actions
prohibited by this Section 5.1.
(d) Advise of Changes. Seller shall promptly advise Buyer in writing
of the occurrence of any matter or event that is material to the assets,
condition (financial or otherwise), Liabilities or results of operations of
the Business.
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ARTICLE VI
PRE-CLOSING AND POST-CLOSING COVENANTS
6.1 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) Confidentiality. The parties acknowledge that Seller and Buyer
have previously executed a non-disclosure agreement dated June 15, 2005
(the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms and Buyer
will hold, and will cause its directors, officers, employees, agents and
advisors (including attorneys, accountants, consultants, bankers and
financial advisors) to hold, any Information (as defined in the
Confidentiality Agreement) confidential in accordance with the terms of the
Confidentiality Agreement.
(b) Access to Information. Seller shall afford Buyer and Buyer's
accountants, counsel and other Representatives reasonable access during
normal business hours to the properties, books, records and personnel of
Seller relating to the Business during the period prior to the Closing to
obtain all information concerning the Business, including the status of
product development efforts, properties, results of operations and
personnel, as Buyer or its Representatives may reasonably request;
provided, however, that Seller may restrict the foregoing access to the
extent that any law, treaty, rule or regulation of any Governmental Entity
applicable to Seller requires Seller to restrict or prohibit access to any
such properties or information.
6.2 PUBLIC DISCLOSURE. Neither Buyer nor Seller nor any of their respective
Affiliates shall issue or cause the publication of any press release or other
public announcement with respect to this Agreement or the other transactions
contemplated hereby without the prior written consent of the other party, except
as may be required by law or by any listing agreement with, or the policies of,
a national securities exchange in which circumstance reasonable efforts to
consult with the other party will still be required to the extent practicable.
6.3 REGULATORY FILINGS; REASONABLE BEST EFFORTS.
(a) Regulatory Filings. Buyer and Seller shall coordinate and
cooperate with one another and shall each use reasonable best efforts to
comply with, and shall each refrain from taking any action that would
impede compliance with, all Legal Requirements, and as promptly as
practicable after the date hereof, Buyer and Seller shall make all filings,
notices, petitions, statements, registrations, submissions of information,
application or submission of other documents required by any Governmental
Entity in connection with the transactions contemplated hereby, including,
if applicable: (i) Notification and Report Forms with the FTC and DOJ as
required by the HSR Act, (ii) any other filing necessary to obtain any
Necessary Consent, and (iii) filings under any other comparable pre-merger
notification forms required by the merger notification or control laws of
any applicable jurisdiction, as agreed by the parties hereto. Buyer and
Seller shall comply as promptly as practicable with any request for
additional information, documents or other materials received by such party
hereto or any of its subsidiaries or Affiliates from any Governmental
Entity. Buyer and Seller will cause all
27
documents that they are responsible for filing with any Governmental Entity
under this Section 6.3(a) to comply in all material respects with all
applicable Legal Requirements. All filing fees under the HSR Act and any
other Antitrust Laws shall be split evenly between Buyer and Seller.
(b) Exchange of Information. Buyer and Seller each shall promptly
supply the other with any information which may be required in order to
effectuate any filings or application pursuant to this Section 6.3. Except
where prohibited by applicable Legal Requirements, and subject to the
Confidentiality Agreement, Buyer and Seller shall consult with outside
counsel to the other prior to taking a position with respect to any such
filing, shall permit outside counsel to the other to review and discuss in
advance, and consider in good faith the views of the other in connection
with any analyses, appearances, presentations, memoranda, briefs, white
papers, arguments, opinions and proposals before making or submitting any
of the foregoing to any Governmental Entity by or on behalf of any party
hereto in connection with any investigations or other Proceedings in
connection with this Agreement or the transactions contemplated hereby
(including under any Antitrust Laws or other fair trade Legal Requirement),
coordinate with outside counsel to the other in preparing and exchanging
such information and promptly provide outside counsel to the other with
copies of all filings, presentations or submissions (and a summary of any
oral presentations) made by such party to any Governmental Entity in
connection with this Agreement or the transactions contemplated hereby,
provided that with respect to any such filing, presentation or submission,
Buyer and Seller need not supply outside counsel to the other with copies
(or in case of oral presentations, a summary) to the extent that any law,
treaty, rule or regulation of any Governmental Entity applicable to such
party requires such party or its subsidiaries to restrict or prohibit
access to any such properties or information.
(c) Notification. Buyer and Seller will notify the other promptly upon
the receipt of any comments from any officials of any Governmental Entity
regarding this Agreement or the transactions contemplated hereby, including
any filings made pursuant hereto and information provided to comply with
any Legal Requirements. Whenever any event occurs that is required to be
set forth in an amendment or supplement to any filing made pursuant to
Section 6.3(a), Buyer and Seller, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the applicable
Governmental Entity such amendment or supplement.
(d) Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth herein, each of the parties agrees to use reasonable
best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
6.4 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to
Buyer and Buyer shall give prompt notice to Seller, of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate or
any failure of Buyer or Seller, as the case may be, to comply with or satisfy in
any material respect any covenant, condition or agreement
28
to be complied with or satisfied by it under this Agreement, such that, (A) in
the case of Seller, the conditions set forth in Section 7.2(a) or Section 7.2(b)
would not be satisfied or (B) in the case of Buyer, the conditions set forth in
Section 7.3(a) or Section 7.3(b) would not be satisfied.
6.5 THIRD-PARTY CONSENTS. As soon as practicable following the date hereof,
Seller will use its commercially reasonable efforts (at its own expense) to
obtain (and Buyer will cooperate at its expense with Seller to obtain) all
consents, waivers and approvals under any Seller Material Contract as may be
required to be obtained in connection with the transactions contemplated hereby.
6.6 EMPLOYEE MATTERS.
(a) Effective as of the end of business on the Closing Date (the
"EMPLOYMENT TERMINATION DATE"), Seller shall terminate, and effective as of
the beginning of business on the business day following the Closing Date
(the "EMPLOYMENT COMMENCEMENT Date"), Buyer will offer to employ the
employees of Seller listed on Section 3.15(b) of the Seller Disclosure
Letter and who are employed by Seller as of the Closing Date. Such offer of
employment shall include compensation (including bonuses, commissions,
stock options, restricted stock, other forms of equity compensation and
benefits) that is comparable to the compensation (including bonuses,
commissions, stock options, restricted stock, other forms of equity
compensation and benefits) provided to such employees by Seller immediately
prior to the execution of this Agreement. Those employees described in the
preceding sentence who accept employment with (and become employed by)
Buyer are the "TRANSFERRED EMPLOYEES." On and after the Closing, Buyer
shall provide to the Transferred Employees participation in any pension,
401(k), medical, dental, vision, life, disability and other benefit plans
(the "BUYER PLANS") offered to similarly situated employees of Buyer. To
the extent permitted under the Buyer Plans, Buyer shall take all necessary
actions to provide that Transferred Employees will receive full credit for
years of service with Seller under the Buyer Plans to the extent taken into
account for such purposes under the benefit plans of Seller in which such
Persons were participating as of the date of this Agreement (the "SELLER
PLANS") prior to the Closing (other than with respect to benefit accrual
under employee 401(k) or other pension or retiree welfare benefit plans and
not for equity compensation vesting or vacation). To the extent permitted
under the Buyer Plans, Buyer shall give credit under those of its Buyer
Plans that are welfare benefit plans for all amounts credited toward
deductibles and out-of-pocket maximums, and time accrued against applicable
waiting periods, by Transferred Employees (including their eligible
dependents), in respect of the calendar year in which the Closing occurs.
For any Transferred Employee or dependent of a Transferred Employee who has
satisfied Seller's pre-existing condition exclusion and/or who has
creditable coverage from another group plan or individual plan, such
Transferred Employee or such dependent would not be subject to Buyer's
pre-existing condition exclusion. If a Transferred Employee or dependent of
a Transferred Employee has partially satisfied Seller's pre-existing
condition exclusion, the amount of time credited to the completion of that
pre-existing condition exclusion will be honored by Buyer.
29
(b) Buyer shall be responsible for making continuation coverage under
Code Section 4980B and Sections 601-608 of ERISA ("COBRA") available to any
Transferred Employee and any eligible spouse or dependent who experiences a
"qualifying event," as defined in Code Section 4980B(f)(3), after the
Employment Termination Date.
(c) Notwithstanding any possible inferences to the contrary, Buyer and
Seller do not intend for this Section 6.6 to create any rights or
obligations except as among Buyer and Seller and no past, present or future
employees of Seller or Buyer (or dependents thereof) shall be treated as
third party beneficiaries of this Section 6.6.
6.7 INSURANCE MATTERS. Seller shall use its commercially reasonable efforts
to keep all insurance policies presently maintained relating to the Business in
full force and effect through the close of business on the Closing Date.
Coverage of the Assets shall terminate as of the Closing Date under all such
policies.
6.8 NONCOMPETITION AGREEMENT. As an inducement for Buyer to enter into this
Agreement, for a period of three (3) years from the Closing Date, Seller will
not, directly or indirectly, engage in, acquire, own or hold a business anywhere
in the world that competes with the Business as conducted immediately prior to
the Closing Date (the "SELLER RESTRICTED BUSINESS"), including as a proprietor,
principal, agent, partner, stockholder, member of any association, consultant or
otherwise. The restrictions set forth in this Section 6.8 shall not prohibit or
otherwise restrict Seller from (i) purchasing and/or owning (directly or
indirectly) up to two percent of the issued and outstanding capital stock of a
publicly held entity carrying on a Seller Restricted Business, so long as Seller
does not participate in the control or take an active part in the management or
direction thereof and does not in any way render services thereto, (ii)
acquiring (directly or indirectly) any Person or business engaged in a Seller
Restricted Business as of the date of such acquisition (or as of any other date)
(such Person or business, an "ACQUIRED BUSINESS"), if less than thirty percent
(30%) of the consolidated gross revenues of such Acquired Business during the
last completed fiscal year of such Acquired Business prior to such acquisition
were derived from any Seller Restricted Business, and Seller may in such case
continue to conduct such Seller Restricted Business through such Acquired
Business without any limitation or restriction hereunder; or (iii) acquiring
(directly or indirectly) any Acquired Business even if thirty percent (30%) or
more of the consolidated gross revenues of such Acquired Business during the
last completed fiscal year of such Acquired Business prior to such acquisition
were derived from any Seller Restricted Business, provided that, in such event,
Seller shall, no later than six (6) months following the completion of such
acquisition, dispose of the portion of such Acquired Business that is then
engaged in such Seller Restricted Business.
6.9 ADDITIONAL SERVICES. Between the date of this Agreement and the Closing
Date, Seller and Buyer agree to negotiate in good faith a customary business
arrangement (including pricing) under which Seller would purchase from Buyer the
application specific integrated circuits (ASICs) for the products identified in
Exhibit B of the Transition Services Agreement and Buyer would provide the
required support services for each of those products. The parties shall attempt
to reach an agreement on pricing and other terms and conditions on a product by
product basis. To the extent that the parties are able to reach an agreement
with respect to the ASIC for a specific product, Buyer shall not be required to
provide Seller Transition Services (as
30
defined in the Transition Services Agreement) under the Transition Services
Agreement with respect to that product.
6.10 RESTRICTIONS ON RESALE OF BUYER COMMON STOCK. The Buyer Common Stock
delivered by Buyer hereunder will be transferable by Seller only pursuant to (a)
public offerings registered under the Securities Act and any applicable state
securities law or (b) an available exemption under the Securities Act and any
applicable state securities law. The transfer agent for the Buyer Common Stock
has been instructed to block any transfers of Buyer Common Stock that are not in
compliance with these provisions. The certificate representing the shares of
Buyer Common Stock delivered hereunder shall be imprinted with a legend in
substantially the following form:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
ACT, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO THE REGISTRATION
PROVISIONS OF SUCH ACTS OR AN EXEMPTION THEREFROM."
It is understood and agreed that the legend set forth above shall be
removed by delivery of substitute certificates without such legend if Seller
shall have delivered to Buyer an opinion of counsel reasonably satisfactory to
Buyer to the effect that such legend is not required for purposes of the
Securities Act.
6.11 NET INVENTORY ADJUSTMENT.
(a) On the day preceding the Closing Date, Seller shall conduct a
physical count of the Inventory on hand after the close of business on such
day. The parties will mutually agree in advance on a plan for the physical
count of the Inventory (including a determination of the scope thereof),
and Buyer or representatives of Buyer shall be entitled to observe the
physical count of the Inventory pursuant to such plan.
(b) Within ten (10) days after the Closing Date, Seller shall prepare
and deliver to Buyer a statement (the "STATEMENT") setting forth the value
of the net Inventory as of the Closing (but determined immediately prior to
giving effect to the transactions contemplated hereby) (the "CLOSING NET
INVENTORY VALUE"). If the Statement as prepared by Seller reflects a
Closing Net Inventory Value of less than $5,300,000, Seller shall include
with the Statement a check payable to Buyer in the amount of the difference
between $5,300,000 and the Closing Net Inventory Value. For purposes of
determining the Closing Net Inventory Value, the Inventory shall be valued
in accordance with the methodology used by Seller in the preparation of the
Financial Statements, including netting any reserve for excess or obsolete
inventory against the gross inventory balance.
(c) During the fifteen (15) day period following Buyer's receipt of
the Statement, Buyer shall be permitted to review Seller's working papers
relating to the Statement. Unless Buyer gives written notice of its
disagreement with the Statement (a "NOTICE OF DISAGREEMENT") to Seller
prior to the twentieth (20th) day following delivery
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of the Statement, then (A) the Statement shall become final and binding
upon such 20th day, and (B) if the Closing Net Inventory Value is more than
$5,300,000, Buyer within five (5) business days thereafter will deliver to
Seller a check payable to Seller in the amount by which the Closing Net
Inventory Value exceeds $5,300,000.
(d) Any Notice of Disagreement shall specify in reasonable detail the
nature of any disagreement so asserted. If a Notice of Disagreement is
received by Seller in a timely manner, then the Statement (as revised in
accordance with this Section 6.11) shall become final and binding upon
Seller and Buyer on the earlier of (i) the date on which Seller and Buyer
resolve in writing any differences they have with respect to the matters
specified in the Notice of Disagreement or (ii) the date any disputed
matters are finally resolved in writing by the Accounting Firm (as defined
below).
(e) During the 30-day period following the delivery of a Notice of
Disagreement, Seller and Buyer shall seek to resolve in writing any
differences which they may have with respect to the matters specified in
the Notice of Disagreement. At the end of such 30-day period, Seller and
Buyer shall submit to an independent accounting firm (the "ACCOUNTING
FIRM") for arbitration of any matters which remain in dispute and which
were properly included in the Notice of Disagreement. The Accounting Firm
shall be the Orange County office of Ernst & Young, LLP or, if such firm is
unable or unwilling to act, such other nationally recognized independent
public accounting firm as shall be agreed upon by Seller and Buyer in
writing. Seller and Buyer hereby agree to use their commercially reasonable
efforts to cause the Accounting Firm to render a decision resolving the
matters submitted to the Accounting Firm within thirty (30) days following
submission. Seller and Buyer agree that judgment may be entered upon the
arbitral award of the Accounting Firm in any court having jurisdiction
pursuant to Section 10.9. The cost of any arbitration (including the fees
and expenses of the Accounting Firm and reasonable attorney fees and
expenses of the parties) pursuant to this Section 6.11 shall be borne by
Buyer and Seller in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, which proportionate allocations shall also
be determined by the Accounting Firm, as arbitrators, at the time the
determination of the Accounting Firm is rendered on the merits of the
matters submitted. The costs and expenses incurred by the accountants,
auditors and other Representatives of any party hereto in connection with
such party's review of the Statement or otherwise in connection with the
matters that are the subject of this Section 6.11 shall be borne by the
party incurring such expenses.
(f) If the sum of the Closing Net Inventory Value as finally
determined pursuant to subsections (d)-(e) (the "FINAL CLOSING NET
INVENTORY VALUE") and the amount of any check provided to Buyer with the
Statement (if any) is less than $5,300,000, Seller shall, within ten (10)
business days after the determination of the Final Closing Net Inventory
Value, deliver to Buyer a check payable to Buyer in the amount of the
excess of (i) $5,300,000 over (ii) the sum of the Final Closing Net
Inventory Value and the amount of any check provided to Buyer with the
Statement (if any). Conversely, if the sum of the Final Closing Net
Inventory Value and the amount of any check provided to Buyer with the
Statement (if any) is more than $5,300,000, Buyer shall, within ten (10)
business days after the determination of the Final Closing Net Inventory
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Value, deliver to Seller a check payable to Seller in the amount by which
the sum of the Final Closing Net Inventory Value and the amount of any
check provided to Buyer with the Statement (if any) exceeds $5,300,000.
6.12 SUPPLEMENT TO DISCLOSURE LETTER. Each of Buyer and Seller may, at any
time after the date hereof and prior to the Closing, supplement any Section of
its respective Disclosure Letter to account for a condition or event that
renders untrue or inaccurate any representation, warranty, covenant, agreement
or other provision of this Agreement or with respect to any matter that was or
would have been required to be set forth or described in the respective
Disclosure Letter; provided, however, that no supplement or amendment to any
Disclosure Letter shall have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VII or for purposes of
determining whether any Person is in breach of this Agreement or whether any
Person is entitled to indemnification pursuant to Article IX or any other remedy
at law or in equity (to the extent available under the other terms of this
Agreement).
6.13 TAX COVENANTS.
(a) COOPERATION AND EXCHANGE OF INFORMATION. Seller and Buyer will
provide each other with such cooperation and information as any of them
reasonably may request of the other in filing any Tax Return, amended Tax
Return or claim for refund, determining a liability for Taxes or a right to
a refund of Taxes, participating in or conducting any audit or other
Proceeding in respect of Taxes. Any information obtained under this Section
6.13(a) shall be kept confidential except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other Proceeding.
(b) TRANSFER TAXES.
(i) Notwithstanding anything to the contrary in Section
6.13(b)(ii), Buyer and Seller shall split equally the financial
responsibility for all real property transfer or gains, sales, use,
transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes which
become payable in connection with the transactions contemplated by
this Agreement.
(ii) The sales, use and transfer Tax Returns required by reason
of the transferring and recording of title to the Assets, if so
required by Law, shall be timely prepared by the party legally
obligated to make such filing. The party legally obligated to file any
Tax Return relating to Transfer Taxes shall provide a copy of such
Returns to Seller and Buyer at least fifteen (15) days prior to the
date such Tax Returns are due, along with a calculation of the amount
of Transfer Taxes payable by Buyer. The parties agree to cooperate
with each other in connection with the preparation and filing of such
Tax Returns, in obtaining all available exemptions from such Transfer
Taxes and in timely providing each other with resale certificates and
any other documents necessary to satisfy any such exemptions. Each
party hereto shall execute and deliver all instruments and
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certificates necessary to enable the other party or parties to comply
with the foregoing.
(c) PROPERTY TAXES. All real estate, personal property, and ad valorem
Taxes relating to the Assets which shall have become due and payable prior
to the Closing Date shall be paid by Seller. All such Taxes with respect to
taxable periods that include, but do not begin or end on, the Closing Date
shall be prorated to the Closing Date (such proration is to be based on the
number of days in the taxable period up to and including the Closing Date,
relative to the number of days in the entire taxable period). In connection
with such proration, in the event the actual Tax amounts are not available
at the Closing Date, proration of Taxes shall be based on 105% of the
actual Taxes for the preceding year for which actual Tax amounts are
available. The amount due one party as a result of such proration shall be
paid to the other party at the Closing, provided, however, that in the
event actual Tax amounts are not available at the Closing Date, an
appropriate additional adjustment payment shall be made by one party to the
other party within ten days after such actual Tax amounts are assessed.
6.14 POST-CLOSING COOPERATION; ACCESS AND ASSISTANCE.
(a) Buyer and Seller shall cooperate with each other, and shall cause
their respective Representatives to cooperate with each other, after the
Closing to ensure the orderly transition of the Business from Seller to
Buyer and to minimize any disruption to the Business and to either party
that might result from the transactions contemplated hereby. After the
Closing, upon reasonable notice, Buyer and Seller shall furnish or cause to
be furnished to each other and their respective Representatives reasonable
access, during normal business hours, to such information and assistance
relating to the Business (to the extent within the control of such party)
as is reasonably necessary for (i) financial reporting and accounting
matters and (ii) defense or prosecution of litigation and disputes.
(b) After the Closing, upon reasonable written notice, Buyer and
Seller shall furnish or cause to be furnished to each other and their
respective Representatives, as promptly as practicable, such information
and assistance (to the extent within the control of such party) relating to
the Assets (including access to books and records) as is reasonably
necessary for the filing of all Tax Returns, and making of any election
related to Taxes, the preparation for any audit by any taxing authority,
and the prosecution or defense of any claim, suit or other Proceeding
related to any Tax Return. Seller and Buyer shall cooperate with each other
in the conduct of any audit or other Proceeding relating to Taxes involving
the Business.
(c) In the event and for so long as any party hereto is contesting or
defending against any third-party Proceeding 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 the Business, the other party hereto shall (x) fully
cooperate with it and its counsel in, and assist it and its counsel with,
the contest or defense, (y) make available its personnel (including for
purposes of fact finding,
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consultation, interviews, depositions and, if required, as witnesses), and
(z) provide such information, testimony and access to its books and
records, in each case as shall be reasonably requested in connection with
the contest or defense, all at the sole cost and expense (not including
employee compensation and benefits costs) of the contesting or defending
party as described in Section 6.14(d) (unless the contesting or defending
party is entitled to indemnification therefor under Article IX). For the
avoidance of doubt, this Section 6.14(c) shall not apply with respect to
disputes between the parties hereto.
(d) Each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred by the other in assisting such party pursuant
to this Section 6.14. No party shall be required by this Section 6.14 to
take any action that would unreasonably interfere with the conduct of its
business or unreasonably disrupt its normal operations (including, in the
case of Buyer, of the Business).
6.15 RELEASE OF LIENS. On or prior to the Closing, Seller shall cause any
and all Liens other than Permitted Liens recorded against or otherwise
respecting the Assets to be satisfied and released in full and shall cause the
holders of such Liens to file all documents and make all filings in all relevant
jurisdictions necessary to release such Liens. All such releases, filings and
documentation shall be in form and substance reasonably acceptable to Buyer.
6.16 COOPERATION WITH WARRANTY CLAIMS. Buyer agrees to process and handle
all warranty claims arising in respect of products of the Business shipped or
sold prior to the Closing, and to promptly inform Seller of any material costs
incurred by Buyer in processing and handling such warranty claims. Buyer agrees
to report to Seller any warranty claims being processed under this Section 6.16
within two business days of the warranty claim being reported to Buyer. Seller
agrees to indemnify Buyer for all out-of-pocket costs and expenses actually
incurred by Buyer in performing its obligations pursuant to this Section 6.16.
6.17 SEC APPROVAL OF FINANCIAL STATEMENTS. Buyer will use its reasonable
best efforts to apply to the SEC as soon as practicable following the date of
this Agreement for permission to use the Financial Statements in Buyer's
required SEC filings following the Closing, provided that (i) in no event shall
such filing be made by Buyer more than five (5) business days from the date
hereof and (ii) Seller (and, as applicable, its outside auditors) will
reasonably cooperate with Buyer in connection therewith.
6.18 ADDITIONAL FINANCIAL STATEMENTS. If Seller is required to provide (and
does provide) additional financial statements to Buyer pursuant to clause (ii)
of Section 7.2(g), such financial statements provided to Buyer shall be prepared
in accordance with GAAP applied on a consistent basis throughout the period
involved and shall fairly present in all material respects the financial
condition, results of operations, and cash flows (in each case if required to be
presented in such financial statements) of the Business at the date or for the
applicable period covered thereby.
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ARTICLE VII
CONDITIONS OF PURCHASE
7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE PURCHASE. The
respective obligations of each party to this Agreement to effect the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of the following conditions:
(a) No Order. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Legal
Requirement (whether temporary, preliminary or permanent) which (i) is in
effect and (ii) has the effect of making the transactions contemplated
hereby illegal or otherwise prohibiting consummation of the transactions
contemplated hereby; provided, however, that prior to invoking this
condition, the party so invoking this condition shall have complied with
its obligations under Section 6.3.
(b) HSR Act. If filing under the HSR Act is required in connection
with the transactions contemplated hereby, all waiting periods (and any
extension thereof) thereunder have expired or terminated early.
(c) Necessary Consents. All Necessary Consents required to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby shall have been obtained or made.
7.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Buyer:
(a) Representations and Warranties. The representations and warranties
of Seller contained in Article III of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date with the same force and effect as if made as of such date,
except (i) for those representations and warranties which address matters
only as of a particular date, which representations shall have been true
and correct as of such particular date and (ii) to the extent the
representation or warranty is already qualified by materiality, it shall be
true and correct. Buyer shall have received a certificate with respect to
the foregoing signed on behalf of Seller, with respect to the
representations and warranties of Seller, by an authorized senior executive
officer of Seller.
(b) Agreements and Covenants. Seller shall have performed or complied
in all material respects with the covenants, obligations and agreements
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date.
(c) Litigation Matters. No litigation brought by a Governmental Entity
shall be pending, and no litigation shall be threatened by any Governmental
Entity, which seeks to enjoin or prohibit the consummation of the
transactions contemplated hereby, and no temporary restraining order,
preliminary or permanent injunction or other order
36
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated
hereby shall be in effect.
(d) Material Adverse Effect. There shall not have occurred any
Material Adverse Effect on the Business during the period from the date
hereof to the Closing Date.
(e) Closing Deliveries. Buyer shall have received all documents,
instruments and other closing deliveries as contemplated by Section 2.3(b).
(f) Consents. Seller shall have delivered to Buyer written consents
from all third parties listed on Schedule 7.2(f).
(g) SEC Matters. Buyer shall have received either (i) the waiver from
the SEC requested by Buyer pursuant to Section 6.17; or (ii) from Seller,
audited financial statements with respect to the Business satisfying the
requirements of the SEC with respect to the financial statements of Buyer
to be included in Buyer's SEC filings following the Closing.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligation of
Seller to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Seller:
(a) Representations and Warranties. The representations and warranties
of Buyer contained in Article IV of this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date with the same force and effect as if made as of such date,
except (i) for those representations and warranties which address matters
only as of a particular date, which representations shall have been true
and correct as of such particular date and (ii) to the extent the
representation or warranty is already qualified by materiality, it shall be
true and correct. Seller shall have received a certificate with respect to
the foregoing signed on behalf of Buyer, with respect to the
representations and warranties of Buyer, by an authorized senior executive
officer of Buyer.
(b) Agreements and Covenants. Buyer shall have performed or complied
in all material respects with the covenants, obligations and agreements
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date. Seller shall have received a certificate with
respect to the foregoing signed on behalf of Buyer, with respect to the
covenants of Buyer, by an authorized senior executive officer of Buyer.
(c) Closing Deliveries. Seller shall have received all documents,
instruments and other closing deliveries as contemplated by Section 2.3(a).
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller if (i) any court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree, or ruling enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree or ruling shall have
become final and non-appealable (unless such order, decree, or ruling has
been withdrawn, reversed, or otherwise made inapplicable); or (ii) any
litigation or other Proceeding is pending before any court of competent
jurisdiction or has been threatened to be instituted by any Person or
governmental body, which in the good faith judgment of the Board of
Directors of Buyer or Seller, as the case may be, is reasonably likely to
result in an order, decree, or ruling enjoining, prohibiting, seeking
substantial damages in respect of, or impairing the benefits of the
transactions contemplated by, this Agreement;
(c) by Seller by written notice to Buyer, upon a breach of any
representation, warranty, covenant or agreement on the part of Buyer set
forth in this Agreement, or if any representation or warranty of Buyer
shall have become untrue or inaccurate, which untruths, inaccuracies or
breach would give rise to the failure of a condition set forth in Sections
7.3(a) or 7.3(b); provided that if such untruth or inaccuracy in Buyer's
representations and warranties or breach by Buyer is curable by Buyer,
through the exercise of reasonable efforts, within 30 days after Buyer's
receipt of written notice from Seller of a breach by Buyer hereunder, then
Seller may not terminate this Agreement under this Section 8.1(c) prior to
the end of such 30-day period, provided that Buyer continues to exercise
reasonable efforts to cure such untruthfulness, inaccuracy or breach
through such 30-day period (it being understood that Seller may not
terminate this Agreement pursuant to this Section 8.1(c) if Seller shall
have materially breached this Agreement or if such untruthfulness,
inaccuracy or breach by Buyer is cured prior to the end of such 30-day
period);
(d) by Buyer by written notice to Seller, upon a breach of any
representation, warranty, covenant or agreement on the part of Seller set
forth in this Agreement, or if any representation or warranty of Seller
shall have become untrue or inaccurate, which untruths, inaccuracies or
breach would give rise to the failure of a condition set forth in Sections
7.2(a) or 7.2(b) provided that if such untruth or inaccuracy in Seller's
representations and warranties or breach by Seller is curable by Seller,
through the exercise of reasonable efforts, within 30 days after Seller's
receipt of written notice from Buyer of a breach by Seller hereunder, then
Buyer may not terminate this Agreement under this Section 8.1(d) prior to
the end of such 30-day period, provided that Seller continue to exercise
reasonable efforts to cure such untruthfulness, inaccuracy or breach
through such 30-day period (it being understood that Buyer may not
terminate this Agreement pursuant to this Section 8.1(d) if Buyer shall
have materially breached this
38
Agreement or if such untruthfulness, inaccuracy or breach by Seller is
cured prior to the end of such 30-day period); or
(e) by Seller or Buyer, if the Closing shall not have taken place on
or before December 29, 2005 (the "TERMINATION DATE"); provided, that the
right to terminate this Agreement under this Section 8.1(e) shall not be
available to (i) Seller if the failure of Seller to fulfill any of its
obligations under this Agreement substantially caused the failure of the
Closing to occur on or before such date or (ii) Buyer if the failure of
Buyer to fulfill any of its obligations under this Agreement substantially
caused the failure of the Closing to occur on or before such date.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 8.1 above shall be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 6.1(a), Section 6.2, this Section 8.2, and Article X, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
ARTICLE IX
INDEMNIFICATION; ESCROW
9.1 INDEMNIFICATION BY SELLER. Subject to the terms of this Article IX,
Seller agrees to indemnify and hold Buyer and its Affiliates and each of their
respective officers and directors (each such Person, a "BUYER INDEMNIFIED
PARTY") harmless against and in respect of any and all losses, costs, expenses,
claims, damages, obligations and liabilities, including reasonable attorneys
fees and disbursements ("DAMAGES"), which such Buyer Indemnified Party has
actually suffered, incurred or become subject to arising out of, based upon or
otherwise in respect of:
(a) any breach of or inaccuracy in any representation or warranty made
by Seller in this Agreement or any related agreement or document
contemplated hereby and executed and delivered by Seller at the Closing;
(b) any breach by Seller of, or failure of Seller to perform, any
covenant or agreement of Seller contained in this Agreement or any related
agreement or document contemplated hereby and executed and delivered by
Seller at the Closing;
(c) the Excluded Assets or Excluded Liabilities; or
(d) as provided in Section 6.16.
9.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold Seller and its
Subsidiaries and their respective Affiliates, officers and directors (each such
Person, a "SELLER INDEMNIFIED PARTY") harmless against and in respect of any and
all Damages which such Seller
39
Indemnified Party has actually suffered, incurred or become subject to arising
out of, based upon or otherwise in respect of:
(a) any breach of or inaccuracy in any representation or warranty made
by Buyer in this Agreement;
(b) any breach by Buyer of, or failure of Buyer to perform, any
covenant or agreement of Buyer contained in this Agreement;
(c) any liability for the income Taxes of Buyer or any member of an
affiliated group with which Buyer files or have filed a Tax Return on a
consolidated or combined basis;
(d) the WARN Act or any similar statute, if and when applicable in
connection with the transactions contemplated hereby and/or the operation
of the Business after the Closing due to Buyer's termination following the
Closing of such number of Transferred Employees as would trigger
application of any such statute; and
(e) the Assumed Liabilities.
9.3 INTER-PARTY CLAIMS. In order for a Buyer Indemnified Party or a Seller
Indemnified Party (each, an "INDEMNIFIED PARTY") to be entitled to any
indemnification pursuant to this Article IX, the Indemnified Party shall notify
the other party or parties from whom such indemnification is sought (the
"INDEMNIFYING PARTY") in writing within ten (10) business days of the event
giving rise to such Indemnified Party's claim for indemnification, specifying in
reasonable detail the basis of such claim; provided, however, that failure to
give such notification shall not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually prejudiced
as a result of such failure. The Indemnified Party shall thereupon give the
Indemnifying Party reasonable access to the books, records and assets of the
Indemnified Party which evidence or support such claim or the act, omission or
occurrence giving rise to such claim and the right, upon prior notice during
normal business hours, to interview any Representative of the Indemnified Party
related thereto. If the Indemnifying Party disputes its liability with respect
to any such claim, the Indemnifying Party and the Indemnified Party shall
proceed to negotiate a resolution of such dispute. If (i) such dispute involves
only monetary Damages (as opposed to any form of injunctive or other equitable
relief), and (ii) the parties are not able to negotiate a resolution of such
dispute within fourteen (14) days of the service of notice as referenced above
the following procedures shall be followed:
(a) Within thirty (30) days following the service of such notice, each
of the parties shall prepare and circulate to the other party (pursuant to
Section 10.4 hereof) a memorandum or other form of statement setting out
its position on the matter in dispute and its reasons for adopting such
position. Each memorandum or statement shall be considered by the
designated senior officers of each of Buyer and Seller who shall endeavor
to resolve the dispute. If the designated senior officers of each of Buyer
and Seller agree upon a resolution or disposition of the matter, they shall
each sign a statement which sets out the terms of their agreement.
40
(b) If the designated senior officers of each of Buyer and Seller are
unable to resolve such dispute within thirty (30) days of its referral to
them under Section 9.3(a), Buyer and Seller shall mutually agree on one
mediator not affiliated with either party to conduct non-binding mediation
of the rights of the respective parties with respect to such dispute. The
parties shall cooperate with one another in selecting a mediator and in
scheduling mediation proceedings, shall act in good faith in such
mediation, shall bear their own respective expenses in connection with such
mediation (except that the parties shall share equally in the out-of-pocket
cost of the mediation itself), and shall use good faith efforts to cause
such mediation to be completed within thirty (30) days after the date on
which the dispute was submitted to mediation, provided that such mediation
may be terminated by either party in its sole discretion at any time more
than forty five (45) days after the date on which the dispute was submitted
to mediation.
(c) In the event that (A) the dispute is not a dispute described in
clause (i) above or (B) resolution of the dispute is not agreed upon after
completion of such mediation, either party may submit the dispute to a
court of competent jurisdiction.
9.4 THIRD PARTY CLAIMS.
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement in respect of, arising
out of or involving a claim made by any Person (other than an Indemnifying
Party, which claims are addressed in Section 9.3) against the Indemnified
Party (a "THIRD PARTY CLAIM"), such Indemnified Party must notify the
Indemnifying Party in writing of the Third Party Claim (which notice shall
specify in reasonable detail the events giving rise to such Third Party
Claim) within ten (10) business days after receipt by such Indemnified
Party of notice of the Third Party Claim; provided, however, that failure
to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, promptly
following the Indemnified Party's receipt thereof, copies of all notices
and documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim.
(b) If a Third Party Claim is made, the Indemnifying Party shall be
entitled to participate in the defense thereof. The Indemnifying Party may
also assume the defense of any Third Party Claim with counsel selected by
the Indemnifying Party. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood and agreed
that the Indemnifying Party shall control such defense. The Indemnifying
Party shall be liable for the fees and expenses of one (1) outside counsel
(and not any fees and expenses allocated to any internal counsel) employed
by the Indemnified Party for any period during which the Indemnifying Party
has not assumed the defense thereof (other than during any period in which
the Indemnified Party shall
41
have failed to give notice of the Third Party Claim as provided above). If
the Indemnifying Party chooses to defend or prosecute a Third Party Claim,
all the Indemnified Parties shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of
records and information that are reasonably relevant to such Third Party
Claim, and making employees and Representatives reasonably available on a
mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Whether or not the Indemnifying Party
assumes the defense of a Third Party Claim, the Indemnified Party shall not
admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the Indemnifying Party's prior written
consent. If the Indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall agree to any settlement, compromise or
discharge of a Third Party Claim that the Indemnifying Party may recommend
and that by its terms obligates the Indemnifying Party to pay the full
amount of Damages in connection with such Third Party Claim and does not
impose any material obligations or material restrictions on the Indemnified
Party in any manner, which settlement, compromise, or discharge shall then
release the Indemnifying Party completely in connection with such Third
Party Claim.
9.5 LIMITATIONS AND REQUIREMENTS.
(a) Seller shall have no obligation to indemnify the Buyer Indemnified
Parties against Damages pursuant to Section 9.1(a) of this Agreement unless
and until the aggregate of all such Damages suffered or incurred by Buyer
and such Persons exceeds $750,000 (the "BASKET AMOUNT") (in which event the
Buyer Indemnified Parties shall be entitled to indemnification for the full
amount of such Damages, including the first $750,000 thereof).
(b) Notwithstanding anything herein to the contrary, Seller shall not
be obligated to indemnify the Buyer Indemnified Parties against Damages
pursuant to Section 9.1(a) to the extent that payments thereof to the Buyer
Indemnified Parties pursuant to the terms of this Agreement exceeds the
Escrow Fund; provided, however, that the indemnification liability of
Seller pursuant to Section 9.1(b) through Section 9.1(d) shall be
unlimited.
(c) Notwithstanding anything herein to the contrary, Buyer shall have
no obligation to indemnify the Seller Indemnified Parties against Damages
pursuant to Section 9.2(a) of this Agreement unless and until the aggregate
of all such Damages suffered or incurred by Seller and such Persons exceeds
$250,000 (in which event the Seller Indemnified Parties shall be entitled
to indemnification for the full amount of such Damages, including the first
$250,000 thereof).
(d) Notwithstanding anything herein to the contrary, Buyer shall not
be obligated to indemnify the Seller Indemnified Parties against Damages
pursuant to Section 9.2(a) to the extent that payments thereof to the
Seller Indemnified Parties pursuant to the terms of this Agreement exceeds
$2,400,000; provided, however, that the
42
indemnification liability of Buyer pursuant to Section 9.2(b) through
Section 9.2(e) shall be unlimited.
(e) Except as otherwise expressly provided in this Agreement, no claim
for indemnification pursuant to this Article IX may or shall be made unless
written notice pursuant to Section 9.3 or Section 9.4, as applicable, is
delivered to the Indemnifying Party.
(f) Buyer acknowledges, on behalf of itself and on behalf of the other
Buyer Indemnified Parties, that their sole and exclusive remedy with
respect to the subject matter of this Agreement and the related agreements
and documents contemplated hereby and executed and delivered by Seller at
the Closing shall be pursuant to the indemnification provisions set forth
in this Article IX (other than claims and causes of action based on
criminal fraud). In furtherance of the foregoing, Buyer hereby waives, on
behalf of itself and each of the other Buyer Indemnified Parties, to the
fullest extent permitted under applicable Law, any and all rights, claims
and causes of action (other than claims and causes of action based on
criminal fraud) it may have against Seller arising under or based upon any
applicable Law or otherwise (except pursuant to the indemnification
provisions set forth in this Article IX).
(g) Upon payment in full of any Inter-Party Claim pursuant to Section
9.3 or the payment of any Judgment with respect to a Third Party Claim
pursuant to Section 9.4, the Indemnifying Party shall be subrogated to the
extent of such payment to the rights of the Indemnified Party against any
Person (other than the Buyer Indemnified Parties) with respect to the
subject matter of such Inter-Party Claim or Third Party Claim. The
Indemnified Parties shall assign or otherwise reasonably cooperate with the
Indemnifying Parties, at the cost and expense of the Indemnified Parties,
to pursue any claims against, or otherwise recover amounts from, any Person
liable or responsible for any Damages for which indemnification has been
received pursuant to this Agreement.
(h) The waiver by either Buyer or Seller of any condition set forth in
Section 7.2 or 7.3, respectively, based upon the accuracy of any
representation or warranty or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations.
(i) Notwithstanding anything herein to the contrary, no party hereto
shall be entitled to be indemnified against any Damages based upon or
arising from any claim to the extent such claim is taken into account in
determining the amounts (if any) due to and paid to Buyer or Seller, as the
case may be, pursuant to Section 6.11.
9.6 CALCULATION AND MITIGATION OF DAMAGES.
(a) The amount of any Damages for which indemnification is provided
under this Article IX shall be net of any amounts recovered or recoverable
by such Indemnified Party under insurance policies or other collateral
sources with respect to such Damages. In the event any amounts recovered or
recoverable under insurance policies or other
43
collateral sources are not received before any claim for indemnification is
actually paid pursuant to this Article IX, then the Buyer Indemnified
Parties shall pursue such insurance policies or collateral sources, and in
the event a Buyer Indemnified Party receives any recovery, the amount of
such recovery shall be applied first, to refund any payments made by the
Indemnifying Parties which would not have been so paid had such recovery
been obtained prior to such payment, and second, any excess to the Buyer
Indemnified Parties. If a Buyer Indemnified Party fails to pursue
recoveries under any "incurrence" based insurance policies or other
collateral sources, then Seller shall have the right of subrogation to
pursue such insurance policies or other collateral sources and may take any
reasonable actions necessary to pursue such rights of subrogation in its
name or the name of the party from whom subrogation is obtained. Buyer
shall use commercially reasonable efforts to cooperate, and cause its
Affiliates and Representatives to use commercially reasonable efforts to
cooperate, with Seller to pursue any such subrogation claim.
(b) Notwithstanding any provision of this Agreement to the contrary,
"Damages" shall not include any consequential, incidental or indirect
damages, special or punitive damages, including loss of revenue, profits or
income, diminution in value or loss of business reputation or opportunity.
(c) Buyer and Seller agree to treat any indemnification payments
received pursuant to this Agreement for all Tax purposes as an adjustment
to the Purchase Price.
9.7 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and hold
harmless any Indemnified Party under this Article IX shall terminate with
respect to claims made pursuant to Section 9.1(a) or Section 9.2(a) when the
applicable representation or warranty terminates pursuant to Section 10.1;
provided, however, that such obligations to indemnify and hold harmless shall
not terminate with respect to any item as to which the Indemnified Party shall
have, before the expiration of the applicable period, previously made a claim by
delivering a notice of such claim (stating in reasonable detail the basis of
such claim) pursuant to Section 9.3 or Section 9.4 to the Indemnifying Party.
The obligations to indemnify and hold harmless any Indemnified Party under this
Article IX shall terminate with respect to claims made pursuant to Section
9.1(b)-(d) or Section 9.2(b)-(e), (X) with respect to claims pursuant to Section
6.8, ninety (90) days following the third anniversary of the Closing Date, or
(Y) with respect to claims pursuant to any other covenant or obligation, upon
the expiration of the statute of limitations that would apply under applicable
law to such claim if brought in a court of competent jurisdiction; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the Indemnified Party shall have,
before the expiration of the applicable period, previously made a claim by
delivering a notice of such claim (stating in reasonable detail the basis of
such claim) pursuant to Section 9.3 or Section 9.4 to the Indemnifying Party.
9.8 ESCROW FUND.
(a) Notwithstanding anything to the contrary contained herein, from
and after the Closing, any payments made to any Buyer Indemnified Party in
respect of any claim
44
for indemnification made pursuant to Section 9.1(a) shall be satisfied
solely from the Escrow Fund pursuant to the terms hereof and of the Escrow
Agreement.
(b) No later than twelve (12) months following the Closing Date, the
Escrow Agent shall release to Seller the Escrow Fund (the "ESCROW
PAYMENT"); provided, however, that if at any time prior to the date on
which the Escrow Payment is due to be released, Buyer (or another Buyer
Indemnified Party) has reasonably and in good faith asserted a claim or
claims for indemnification pursuant to Section 9.3 or 9.4 that,
individually or when aggregated with the other such claims made by the
Buyer Indemnified Parties, is for Damages in excess of the Basket Amount
(an "EXCESS CLAIM"), and such Excess Claim is pending or unresolved, Buyer
and Seller agree to promptly thereafter jointly instruct the Escrow Agent
in writing to withhold from the Escrow Payment a number of shares and/or
amount of cash, if any, having an aggregate value equal to the amount of
such Excess Claims (in the aggregate) until such matters are resolved. For
all purposes of the Escrow Fund, shares of Buyer Common Stock included in
the Escrow Fund shall be valued at the Issuance Price. If it is finally
determined, by the agreement of Buyer and Seller or otherwise pursuant to
this Agreement or by a court of competent jurisdiction, that any part or
all of such Excess Claims are covered by Section 9.1, (i) the covered
amount of such Excess Claims may be offset against the retained portion of
the Escrow Fund, and, if such offset amount is greater than the Basket
Amount, Buyer and Seller shall promptly thereafter jointly instruct the
Escrow Agent in writing to release shares and/or cash, if any, having an
aggregate value equal to such offset amount (including the Basket Amount)
to Buyer; and (ii) Buyer and Seller shall promptly thereafter jointly
instruct the Escrow Agent in writing (assuming that at such time the
12-month anniversary of the Closing Date has passed) to release the
remainder of the Escrow Payment to Seller. If it is finally determined that
any such Excess Claim is not covered by Section 9.1 (again assuming that at
such time the 12-month anniversary of the Closing Date has passed) Buyer
and Seller shall promptly thereafter jointly instruct the Escrow Agent in
writing to release all amounts withheld with respect to such Excess Claim
to Seller. At any time prior to distribution of the entire Escrow Fund
pursuant to this Section 9.8, Seller may exchange any or all of the shares
of Buyer Common Stock in the Escrow Fund held by the Escrow Agent for cash
by wire transfer of immediately available funds to the Escrow Agent in an
amount equal to the Issuance Price multiplied by the number of shares of
Buyer Common Stock so exchanged. Upon receipt of such wire transfer, the
Escrow Agent shall immediately deliver to Seller certificates in the name
of Seller representing the number of shares of Buyer Common Stock so
exchanged and such shares shall be considered released from the Escrow Fund
and, upon receipt by Seller, no longer subject to the terms of this
Agreement. Dividends, distributions and other income earned on the Escrow
Fund (including on the investment or reinvestment thereof) shall be payable
to Seller as part of the Escrow Payment. Buyer shall, however, be entitled
to dividends, distributions and other income earned on that portion (if
any) of the Escrow Fund (including on the investment or reinvestment
thereof) to which Buyer is entitled as a result of a claim (or claims) by
Buyer which is ultimately resolved as provided above in favor of Buyer (and
Seller shall, if it receives any such dividends, distributions and other
income from the Escrow Agent, promptly forward such amounts to Buyer).
45
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the parties hereto in this Agreement (including the
Disclosure Letters) and in the other agreements, Schedules, and certificates
delivered pursuant hereto shall survive the consummation of the transactions
contemplated hereby and thereby, but will terminate at, and will have no further
force and effect after, the twelve-month anniversary of the Closing Date. The
covenants and obligations of the parties contained in Section 6.8 of this
Agreement shall terminate upon, and will have no further force and effect after,
the third anniversary of the Closing Date; all other covenants and obligations
of the parties hereto contained shall terminate upon, and will have no further
force and effect after, the expiration of the statute of limitations that would
apply under applicable law to a claim with respect to such covenant or
obligation if brought in a court of competent jurisdiction;
10.2 AMENDMENT. This Agreement may not be amended except by execution of an
instrument in writing signed on behalf of Buyer and Seller.
10.3 EXTENSION; WAIVER. At any time prior to the Closing Date either party
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed: (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
10.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission by
telecopy or telefacsimile, or (iii) on the date of confirmation of receipt (or,
the first business day following such receipt if the date is not a business day)
if delivered by a nationally recognized courier service. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
(a) if to Buyer, to:
MARVELL TECHNOLOGY GROUP LTD.
c/o Marvell Semiconductor, Inc.
710 First Avenue
Sunnyvale, California 94089
Attention: Vice President and General Counsel
Facsimile No.: (408) 752-9028
46
MARVELL INTERNATIONAL LTD.
c/o Marvell Semiconductor, Inc.
710 First Avenue
Sunnyvale, California 94089
Attention: Vice President and General Counsel
Facsimile No.: (408) 752-9028
with a copy to:
Pillsbury Winthrop Shaw Pittman LLP
2475 Hanover Street
Palo Alto, California 94304
Attention: Bradley D. Kohn, Esq.
Facsimile No.: (650) 233-4545
(b) if to Seller, to:
QLOGIC CORPORATION
26650 Aliso Viejo Parkway
Aliso Viejo, California 92656
Attention: Vice President and General Counsel
Facsimile No.: (949) 386-6488
with a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive, 17th Floor
Newport Beach, California 92660
Attention: Gary J. Singer, Esq.
Facsimile No.: (949) 823-6994
10.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.6 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Seller Disclosure Letter
and the Buyer Disclosure Letter, (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement and (ii) are not
intended to confer upon any other Person any rights or remedies hereunder,
except as specifically provided, following the Closing, in Sections 9.1 and 9.2.
47
10.7 SEVERABILITY. In the event that 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 shall
continue in full force and effect and the application of such provision to other
Persons or circumstances shall be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that shall achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision.
10.8 OTHER REMEDIES; SPECIFIC PERFORMANCE.
(a) 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 or
equity upon such party, and the exercise by a party of any one remedy shall
not preclude the exercise of any other remedy. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached.
(b) Specific Performance. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at
law or in equity.
10.9 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof. Each party hereby (a) irrevocably and unconditionally submits to
the exclusive jurisdiction of the U.S. federal courts located in the State of
California, with respect to all Proceedings arising out of or relating to this
Agreement and the transactions contemplated hereby, (b) agrees that all claims
with respect to any such Proceeding shall be heard and determined in such courts
and agrees not to commence a Proceeding relating to this Agreement or the
transactions contemplated hereby except in such courts, (c) irrevocably and
unconditionally waives any objection to the laying of venue of any Proceeding
arising out of this Agreement or the transactions contemplated hereby and
irrevocably and unconditionally waives the defense of an inconvenient forum, (d)
consents to service of process upon him, her or it by mailing or delivering such
service to the address set forth in Section 10.4 hereof, and (e) agrees that a
final judgment in any such Proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
10.10 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document shall
be construed against the party drafting such agreement or document.
48
10.11 ASSIGNMENT. Neither this Agreement nor any rights or obligations
under it are assignable by either party without the prior written consent of the
other party, except that Buyer may assign its rights hereunder to any Affiliate
and may collaterally assign its rights hereunder to any financial institution
providing financing in connection with the transactions contemplated by this
Agreement. Any purported assignment in violation of this Section 10.11 shall be
void. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.12 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Closing occurs.
ARTICLE XI
DEFINITIONS
11.1 RULES OF CONSTRUCTION. For all purposes of this Agreement, except as
otherwise expressly provided: (a) the terms defined in this Agreement include
the plural as well as the singular; (b) all references in this Agreement to
designated "Articles," "Sections," "Exhibits," and other subdivisions are to the
designated Articles, Sections, Exhibits, and other subdivisions of the body of
this Agreement; (c) pronouns of either gender or neuter include, as appropriate,
the other pronoun forms; (d) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; (e) "or" is not exclusive; (f)
"including" and "includes" will be deemed to be followed by "but not limited to"
and "but is not limited to," respectively; (g) any definition of or reference to
any law, act, agreement, instrument or other document herein shall be construed
as referring to such law, act, agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified; (h) any definition of
or reference to any law, statute or treaty shall be construed as referring also
to any successor law, statue or treaty and to any rules and regulations
promulgated thereunder; and (i) all accounting terms shall have the meanings
assigned to them under GAAP.
11.2 DEFINED TERMS. As used in this Agreement and the Exhibits delivered
pursuant to this Agreement, the following definitions will apply.
"401(k) Match" means the matching amount under Seller's 401(k) plan
relating to Accrued Compensation for the Transferred Employees.
"Accounting Firm" has the meaning set forth in Section 6.11(e).
"Accounts Payable" has the meaning set forth in Section 1.4(e).
"Accounts Receivable" has the meaning set forth in Section 1.2(c).
"Accrued Compensation" means the aggregate amount of accrued (but unpaid)
compensation due to the Transferred Employees as of the Closing Date (including
related obligations to pay payroll taxes).
49
"Acquired Business" has the meaning set forth in Section 6.8.
"Affiliate" shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"Agreement" has the meaning set forth in the first paragraph on page 1.
"Antitrust Laws" shall mean the Sherman Act, the Clayton Act, the HSR Act,
the Federal Trade Commission Act, in each case as amended, and all other
federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
"Assets" shall have the meaning set forth in Section 1.1.
"Assigned Contracts" shall have the meaning set forth in Section 1.1(f).
"Assignment and Assumption Agreement" shall have the meaning set forth in
Section 2.3(a)(v).
"Assumed Liabilities" shall have the meaning set forth in Section 1.3.
"Basket Amount" shall have the meaning set forth in Section 9.5(a).
"Bill of Sale" shall have the meaning set forth in Section 2.3(a)(iv).
"Business" shall have the meaning set forth in Recital A.
"Business Employee" has the meaning set forth in Section 3.15.
"Business Permits" shall have the meaning set forth in Section 3.7(b).
"Buyer" shall have the meaning set forth in the first paragraph on page 1.
"Buyer Common Stock" shall mean the common stock of Marvell Technology, par
value $0.002 per share.
"Buyer Disclosure Letter" shall have the meaning set forth in Article IV.
"Buyer Indemnified Party" shall have the meaning set forth in Section 9.1.
"Buyer Plans" shall have the meaning set forth in Section 6.6(a).
"Buyer SEC Documents" shall have the meaning set forth in Section 4.6.
"Buyer Stock Event" means any event by which the outstanding shares of
Buyer Common Stock have been changed into a different number of shares,
including a stock split, stock dividend, reclassification, recapitalization,
stock combination, exchange of shares, readjustment, or otherwise, provided that
in no event shall any of the following be considered a
50
Buyer Stock Event: (a) an acquisition by Buyer using Buyer Common Stock as
consideration; (b) a sale by Buyer of Buyer Common Stock for cash; or (c) an
issuance of Buyer Common Stock pursuant to a stock option plan of Buyer.
"Closing" shall have the meaning set forth in Section 2.1.
"Closing Date" shall have the meaning set forth in Section 2.1.
"Closing Net Inventory Value" shall have the meaning set forth in Section
6.11(b).
"COBRA" shall have the meaning set forth in Section 6.6(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.1(a).
"Consent" shall mean a consent, authorization or approval of a Person, or
filing or registration with a Person.
"Contingent Workers" shall mean any independent contractors, temporary
employees, leased employees or any other servants or agents similar to the above
employed or used with respect to the Business.
"Control" (including, with correlative meanings, the terms "controlled by"
and "under common control with") shall mean the possession of the power to
direct the management and policies of the referenced Person, whether through
ownership interests, by contract or otherwise.
"Copyrights" shall have the meaning set forth in the definition of
"Intellectual Property" in this Section 11.2.
"Damages" shall have the meaning set forth in Section 9.1.
"DOJ" shall mean the Antitrust Division of the Department of Justice.
"Employee Plans" shall have the meaning set forth in Section 3.14(a).
"Employment Commencement Date" shall have the meaning set forth in Section
6.6(a).
"Employment Termination Date" shall have the meaning set forth in Section
6.6(a).
"Environmental Claim" shall mean any claim, demand, action, judicial or
administrative Proceeding, notice of noncompliance, notice of violation, consent
order, or consent agreement under any Environmental Law.
"Environmental Law" shall mean any Legal Requirement, or judicial or
administrative interpretation thereof, relating to pollution or protection of
the environment and natural resources and public and occupational health and
safety relating to Hazardous Materials and the environment, including, without
limitation, any law that imposes liability or standards of conduct concerning
discharges, emissions, Releases or threatened Releases of any Hazardous Material
51
into the environment, including into ambient air, surface water, groundwater or
land, or otherwise relating to the generation, treatment, storage, disposal,
cleanup, transport or handling of any Hazardous Material.
"Escrow Agreement" shall mean the Escrow Agreement, dated the date hereof,
by and among Buyer, Seller, and the Escrow Agent, substantially in the form of
Schedule 11.2 hereof.
"Escrow Agent" shall mean the Escrow Agent as defined in the Escrow
Agreement, which shall be a financial institution mutually agreed to by Buyer
and Seller following the date hereof and prior to the Closing Date.
"Escrow Fund" shall have the meaning set forth in Section 2.2.
"Escrow Payment" shall have the meaning set forth in Section 9.8(b)
"Excess Claim" shall have the meaning set forth in Section 9.8(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Excluded Assets" shall have the meaning set forth in Section 1.2.
"Excluded Liabilities" shall have the meaning set forth in Section 1.4.
"Final Closing Net Inventory Value" shall have the meaning set forth in
Section 6.11(f).
"Financial Statements" shall have the meaning set forth in Section 3.4(a).
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall have the meaning set forth in Section 3.4(a).
"Governmental Entity" shall have the meaning set forth in Section 3.2(c).
"Hazardous Material" shall have the meaning set forth in Section 3.9(a).
"Hazardous Materials Activities" shall have the meaning set forth in
Section 3.9(b).
"HSR Act" shall have the meaning set forth in Section 3.2(c).
"Indemnified Party" shall have the meaning set forth in Section 9.3.
"Indemnifying Party" shall have the meaning set forth in Section 9.3.
"Intellectual Property" shall mean any or all of the following: (i)
trademarks and service marks (whether registered or unregistered), trade names,
trade dress, business names, brand names, logos and designs, including all
registrations and applications for any of the foregoing (collectively,
"TRADEMARKS"); (ii) patents, utility models, and registrations and patent
applications relating to the foregoing (including any and all provisionals,
continuations,
52
continuations-in-part, divisionals, counterparts, reissues, reexaminations,
extensions, renewals and applications for any of the foregoing and all related
disclosures), unfiled patent applications and inventions disclosures
(collectively, "PATENTS"); (iii) registered copyrights under applicable state or
federal statutes (collectively "COPYRIGHTS"); (iv) mask works whether registered
or unregistered (collectively, "MASK WORKS") and (v) confidential and
proprietary information, including ideas, formulas, algorithms, designs,
patterns, unpublished patent applications, compilations, programs,
specifications, data, devices, methods, techniques, processes or other know-how
as well as any other financial, marketing, customer, pricing and cost
information related to the Business, that derives independent economic value,
actual or potential, from not being generally known to the public or to other
Persons who can obtain economic value from its disclosure or use (collectively,
and expressly including the items referenced on Schedule 1.1(d)(i), "TRADE
SECRETS").
"Inventory" shall have the meaning set forth in Section 1.1(c).
"IP and Technology License Agreement" shall have the meaning set forth in
Section 2.3(a)(vii).
"Issuance Price" shall mean the average of the (per share) closing prices
of Buyer Common Stock on the Nasdaq Stock Market for the ten (10) consecutive
trading day period ending one (1) trading day prior to the Closing Date,
provided that if a Buyer Stock Event occurs during such determination period,
the Issuance Price will be correspondingly adjusted.
"Judgment" shall have the meaning set forth in Section 3.2(b).
"Knowledge" shall mean, with respect to Seller, with respect to any matter
in question, or any similar expression with regard to the Knowledge or awareness
of or receipt of notice by Seller, shall mean the actual, direct, and personal
knowledge of any of the individuals listed on Section 11.2 of the Seller
Disclosure Letter.
"Leased Property" shall have the meaning set forth in Section 1.1(a).
"Legal Requirements" shall mean any federal, state, local, municipal,
foreign or other law (including any Antitrust Law), statute, constitution,
principle of common law, resolution, ordinance, code, order, edict, decree,
rule, regulation, ruling, judgment or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity.
"Liability" shall mean with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise and whether or not the same is required to be accrued in accordance
with GAAP on the financial statements of such Person.
"Lien" shall mean any pledge, claim, lien, charge, preemptive right,
mortgage, encumbrance, option or security interest.
53
"Marvell International" shall have the meaning set forth in the first
paragraph on page 1.
"Marvell Technology" shall have the meaning set forth in the first
paragraph on page 1.
"Mask Works" shall have the meaning set forth in the definition of
"Intellectual Property" in this Section 11.2.
"Material Adverse Effect," when used in connection with an entity, means
any material adverse change in or material adverse effect on the business,
results of operations or financial condition of such entity taken as a whole
with its subsidiaries; except for changes or effects that, alone or in
combination, arise out of or result from (i) changes in economic conditions or
financial or securities markets in general or the industries and markets in
which Seller conducts its business, (ii) any change in such entity's stock price
or trading volume, (iii) any failure by such entity to meet revenue or earnings
projections, (iv) any changes in laws or GAAP after the date hereof, (v) the
execution and performance of or compliance with this Agreement, (vi) the
announcement of this Agreement and the transactions contemplated hereby
(including, without limitation, any (x) actions by clients or competitors, (y)
loss of personnel or clients, or (z) the delay or cancellation of orders for
services and products), (vii) any outbreak or escalation of hostilities
involving the United States, the declaration by the United States of a national
emergency or war, or the occurrence of any acts of terrorism, or (viii), in the
case of Seller, any acts taken with the express written consent of Buyer,
delivered to Seller in accordance with Section 10.4 hereof.
"Necessary Consents" shall have the meaning set forth in Section 3.2(c).
"Nonassertion Letter Agreement" shall have the meaning set forth in Section
2.3(a)(xi).
"Notice of Disagreement" shall have the meaning set forth in Section
6.11(c).
"Patents" shall have the meaning set forth in the definition of
"Intellectual Property" in this Section 11.2.
"Permits" shall mean permits, licenses, authorizations, franchises,
variances, exemptions, orders and approvals from Governmental Entities.
"Permitted Liens" shall mean Liens for Taxes and other governmental charges
and assessments that are not yet due and payable, and Liens for current Taxes
and other charges and assessments of any Governmental Entity that may thereafter
be paid without penalty.
"Person" means any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
"Personnel" shall have the meaning set forth in Section 3.6(d)(ii).
"Pre-Closing Environmental Liability" shall mean any loss, claim, demand,
requirement, lawsuit, responsibility or other Liability arising under
Environmental Laws as a result of or in
54
connection with (1) the ownership or operation of the Business (including by any
former owner or operator thereof) or the Assets or any Excluded Asset (or any
assets previously owned or operated in connection with the Business) prior to
the Closing, (2)(A) personal injury, property damage or exposure to a Hazardous
Material or (B) investigation, remediation, natural resources damages or other
response actions (including claims related to any Releases), in either case (a)
arising out of the ownership or operation of the Business (including by any
former owner or operator thereof) or the Assets or any Excluded Asset (or any
assets previously owned or operated in connection with the Business) and (b)
occurring prior to the Closing or (3) the transportation, Release or recycling
of a Hazardous Material or the arrangement for such activities by Seller or in
connection with the Assets or the Business, from, at or to any off-site location
prior to the Closing.
"Proceeding" shall have the meaning set forth in Section 1.4(d).
"PTO Amount" is the aggregate dollar value of paid time off payable to the
Transferred Employees at Closing by Seller.
"Purchase Order" shall have the meaning set forth in Section 1.1(g).
"Purchase Price" shall mean $225,000,000.
"Registration Rights Agreement" shall have the meaning set forth in Section
2.3(a)(vi).
"Release" shall mean any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying,
seeping, dispersal, migration, transporting, placing and the like, including
without limitation, the moving of any materials through, into or upon, any land,
soil, surface water, groundwater or air, or otherwise entering into the
environment.
"Representative" or "Representatives" means, with respect to a particular
Person, any director, member, limited or general partner, officer, employee,
agent, consultant, advisor or other representative of such Person, including
outside legal counsel, accountants and financial advisors.
"Retained Patent License Agreement" shall have the meaning set forth in
Section 2.3(a)(viii).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Seller" shall have the meaning set forth in the first paragraph on page 1.
"Seller Affiliated Group" has the meaning given in Section 1.4(h).
"Seller Disclosure Letter" shall have the meaning set forth in Article III.
55
"Seller Group" shall mean Seller and its Affiliates, both collectively and
in their individual capacities, other than Affiliates that have no relationship
with the Business.
"Seller Indemnified Party" shall have the meaning set forth in Section 9.2.
"Seller Material Contract" shall have the meaning set forth in Section
3.10(a).
"Seller Patents" shall have the meaning set forth in Section 3.6(c)(i).
"Seller Plans" shall have the meaning set forth in Section 6.6(a).
"Seller Restricted Business" has the meaning set forth in Section 6.8.
"Seller Trademarks" shall have the meaning set forth in Section 3.6(b)(i).
"Statement" shall have the meaning set forth in Section 6.11(b).
"Tax" shall have the meaning set forth in Section 3.5(a).
"Taxes" shall have the meaning set forth in Section 3.5(a).
"Tax Return" shall have the meaning set forth in Section 3.5(a).
"Technology" shall mean integrated circuits, product designs and/or
specifications, technical information, evaluation boards, reference designs,
inventions (whether or not patentable), industrial models, development tools,
diagrams, models, flow charts, software, programs, source codes, algorithms,
databases and data collections, database tapes, documentation, technical
manuals, compilers, interpreters, firmware, research records, records of
inventions, works of authorship (whether or not copyrightable), test
information, test programs, test suites, prototypes, market surveys and
marketing know-how, and any and all other inventions, discoveries, know-how,
formulae, practices, processes, procedures, ideas, specifications, engineering
data, reports, information and materials of a technical nature or concerning
research and development and/or engineering or programming activities, including
works in progress and technology under development, all tangible embodiments of
Intellectual Property, and all media carrying any of the aforesaid, except for
such of the foregoing as constitute Intellectual Property (which, solely for
avoidance of doubt, the parties acknowledge includes without limitation the
items referenced on Schedule 1.1(d)(i)).
"Termination Date" shall have the meaning set forth in Section 8.1(e).
"Third Party Claim" shall have the meaning set forth in Section 9.4(a).
"Trademarks" shall have the meaning set forth in the definition of
"Intellectual Property" in this Section 11.2.
"Trade Secrets" shall have the meaning set forth in the definition of
"Intellectual Property" in this Section 11.2.
"Transferred Employees" shall have the meaning set forth in Section 6.6(a).
56
"Transferred Intellectual Property" shall have the meaning set forth in
Section 1.1(d).
"Transferred Patent License Agreement" shall have the meaning set forth in
Section 2.3(a)(ix).
"Transferred Technology" shall have the meaning set forth in Section
1.1(e).
"Transition Services Agreement" shall have the meaning set forth in Section
2.3(a)(iii).
"WARN Act" means the Worker Adjustment and Retraining Act of 1988, as
amended.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
MARVELL TECHNOLOGY GROUP LTD.,
a Bermuda corporation
By: /s/ Dr. Sehat Sutardja
------------------------------------
Dr. Sehat Sutardja
President and Chief Executive
Officer
MARVELL INTERNATIONAL LTD.,
a Bermuda corporation
By: /s/ Carol Feathers
------------------------------------
Carol Feathers
General Manager
QLOGIC CORPORATION,
a Delaware corporation
By: /s/ H. K. Desai
------------------------------------
Name: H. K. Desai
Title: Chairman, CEO and President
S-1 Asset Purchase Agreement