EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
Between
WIRE ONE TECHNOLOGIES, INC.
as Seller
and
GORES TECHNOLOGY GROUP
as Buyer
Dated as of June 10, 2003
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................................................................1
SECTION 1.1. Certain Defined Terms............................................................1
ARTICLE II PURCHASE AND SALE.........................................................................................8
SECTION 2.1. Purchase and Sale................................................................8
SECTION 2.2. Consideration for Sale and Conveyance...........................................11
SECTION 2.3. Minimum Net Assets..............................................................12
SECTION 2.4. Closing.........................................................................13
SECTION 2.5. Post-Closing Additional Payments................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................................................................15
SECTION 3.1. Organization and Authority of Seller............................................15
SECTION 3.2. Power and Authority.............................................................16
SECTION 3.3. No Conflict.....................................................................16
SECTION 3.4. Governmental Consents and Approvals.............................................16
SECTION 3.5. Financial Statements............................................................17
SECTION 3.6. Receivables.....................................................................17
SECTION 3.7. Inventory.......................................................................17
SECTION 3.8. Unfulfilled Sales Order Schedule................................................18
SECTION 3.9. Title to Properties; Absence of Encumbrances....................................18
SECTION 3.10. No Undisclosed Liabilities......................................................18
SECTION 3.11. Absence of Certain Changes or Events............................................18
SECTION 3.12. Litigation......................................................................20
SECTION 3.13. Compliance with Law.............................................................20
SECTION 3.14. Material Contracts..............................................................21
SECTION 3.15. Intellectual Property...........................................................22
SECTION 3.16. Real Property...................................................................23
SECTION 3.17. Customers.......................................................................24
SECTION 3.18. Suppliers.......................................................................24
SECTION 3.19. Employee Benefit Matters........................................................24
SECTION 3.20. Labor Matters...................................................................25
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SECTION 3.21. Employees.......................................................................25
SECTION 3.22. Taxes...........................................................................25
SECTION 3.23. Agreements and Transactions with Affiliates.....................................26
SECTION 3.24. Licenses and Permits............................................................26
SECTION 3.25. Environmental, Health and Safety Matters........................................27
SECTION 3.26. Restrictive Documents and Territorial Restrictions..............................27
SECTION 3.27. Insurance.......................................................................27
SECTION 3.28. Brokers.........................................................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..................................................................28
SECTION 4.1. Organization and Authority of Buyer.............................................28
SECTION 4.2. No Conflict.....................................................................28
SECTION 4.3. Governmental Consents and Approvals.............................................29
SECTION 4.4. Litigation......................................................................29
SECTION 4.5. Brokers.........................................................................29
ARTICLE V ADDITIONAL AGREEMENTS.....................................................................................29
SECTION 5.1. Conduct of Business Prior to the Closing........................................29
SECTION 5.2. Access to Information...........................................................30
SECTION 5.3. Confidentiality.................................................................30
SECTION 5.4. Regulatory and Other Authorizations; Notices and Consents.......................31
SECTION 5.5. Stockholder Approval; Preparation of Proxy Statement............................32
SECTION 5.6. Stockholder Meeting.............................................................33
SECTION 5.7. No Solicitation or Negotiation; Breakup Fee.....................................33
SECTION 5.8. Seller Covenant Not to Compete..................................................34
SECTION 5.9. Buyer Covenant Not to Compete...................................................35
SECTION 5.10. Bulk Transfer Laws..............................................................36
SECTION 5.11. Tax Matters.....................................................................36
SECTION 5.12. Further Action..................................................................37
SECTION 5.13. Use of Intellectual Property....................................................37
SECTION 5.14 Transition Period...............................................................38
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TABLE OF CONTENTS
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SECTION 5.15 Sales to New Customers of Seller's Network Business During Transition
Period..........................................................................38
ARTICLE VI EMPLOYEE MATTERS.........................................................................................41
SECTION 6.1. Employment Offers...............................................................41
SECTION 6.2. Access to Employees.............................................................41
SECTION 6.3. Benefits........................................................................41
SECTION 6.4. Benefits Liabilities............................................................42
ARTICLE VII CONDITIONS TO CLOSING...................................................................................42
SECTION 7.1. Conditions to Obligations of Seller.............................................42
SECTION 7.2. Conditions to Obligations of Buyer..............................................43
ARTICLE VIII INDEMNIFICATION........................................................................................44
SECTION 8.1. Survival of Representations and Warranties......................................44
SECTION 8.2. Indemnification.................................................................44
SECTION 8.3. Limits on Indemnification.......................................................46
ARTICLE IX TERMINATION AND WAIVER...................................................................................46
SECTION 9.1. Termination.....................................................................46
SECTION 9.2. Notice of Termination; Effect of Termination....................................48
SECTION 9.3. Fees and Expenses...............................................................48
SECTION 9.4. Waiver..........................................................................48
ARTICLE X MISCELLANEOUS.............................................................................................49
SECTION 10.1. Notices.........................................................................49
SECTION 10.2. Public Announcements............................................................50
SECTION 10.3. Further Assurances and Cooperation..............................................50
SECTION 10.4. Headings........................................................................50
SECTION 10.5. Severability....................................................................50
SECTION 10.6. Entire Agreement................................................................51
SECTION 10.7. Assignment......................................................................51
SECTION 10.8. No Third Party Beneficiaries....................................................51
SECTION 10.9. Amendment.......................................................................51
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SECTION 10.10. Governing Law...................................................................51
SECTION 10.11. Jurisdiction and Venue..........................................................52
SECTION 10.12. Counterparts....................................................................52
SECTION 10.13. Rules of Construction...........................................................52
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 10, 2003, between WIRE ONE
TECHNOLOGIES, INC., a Delaware corporation ("Seller"), and GORES TECHNOLOGY
GROUP, a California corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the Business (as defined below)); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, all right, title and interest of Seller in and to certain
properties and assets of the Business, and in connection therewith Buyer is
willing to pay certain consideration and assume certain liabilities of Seller
relating thereto, all upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, Buyer and Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms.
Unless the context otherwise requires, the following terms, when used
in this Agreement, shall have the respective meanings specified below:
"Accountants" shall have the meaning specified in Section 2.3(c).
"Acquisition Documents" shall mean this Agreement, the Ancillary
Agreements, and any certificate, instrument, report or other document delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby.
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Affirmative Recommendation" shall mean the affirmative recommendation
of the Board of Directors of Seller to the Seller's stockholders in favor of the
adoption of this Agreement and the approval of the transactions contemplated
hereby.
"Agreement" shall mean this Asset Purchase Agreement, dated as of June
10, 2003, between Seller and Buyer (including the Exhibits and Schedules hereto
and the Disclosure Schedule) and all amendments, modifications or supplements
hereto made in accordance with the provisions of Section 10.9.
"Ancillary Agreements" shall mean the Bill of Sale, the Assumption
Agreement, the Real Estate Agreements, the Transition Services Agreement and the
Glowpoint Sales Agency Agreement.
"Assets" shall have the meaning specified in Section 2.1(a).
"Assumed Liabilities" shall have the meaning specified in Section
2.2(d).
"Assumption Agreement" shall mean the Assumption Agreement to be
executed by Buyer and Seller on the Closing Date, substantially in the form of
Exhibit 1.1(a).
"Bill of Sale" shall mean the General Assignment and Bill of Sale to be
executed by Seller on the Closing Date, substantially in the form of Exhibit
1.1(b).
"Business" shall mean the business of marketing, distributing, selling,
installing, maintaining and supporting videoconferencing hardware products
(which products may also (i) embody associated enabling software and (ii) carry
audio transmissions) conducted at various locations in the United States, and,
through independent subcontractors engaged from time to time, other countries.
The Business expressly excludes Seller's Network Business (as defined in Section
2.1(b)(ii)).
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in The
City of New York.
"Business Financial Statements" shall have the meaning specified in
Section 3.5(a)(ii).
"Business Intellectual Property" shall mean any and all material
Intellectual Property primarily used in or necessary to conduct the Business in
the manner currently conducted, but expressly excluding all Intellectual
Property used in or necessary to conduct the business associated with the
Excluded Assets.
"Buyer" shall have the meaning specified in the recitals to this
Agreement.
"Buyer Indemnified Party" shall have the meaning specified in Section
8.2(a).
"Cash Payment" shall have the meaning specified in Section 2.2(a).
"Closing" shall have the meaning specified in Section 2.4(a).
"Closing Cash Adjustment" shall have the meaning specified in Section
2.3(a).
"Closing Date" shall have the meaning specified in Section 2.4(a).
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"Closing Statement" shall have the meaning specified in Section 2.3(a).
"Closing Time" shall mean 12:01 a.m. on the Closing Date,
"Code" shall mean the Internal Revenue Code of 1986, as amended through
the date hereof.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Corporate Cost Allocations" shall have the meaning specified in
Section 5.14.
"Current Assets" shall mean the current assets of the Business as of
the Measurement Date reflected on the Closing Statement, determined in
accordance with GAAP. Current Assets shall not include any Excluded Assets or
any intercompany account receivable.
"Direct Costs" shall have the meaning specified in Section 5.14.
"Disclosure Schedule" shall mean the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Employee" shall mean any of the key employees identified as such on
Section 3.21 of the Disclosure Schedule and each of the other employees of the
Business, all of which are identified on that Schedule.
"Employee Benefit Plan(s)" shall mean: (a) any "employee welfare
benefit plan," as defined in Section 3(1) of ERISA or any "employee pension
benefit plan," as defined in Section 3(2) of ERISA, which Seller sponsors or to
which Seller contributes or is required to contribute, or under which Seller may
incur any liability, and which covers an employee or former employee of Seller
who is or was involved in the Business, including each multi-employer welfare
benefit plan; (b) any "multiemployer plan," as defined in Section 4001(a)(3) of
ERISA, to which Seller has contributed or been obligated to contribute at any
time within the six (6) years prior to the date hereof, or under which Seller
may incur any liability, and which covers an employee or former employee of
Seller who is or was involved in the Business, and (c) any incentive
compensation, commission, vacation pay, holiday pay, sabbatical leave,
scholarship or tuition reimbursement, dependent care assistance, immigration
assistance, salary continuation, employee loan or loan guarantee, split dollar
arrangement, deferred compensation plan, severance pay, bonus plan, profit
sharing plan, stock option plan, employee stock purchase plan, restricted stock,
stock appreciation right, phantom stock, and any other employee benefit plan,
agreement, arrangement, or commitment maintained by or on behalf of Seller which
covers any employee or former employee of or consultant or former consultant to
Seller who is or was involved in the Business including, for greater certainty,
any registered retirement savings, pension, retirement, investment, health or
welfare plan which Seller sponsors or to which Seller contributes or is required
to contribute and which applies to or in respect of any employee or former
employee employed by Seller within or outside the United States in connection
with the Business and any such plan which applies to or in respect of any
consultant or former consultant to Seller who is or was involved in the
Business.
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"Employment Offer" shall have the meaning specified in Section 6.1.
"Encumbrance" shall mean any security interest, pledge, mortgage, lien
(including, without limitation, environmental and Tax liens), charge,
encumbrance, adverse claim, preferential arrangement, or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"ERISA" shall have the meaning specified in Section 3.19(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" shall have the meaning specified in Section 2.1(b).
"Excluded Liabilities" shall have the meaning specified in Section
2.2(d).
"Final Cash Adjustment" shall have the meaning specified in Section
2.3(d).
"Financial Statements" shall have the meaning specified in Section
3.5(a)(i).
"Fixed Assets" shall have the meaning specified in Section 2.1(a)(iv).
"Fixed Direct Costs" shall have the meaning specified in Section 5.14.
"GAAP" shall mean generally accepted accounting principles and
practices in effect from time to time in the United States applied consistently
throughout the periods involved.
"Glowpoint Sales Agency Agreement" shall mean the Sales Agency
Agreement executed by Buyer and Seller on the Closing Date, substantially in the
form of Exhibit 1.1(d).
"Governmental Authority" shall mean any U.S. or foreign, national,
federal, state, municipal or local or other government, governmental, regulatory
or administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Indemnified Party" shall have the meaning specified in Section
8.2(c).
"Indemnifying Party" shall have the meaning specified in Section
8.2(c).
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"Intellectual Property" shall mean any or all of the following and all
common law and statutory rights in, arising out of, or associated therewith: (i)
United States and foreign patents and utility models and applications therefor
and all reissues, divisions, reexaminations, renewals, extensions, provisionals,
continuations and continuations-in-part thereof ("Patents"); (ii) inventions
(whether patentable or not), improvements, trade secrets, proprietary
information, know-how, and any rights in technology, invention disclosures,
technical data and customer lists, and all documentation relating to any of the
foregoing; (iii) copyrights, copyright registrations and applications therefor,
and all other rights corresponding thereto; (iv) domain names, uniform resource
locators ("URLs"), other names and locators associated with the Internet, and
applications or registrations therefor ("Domain Names"); (v) industrial designs
and any registrations and applications therefor; (vi) trade names, logos, common
law trademarks and service marks, trademark and service mark registrations and
applications therefor ("Trademarks"); (vii) all rights in databases and data
collections; (viii) all moral and economic rights of authors and inventors,
however denominated; and (ix) any similar or equivalent rights to any of the
foregoing (as applicable).
"Inventory" means, collectively, the Sales Inventory and the Service
Inventory.
"Law" shall mean any foreign, national, federal, state or local
statute, law, treaty, ordinance, regulation, or rule.
"Liabilities" shall mean any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.
"Licenses" shall have the meaning specified in Section 3.24.
"Lists" shall have the meaning specified in Section 2.1(a)(vi).
"Loss" shall have the meaning specified in Section 8.2(a).
"Material Adverse Effect" shall mean any circumstance, change in, or
effect on, the Business or Seller that, individually or in the aggregate, could
reasonably be expected to be materially adverse to the business, operations,
assets or liabilities, prospects, results of operations or the condition
(financial or otherwise) of the Business other than any such circumstance,
change or effect on or involving Seller that is attributable to any Excluded
Asset.
"Material Contracts" shall have the meaning specified in Section 3.14.
"Measurement Date" shall mean June 30, 2003.
"Monthly Transition Amount" shall have the meaning specified in Section
5.14.
"Net Assets" shall mean Current Assets minus Total Liabilities.
"Non-Transferable Asset" shall have the meaning specified in Section
5.4(d).
"Note" shall have the meaning specified in Section 2.2(a).
"Offered Employees" shall have the meaning specified in Section 6.1.
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"Permitted Encumbrances" shall mean such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for Taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by Law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations
that (i) are not overdue for a period of more than 60 days and (ii) are not in
excess of $25,000 in the case of a single property or $100,000 in the aggregate
at any time; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) were not
incurred in connection with any indebtedness of Seller, (ii) do not render title
to the property encumbered thereby unmarketable, (iii) do not encumber any of
the Seller Occupied Business Facility Leases, and (iv) do not, individually or
in the aggregate, materially adversely affect the use of any Seller Occupied
Business Facilities for the conduct of the Business.
"Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Exchange Act.
"Proxy Statement" shall have the meaning specified in Section 5.5(a).
"Purchase Price" shall have the meaning specified in Section 2.2(a).
"Purchase Price Bank Account" shall mean a bank account in the United
States to be designated by Seller in a written notice to Buyer at least three
(3) Business Days before the Closing.
"Real Estate Agreements" shall mean collectively (i) an instrument of
assignment for each Seller Occupied Business Facility Lease, in customary form
and substance; and (ii) consents to such assignments from all landlords and
lenders (if required by the applicable loan documents) having an interest in any
Seller Occupied Business Facility, in customary form and substance.
"Receivables" shall mean any and all accounts receivable, notes and
other amounts receivable from customers and others arising from the conduct of
the Business by Seller before the Closing Date, whether or not in the ordinary
course, together with any unpaid financing charges accrued thereon, and
including associated reserves and earnings in excess of billings.
"Regulations" shall mean the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Representative" shall have the meaning specified in Section 5.14.
"Restricted Buyers" shall have the meaning specified in Section 5.8(f).
"Restricted Territory" shall have the meaning specified in Section
5.8(a).
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"Sales Inventory" shall mean all finished goods, spare parts,
refurbished equipment, replacement and component parts owned or stored by or for
Seller, including goods in transit, for potential sale by the Business and any
associated reserves and prepaid deposits for any of the same.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning specified in the recitals to this
Agreement.
"Seller Indemnified Party" shall have the meaning specified in Section
8.2(b).
"Seller Occupied Business Facility" shall mean each of the facilities
set forth in Schedule 3.16.
"Seller Occupied Business Facility Leases" shall mean all contracts for
the use or occupancy of each Seller Occupied Business Facility.
"Seller Restricted Business" shall have the meaning specified in
Section 5.8(b).
"Seller Stockholders' Meeting" shall have the meaning specified in
Section 5.6.
"Seller's Network Business" shall have the meaning specified in Section
2.1(b)(ii).
"Service Inventory" shall mean all finished goods, spare parts,
refurbished equipment, replacement and component parts owned or stored by or for
Seller, including at customer sites, for use in connection with the provision of
maintenance services as a part of the Business.
"Tax" or "Taxes" shall mean (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts; (ii) any liability for the payment of any amounts of
the type described in clause (i) as a result of being or ceasing to be a member
of an affiliated, consolidated, combined or unitary group for any period
(including, without limitation, any liability under Treas. Reg. Section 1.1502-6
or any comparable provision of foreign, state or local law); and (iii) any
liability for the payment of any amounts of the type described in clause (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Governmental Authority relating to Taxes.
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"Third Party Claims" shall have the meaning specified in Section
8.2(c).
"Total Liabilities" shall mean all Assumed Liabilities as of the
Measurement Date as set forth on the Closing Statement, determined in accordance
with GAAP.
"Total Net Revenues" shall mean the amounts billed by Buyer from the
operation of the Business by Buyer after the Closing less the following items:
normal and customary cash and trade discounts, credits for returns and
allowances, bad debt, insurance costs and transportation charges or allowances,
if any, any sales or other excise taxes or duties imposed with respect to such
sales, and selling commissions by resellers or trading agents, if any.
"Transferred Employees" shall have the meaning specified in Section
6.1.
"Transition Accounts" shall have the meaning specified in Section 5.14.
"Transition Budget" shall have the meaning specified in Section 5.14.
"Transition Cap" shall have the meaning specified in Section 5.14.
"Transition Cost Amount" shall have the meaning specified in Section
5.14.
"Transition Period" shall have the meaning specified in Section 5.14.
"Transition Services Agreement" shall mean the Transition Services
Agreement executed by Buyer and Seller on the Closing Date, substantially in the
form of Exhibit 1.1(c).
"Transition Statements" shall have the meaning specified in Section
5.14.
"Triggering Event" shall mean the occurrence of any of the following
with respect to Seller: (a) its Board of Directors or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Buyer the Affirmative Recommendation, (b) it shall have failed
to include the Affirmative Recommendation in its proxy materials with respect to
the Seller's Stockholder Meeting, or (c) its Board of Directors or any committee
thereof shall have approved any proposal with respect to any transaction or
series of related transactions in which any party other than Buyer shall be
entitled to purchase any substantial portion of the Business or the Assets,
whether by asset sale, sale of stock or other securities, spin-off,
contribution, merger, consolidation, reorganization, recapitalization,
liquidation or otherwise.
"Variable Direct Costs" shall have the meaning specified in Section
5.14.
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ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale.
(a) Sale and Conveyance of the Assets. Subject to the terms and
conditions of this Agreement, Seller hereby sells, assigns, transfers and
conveys to Buyer the following assets and properties relating to the Business
(collectively, the "Assets"):
(i) all Inventory as of the Closing Time, including without
limitation as set forth on Section 2.1(a)(i) of the Disclosure Schedule;
(ii) all Receivables as of the Closing Time, including without
limitation as set forth on Section 2.1(a)(ii) of the Disclosure Schedule;
(iii) all Business Intellectual Property owned by Seller and
all Business Intellectual Property licensed to Seller (to the extent
transferable), including without limitation as set forth on Section 2.1(a)(iii)
of the Disclosure Schedule;
(iv) all furniture, equipment, fixtures, leasehold
improvements, tools, computers, machinery and other tangible personal property
used primarily in the Business, including without limitation as set forth on
Section 2.1(a)(iv) of the Disclosure Schedule (the "Fixed Assets");
(v) Seller's interest in all personal property leases, rental
agreements, sales and purchase orders and acknowledgments, customer license and
maintenance agreements, third party product agreements, third party supply
agreements and any and all other contracts or binding agreements primarily
relating to the Business (the "Contracts") and all of Seller's interests
(including rights to refund and offset), privileges, claims, causes of action
and options relating to the Contracts or any portion thereof, and all bids and
offers (including open sales orders) relating thereto, including without
limitation as set forth on Section 2.1(a)(v) of the Disclosure Schedule;
(vi) all customer, distributor, supplier and other mailing or
contact lists and other sales-related, distribution-related and supply-related
materials used primarily in the Business (the "Lists") (provided that Seller
shall, following the Closing, remain entitled to use the Lists in connection
with Seller's Network Business, subject to Seller's compliance with Section 5.8
in connection with such use); provided that Buyer shall also receive copies of
all lists used in the Business;
(vii) all labels, signs, packaging materials, promotional
materials, point-of-purchase displays, sales literature, advertising, brochures,
user manuals, graphics, artwork (in each case, in paper and electronic format),
UPC codes and all other items relating to the Assets;
(viii) all books of account, general and financial records,
copies of tax records, property records, contract records, copies of (subject to
the requirements and limitations of law) personnel records of the Transferred
Employees, invoices, shipping, purchasing and sales records, correspondence and
other documents, records and files and all computer software and programs and
any rights thereto relating to the Business (in each case in paper or electronic
format), excluding, without limitation, the organization documents, minute and
stock record books and the corporate seal of Seller;
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(ix) certain rights of Seller under certain leasehold
interests used in the operation of the Business and listed on Section 2.1(a)(ix)
of the Disclosure Schedule attached hereto and made a part hereof (the
"Leases");
(x) all of the intangible rights and property of Seller
associated with the Business, including going concern value and goodwill
associated with the Business;
(xi) all governmental authorizations, permits, licenses and
approvals, and all pending applications therefor or renewals thereof used in
connection with the Business, in each case to the extent transferable to Buyer;
(xii) all telephone and facsimile numbers, email addresses,
and post office boxes used by Seller primarily in connection with the Business
as set forth on Section 2.1(a)(xii) of the Disclosure Schedule;
(xiii) all guarantees, warranties, indemnities and similar
rights in favor of Seller with respect to the Business or any of the Assets;
(xiv) all claims of Seller against third parties relating to
the Assets, whether choate or inchoate, known or unknown, contingent or
noncontingent;
(xv) all rights of Seller in respect of the Assets relating to
deposits and prepaid expenses, claims for refunds and rights to offset; and
(xvi) all rights in and to the Transition Accounts.
(b) Excluded Assets. Anything to the contrary notwithstanding, the
Assets shall not include any of the following rights, properties or assets (the
"Excluded Assets"):
(i) all cash, cash equivalents and bank accounts (other than
the Transition Accounts);
(ii) all right, title and interest in and to assets,
properties, goodwill and business of every kind and description and wherever
located, whether tangible or intangible, real, personal or mixed, directly or
indirectly owned by Seller or to which Seller is directly or indirectly entitled
and, in any case, necessary for the operation of, or that is primarily used in,
Seller's network division (including without limitation the designing,
marketing, distributing, selling, installing, maintaining and supporting of the
Glowpoint network and of such division's bridging, gateway and network design
operations) (collectively, "Seller's Network Business");
(iii) all rights of Seller arising under the Acquisition
Documents;
(iv) trademarks, service marks and trade names relating to
Seller's Network Business;
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(v) any rights of Seller to Tax Refunds or any accrued prepaid
Taxes;
(vi) any records relating to the internal governance of
Seller; and
(vii) any insurance policies of Seller or any right, title or
interest of Seller thereunder, including any prepaid insurance premiums and all
insurance benefits thereunder, including rights and proceeds, arising from or
relating to the operation of the Business prior to the Measurement Date.
SECTION 2.2. Consideration for Sale and Conveyance.
(a) Purchase Price. Subject to the terms and conditions of this
Agreement, in reliance upon the representations, warranties and agreements of
Seller contained herein, and in full consideration of the aforesaid sale,
conveyance and delivery of the Assets, the purchase price (the "Purchase Price")
shall be an amount equal to $23,000,000, as adjusted pursuant to Section 2.3,
payable by Buyer to Seller in immediately available funds to the Purchase Price
Bank Account, as follows: (i) $20,000,000 at Closing (the "Cash Payment"), as
adjusted pursuant to Section 2.3; (ii) $2,000,000 (the "Holdback Amount") at
such time as the Net Assets are fully and finally determined pursuant to Section
2.3(d); (iii) an unsecured promissory note in the principal amount of
$1,000,000, such promissory note to be substantially in the form of Exhibit
2.2(a) attached hereto (the "Note");
(b) Post-Closing Additional Payments. Purchaser shall pay to Seller
such additional payments as are required by Section 2.5.
(c) Allocation of Purchase Price. Exhibit 2.2(c) attached hereto is a
preliminary allocation of the Purchase Price among the Assets. Promptly
following the Closing, the final allocation (the "Final Allocation") will be
prepared by Buyer in a manner consistent with the Exhibit attached hereto and
presented to Seller for Seller's approval, which approval shall not be
unreasonably withheld. Seller and Buyer each agree (a) to report the sale of the
Purchased Assets for Tax purposes in accordance with the allocations set forth
on the Final Allocation and to follow the allocations set forth on the Final
Allocation in determining and reporting their liabilities for any Taxes, (b)
without limitation, not to take any position inconsistent with such allocations
on any of its Tax Returns, and (c) to timely file federal tax Form 8594 with the
applicable Tax Return for the year of this transaction reflecting such Purchase
Price allocations.
(d) Assumption of Liabilities. Except as specifically provided herein,
Buyer is not assuming, or becoming responsible for, any liabilities, obligations
or debts of Seller and, except as set forth herein, Seller shall remain liable
for all of its liabilities, obligations and debts. On the terms and subject to
the conditions of this Agreement, Buyer is hereby assuming the following
liabilities of Seller (collectively, the "Assumed Liabilities"):
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(i) any Liabilities to be paid or performed after the Closing
Date that arise from or out of the performance or non-performance by Buyer after
the Closing Date of any Contracts included in the Assets and as set forth in
Sections 2.1(a)(iv) or 2.1(a)(v) of the Disclosure Schedule hereto or entered
into after the date hereof in accordance with the terms hereof, including under
any such extended warranty, customer support, upgrade or product delivery
contracts for Sales Inventory, but not including (1) any liability, obligation
or commitment of Seller for any breach thereof by Seller or a
predecessor-in-interest occurring prior to the Closing Date or on or after the
Closing Date solely with respect to any obligations of Seller or such
predecessor-in-interest arising under any such contract prior to the Closing
Date, or (2) liabilities as of the Closing Date of the type required by GAAP to
be reflected on the Closing Statement for future performance of such obligations
in excess of the amount with respect thereto as reflected on the Closing
Statement (as finally determined); and
(ii) the accounts payable, customer deposits, deferred revenue
and accrued liabilities listed on Section 2.2(d)(ii) of the Disclosure Schedule,
but not including any such liability to the extent that (A) it exceeds the
amount with respect thereto set forth on the Closing Statement (as finally
determined) and (B) it evidences any intercompany obligation of the Seller and
its subsidiaries.
(e) Except for the Assumed Liabilities specifically set forth in
Section 2.2(d) above, Seller shall retain, and shall remain responsible for
paying, performing and discharging when due, and Buyer shall not assume or have
any responsibility for, all Liabilities of Seller as of the Closing Date
(collectively, the "Excluded Liabilities").
SECTION 2.3. Minimum Net Assets.
(a) No later than ten business days after the Measurement Date, Seller
shall deliver to Buyer a good faith estimate substantially in the form of
Exhibit 2.3(a), reasonably acceptable to Buyer, of a statement of the Assets and
the Assumed Liabilities of the Business as of the Measurement Date (the "Closing
Statement"), prepared in accordance with GAAP, and including a computation in
accordance with such data of the estimated Net Assets of the Business as of the
Measurement Date, together with the detailed work papers which support the
Estimated Closing Statement. The Cash Payment shall be decreased by the amount
by which the sum of the Net Assets at the Measurement Date is less than
$15,000,000 (the "Closing Cash Adjustment").
(b) Buyer shall have the right to review the books and records of
Seller and the Business for a period of ninety (90) days after the Closing Date
(or such reasonable extension thereof as approved by Seller, such approval not
to be unreasonably withheld) to verify and confirm the accuracy thereof. If,
after such review, Buyer agrees with the Closing Statement, Buyer shall promptly
(and in any event within ninety (90) days after the Closing Date or approved
extension) notify Seller of its agreement. If, after such review, Buyer objects
to the Closing Statement, Buyer shall promptly (and in any event within ninety
(90) days after the Closing Date or approved extension) provide Seller with a
statement indicating the basis for its objections, and Buyer and Seller shall
meet and confer in an effort to resolve such disagreement in good faith.
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(c) In the event that Buyer and Seller are unable to resolve a
disagreement with respect to the Closing Statement within ten (10) days
following the date of Buyer's objection (or such longer period as Buyer and
Seller may agree), the Net Assets shall be determined by PricewaterhouseCoopers
LLP or such other independent firm of certified public accountants mutually
agreeable to Buyer and Seller (the "Accountants"). If issues in dispute are
submitted to the Accountants for resolution, (i) each party shall furnish to the
Accountants such work papers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party,
and shall be afforded the opportunity to present to the Accountants any material
relating to the determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants of the Net Assets as set
forth in a notice delivered to both parties by the Accountants, will be binding
and conclusive on the parties; and (iii) the fees and expenses of the
Accountants for such determination shall be paid by the parties based upon the
degree to which the Accountants accept the respective positions of the parties.
For example, if it is Buyer's position that the adjustment owed by Seller to
Buyer is $300, Seller's position that the adjustment owed by Seller to Buyer is
$100 and the Accountants' finding that the adjustment owed by Seller to Buyer is
$150, then Buyer shall pay 75% (300-150 / 300-100) of the Accountants' fees and
expenses and Seller shall pay 25% (150-100 / 300-100) of the Accountants' fees
and expenses. Other than the expense of retaining the Accountants, the expense
of preparing the Closing Statement shall be borne by Seller.
(d) Upon the determination of the Net Assets pursuant to either the
agreement of the parties or the determination of the Accountants, the parties
shall recompute the Net Assets and the Purchase Price using the Net Assets as so
agreed or determined (the "Final Cash Adjustment"). Within three (3) business
days of such agreement or determination, in the event that the Purchase Price
based on the Closing Cash Adjustment exceeds the Purchase Price based on the
Final Cash Adjustment, then Buyer shall deduct the amount of such excess from
the Holdback Amount and promptly pay the remainder, if any, of the Holdback
Amount, together with interest thereon at the rate of 5% from the date on which
any dispute is submitted to the Accountants pursuant to subsection (c) above
through and including the date of payment, to Seller by wire transfer of
immediately available funds. If the amount of such excess exceeds the Holdback
Amount, Seller will promptly pay to Buyer by wire transfer of immediately
available funds, the amount by which such excess exceeds the Holdback Amount,
together with interest thereon at the rate of 5% from the date on which any
dispute is submitted to the Accountants pursuant to subsection (c) above through
and including the date of payment. If the Cash Payment was decreased under
Section 2.3(a) and the Purchase Price based on the Final Cash Adjustment exceeds
the Purchase Price based on the Closing Cash Adjustment, the Buyer shall
promptly pay such excess to Seller by wire transfer of immediately available
funds.
SECTION 2.4. Closing.
(a) Closing. The closing (the "Closing") of the purchase and sale of
the Assets provided for in this Agreement shall take place at the offices of
Morrison & Foerster LLP at 10:00 a.m. New York time on the second Business Day
following the satisfaction or waiver of all other conditions to the obligations
of the parties set forth in Article VII (other than those conditions which by
their terms are to be satisfied or waived as of the Closing), or at such other
place or at such other time or on such other date as Seller and Buyer may
mutually agree upon in writing (the day on which the Closing takes place being
the "Closing Date"). All transactions occurring at the Closing shall be deemed
to have occurred simultaneously as of the Closing Time, and no one transaction
shall be complete until all transactions have been completed.
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(b) Closing Deliveries by Seller. On the terms and subject to the
conditions of this Agreement, at and as of the Closing, Seller shall deliver or
cause to be delivered to Buyer:
(i) the Bill of Sale and such other instruments, in customary
form and substance, as may reasonably be requested by Buyer to transfer the
Assets to Buyer or evidence such transfer on the public records;
(ii) an executed counterpart of the Assumption Agreement;
(iii) an executed counterpart of each of the Real Estate
Agreements required to be executed by Seller;
(iv) an executed counterpart of the Transition Services
Agreement; and
(v) the certificates and other documents required to be
delivered pursuant to Section 7.2.
(c) Closing Deliveries by Buyer.
On the terms and subject to the conditions of this Agreement, at and as
of the Closing, Buyer shall deliver to Seller:
(i) the Cash Payment, payable by wire transfer in immediately
available funds to the Purchase Price Bank Account;
(ii) an executed counterpart of the Assumption Agreement;
(iii) an executed counterpart of each of the Real Estate
Agreements required to be executed by Buyer;
(iv) an executed counterpart of the Transition Services
Agreement; and
(d) the certificates and other documents required to be delivered
pursuant to Section 7.1.
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SECTION 2.5. Post-Closing Additional Payments
(a) Buyer shall pay to Seller within sixty (60) days following the last
day of each of the first two (2) years after the Closing Date ending on June 30,
2004 and June 30, 2005, respectively, additional payments equal to five percent
(5.0%) of the sum of (1) Total Net Revenues plus (2) the annual revenues derived
from the Pierce Technology Services, Inc. (formerly Forgent Networks, Inc.)
videoconferencing services business for such year in excess of Ninety-Six
Million Dollars ($96,000,000) (the "Additional Payments"); provided, however,
that in no event shall Buyer be obligated to pay Seller additional payments
pursuant to this Section such that the aggregate amount of such payments would
exceed Two Million Dollars ($2,000,000), and provided further, that upon a sale
of substantially all of the assets of the Business by Buyer prior to June 30,
2005, whether by merger, sale of stock or sale of assets, for total
consideration that is greater than Thirty-Five Million Dollars ($35,000,000),
Buyer shall pay to Seller Two Million Dollars ($2,000,000) less the sum of any
Additional Payments previously paid. Concurrently with each payment, Buyer shall
provide Seller with a certificate, signed by its chief financial officer,
showing the computation of such payment.
(b) Each payment under Section 2.5(a) shall be accompanied by
a reasonably detailed statement of the computation of the amount thereof. Not
more than once in any calendar year, Seller shall have the right to audit any of
Buyer's books of account, documents, records, papers and files relating to the
payments under Section 2.5(a). Seller shall complete such audit within sixty
(60) days of its commencement. If Seller has any objections to the computations,
Seller will deliver detailed statements describing its objections to Buyer
within twenty (20) days after the completion of such audit. The parties will use
their reasonable efforts to resolve any such Seller's objections. If, however,
the parties do not obtain final resolution of this matter within 20 days after
Buyer has received the statements of objections, the dispute shall be referred
to the Accountants. The parties will cooperate with the Accountants. The
Accountants' determination of such payment shall be binding upon all parties.
Buyer and Seller will share responsibility for the fees and expenses of the
Accountants based on the degree to which the Accountants accept the respective
positions of the parties, as conclusively determined by the Accountants. For
example, if it is Buyer's position that the payment owed by Buyer to Seller is
$100, Seller's position that the payment owed by Buyer to Seller is $300 and the
Accountants' finding that the payment owed by Buyer to Seller is $250, then
Buyer shall pay 75% (i.e., (250-100/300-100) of the Accountants' fees and
expenses and Seller shall pay 25% (i.e., (300-250/300-100)) of the Accountants'
fees and expenses.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER
Except as set forth on the Disclosure Schedule, Seller represents and
warrants to, and agrees with, Buyer as follows:
SECTION 3.1. Organization and Authority of Seller
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 to carry on the Business as it is now being conducted and has
all requisite authority to own, lease, and operate the properties constituting
the Business as and where such properties are now owned or leased and the
Business is presently being conducted. Seller is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of the Business makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not reasonably be expected to have a Material Adverse Effect.
Section 3.1 of the Disclosure Schedule sets forth the jurisdictions in which
Seller is qualified to do business for purposes of conducting the Business.
Copies of Seller's Certificate of Incorporation and By-Laws (certified as of the
date hereof by the Secretary of Seller), which have been delivered to Buyer, are
true and complete.
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SECTION 3.2. Power and Authority
Seller has the corporate power and authority to enter into this
Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements by Seller, the performance by Seller of its
obligations hereunder and thereunder and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of Seller, other than the required
approval of this Agreement and the transactions contemplated hereby by the
stockholders of Seller. This Agreement has been, and upon their execution the
Ancillary Agreements will be, duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Buyer) this Agreement
constitutes, and upon their execution the Ancillary Agreements will constitute,
legal, valid and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles related to or limiting creditors' rights generally and by
general principles of equity.
SECTION 3.3. No Conflict
Assuming the making and obtaining of all filings, notifications,
consents, approvals, authorizations and other actions referred to in Section
3.4, except as may result from any facts or circumstances relating solely to
Buyer, the execution, delivery and performance of this Agreement and the
Ancillary Agreements by Seller does not and will not (a) violate, conflict with
or result in the breach of any provision of the Certificate of Incorporation or
By-Laws of Seller, (b) conflict with or violate any Law or Governmental Order
applicable to Seller, or the Assets or the Business, (c) conflict with, result
in any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, any License or contract included in
the Assets, or result in the creation of any Encumbrance on any of the Assets,
or (d) result in the payment by, or the creation of any obligation (absolute or
contingent) to pay on behalf of, the Seller or Business of any severance,
termination, "golden parachute," or other similar payment pursuant to any
employment agreement or contract or the triggering of any severance notice
obligation with respect to any of the Transferred Employees, except, with
respect to clauses (b) and (c), for such conflicts, violations, breaches,
defaults or Encumbrances which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.4. Governmental Consents and Approvals
The execution, delivery and performance of this Agreement and each
Ancillary Agreement by Seller does not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except any filings with
Governmental Authorities necessary to obtain the required approval of this
Agreement and the transactions contemplated hereby by the stockholders of
Seller.
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SECTION 3.5. Financial Statements
(a) Financial Statements. Seller has delivered to Buyer: (i) (A) an
audited balance sheet of Seller as of December 31, 2000, 2001 and 2002, and the
related audited statements of operations, stockholders' equity and cash flows,
including in the related notes thereto, accompanied by the report thereon of BDO
Seidman L.L.P., independent certified public accountants and (B) the unaudited
balance sheet of the Seller and the related statements of operations,
stockholders' equity and cash flows as at March 31, 2003 (the "Financial
Statements"); and (ii) the unaudited balance sheet of the Business as at
December 31, 2002 and March 31, 2003 and the related statement of operations for
the year ended December 31, 2002 and the three months ended March 31, 2003 (the
"Business Financial Statements"). The Financial Statements and the Business
Financial Statements are in accordance with the books, records and accounts of
Seller maintained with respect to the Business, were prepared pursuant to the
related work papers, are complete and correct, and fairly present in all
material respects the financial condition and the results of operations of
Seller and the Business, as the case may be, at the dates and for periods
referred to in such financial statements, all in accordance with GAAP
consistently applied, except that the Business Financial Statements do not
include footnotes. The Financial Statements and Business Financial Statements
are attached hereto as Section 3.5 of the Disclosure Schedule. The Business
Financial Statements do not reflect the operations of any entity or business
other than the Business.
SECTION 3.6. Receivables
The Receivables have arisen from bona fide transactions in the ordinary
and normal course of business of Seller, represent valid obligations due to
Seller and are not owed by an Affiliate of Seller. None of the Receivables
constitute duplicate billings of other Receivables, and, except as set forth on
Section 3.6 of the Disclosure Schedule, no account debtors have brought to the
attention of Seller any dispute over the Receivables. No Receivable is subject
to a valid right of setoff, counterclaim, or a valid defense against collection,
whether based on payment, defective installation, or otherwise.
SECTION 3.7. Inventory
All items included in the Inventory are useable or saleable in the
ordinary course of the Business. Seller is not in possession of any inventory
relating to the Business that is not owned by Seller, other than goods already
sold (which sold goods are not included within the Inventory). All of the
Inventory has been valued at the lower of cost or market value. Inventory now on
hand that were purchased after the date of the Business Financial Statements
were purchased in the ordinary course of business of Seller at a cost not
exceeding market prices prevailing at the time of purchase.
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SECTION 3.8. Unfulfilled Sales Order Schedule
Seller has prepared and attached hereto the Unfulfilled Sales Order
Schedule, which is Section 3.8 of the Disclosure Schedule, including, for each
purchase order, any purchase order number, name of customer and contract price.
The Unfulfilled Sales Order Schedule was prepared based on good faith estimates
and assumptions.
SECTION 3.9. Title to Properties; Absence of Encumbrances
Seller owns outright, has good and valid title to, or a valid leasehold
interest in, or a valid license to use, all the property included in the Assets,
free and clear of all Encumbrances of any nature whatsoever, other than
Permitted Encumbrances. All of the properties and assets purported to be owned,
leased, or used by the Business, including, without limitation, the Fixed Assets
are, subject to ordinary wear and tear, in good operating condition and repair,
fit for their present use, and conform to all applicable laws. Except for those
assets and properties listed in Section 3.9 of the Disclosure Schedule, the
Assets comprise all properties and assets primarily used in or necessary for the
continued conduct of the Business as now being conducted and are adequate for
the purposes for which such properties and assets are currently used or held for
use. There are no material assets or properties primarily used in the conduct of
the Business and owned by any Person other than Seller that will not continue to
be leased or licensed to Buyer under valid, current leases or licenses following
the Closing.
SECTION 3.10. No Undisclosed Liabilities
Seller has no liabilities, debts, commitments or obligations of any
nature whatsoever relating to the Business (whether accrued, absolute contingent
or otherwise), and whether due or to become due, including, without limitation,
any Tax liabilities of any nature whatsoever due or to become due with respect
to any period ended as of or prior to the date hereof, except for those
liabilities (i) reflected or reserved against in the Business Financial
Statements, (ii) incurred in the ordinary course of the Business and not
required to be set forth on the Business Financial Statements under GAAP as
detailed on Section 3.10 of the Disclosure Schedule, (iii) incurred in the
ordinary course of business consistent with past practices of the Seller and the
Business since the date of the Business Financial Statements and (iv) incurred
in connection with the execution of this Agreement and any agreements
contemplated hereby.
SECTION 3.11. Absence of Certain Changes or Events
(a) Since March 31, 2003, except as set forth in Section 3.11 of the
Disclosure Schedule, the Business has been conducted only in the normal and
ordinary course of business consistent with past practice and there has not
been:
(i) any contingent obligation incurred by way of guaranty,
endorsement, indemnity, warranty or otherwise by Seller relating to the
Business, except customary warranties arising under Contracts entered into in
the normal and ordinary course of the Business or except by endorsement of
negotiable instruments for deposit or collection in the normal and ordinary
course of the Business;
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(ii) any increase in the rate of fixed or percentage
compensation payable or to become payable by Seller to any of the Business'
officers or employees or agents whose total compensation for services rendered
is currently at an annual rate of more than $100,000; or any bonus, other
additional salary, percentage compensation or other like benefit granted, made
or accrued to the benefit of any of the officers, employees or agents of the
Business, or any employee welfare, pension, retirement, severance or similar
payment or arrangements for the benefit of officers, employees or agents of the
Business made or agreed to by Seller;
(iii) any damage, destruction or loss by fire or other
casualty, whether or not covered by insurance, affecting the Business or the
properties relating to the Business, or of any items carried on the books of
Seller relating to the Business at more than $50,000;
(iv) any discharge or satisfaction by Seller of any lien,
charge or encumbrance relating to the Assets;
(v) any subjection of the Assets by Seller to any lien or
encumbrance of any kind or any waiver by Seller of any material right relating
to the Business;
(vi) any labor trouble which has materially and adversely
affected the Business or, to the best knowledge of Seller, the prospects of the
Business;
(vii) any purchase commitments by Seller relating to the
Business in excess of the Business' normal requirements or its normal operating
inventories or at a higher than current market price;
(viii) any transfer, lease or other disposition by Seller of
any fixed or capital asset of the type that would have been included in the
Assets had there been no such transfer, lease or disposition or any acquisition
of any fixed or capital asset included in the Assets in an amount in excess of
$50,000 except, in each case, in the ordinary course of the Business;
(ix) any material amendment, rescission, or notice of
termination of any contract, lease or other agreement or any agreement to settle
any litigation, action or proceeding before any court or governmental body
relating to the Business or the properties of the Business;
(x) any cancellation or compromise of claims of Seller
relating to the Business other than in the normal and ordinary course of the
Business;
(xi) any transfer or grant by Seller of any rights under any
lease, license or agreement, Patent, invention, Trademark, trade name, service
mark or copyright relating to the Business or with respect to any know-how
relating to the Business or any modification with respect to any such agreement
or proprietary right;
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(xii) any material adverse change in the business relationship
of Seller with any customer of the Business who constituted 5% or more of the
Business' revenues for the calendar year ended December 31, 2002 or any material
adverse change in relations of Seller with the employees, agents or suppliers of
the Business;
(xiii) any capital expenditure (or series of capital
expenditures) that is either material or outside the ordinary course of
business;
(xiv) any failure to repay any material obligation when due
related to the Business;
(xv) any material change in the manner of conducting the
Business, or any delayed payment of any material amount of accounts payable or
accelerated collection of any material amount of accounts receivable;
(xvi) any material revaluation by the Seller of any of the
assets or liabilities of the Business, including without limitation, any
material write-offs, material increases or decreases in any reserves or any
material write-up of the value of inventory, property, plant, equipment, or any
other Asset;
(xvii) any Material Adverse Effect;
(xviii) any material change with respect to the management of
the Business; or
(xix) any agreement entered into or any commitment made to
take any of the types of actions described in subparagraphs (i) through (xviii)
above.
SECTION 3.12. Litigation
There is no claim, legal action, suit, arbitration, government
investigation or other legal or administrative proceeding, pending or, to the
knowledge of Seller, threatened against, or relating to, or any order,
injunction, ruling, charge, decree, or judgment in progress, pending or in
effect against, the Business or the properties of the Business or the Assets or
the transactions contemplated by this Agreement, nor is there any basis known to
Seller for any such action. Seller is not in default under any order, writ,
injunction, or decree of any Governmental Authority relating to the Business or
the Assets. There is no decree or judgment of any kind in existence enjoining or
restraining Seller or any officer of Seller from taking any action of any kind
relating to the Business or the Assets.
SECTION 3.13. Compliance with Law
Seller is in compliance in all material respects with all Laws relating
to the Assets and/or Business, or the operation thereof, including, without
limitation, all applicable laws respecting employment, employment practices and
employment benefits, terms and conditions of employment, and wages and hours,
and the Worker Adjustment and Retraining Notification Act. Seller is not, and
during the past five years has not been, engaged in any unfair labor practices
relating to the Business. There are no unfair labor practices or similar
complaints relating to the Business pending before the National Labor Relations
Board nor does Seller know of any basis for any such complaint.
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SECTION 3.14. Material Contracts
Section 3.14 of the Disclosure Schedule contains a true and complete
list of all material contracts and other written instruments (the "Material
Contracts") with respect to the Business to which Seller is a party (whether or
not Seller has yet commenced performance), including:
(i) any contract or other instrument calling for a financial
commitment by Seller of an amount or value of more than $50,000 over the life of
the contract;
(ii) any agreement, contract or commitment that involves the
payment by any party thereto of more than $50,000 annually, unless cancelable by
Seller without penalty to it on not more than ninety days' notice;
(iii) any employment contracts, arrangements or policies,
deferred compensation, severance, change-in-control or other plan or arrangement
(including without limitation any collective bargaining contract or union
agreement) relating to the Transferred Employees;
(iv) any leases, sales contracts, and other agreements with
respect to any property included in the Assets, except for leases of personal
property involving less than $50,000 per year;
(v) any agreement, contract or commitment to be performed
relating to capital expenditures in excess of $50,000;
(vi) any agreement, indenture or instrument relating to
indebtedness for borrowed money or the deferred purchase price of property
(excluding trade payables in the ordinary course of business, and personal
property leases for telephones, copy machines, facsimile machines and other
office equipment having aggregate annual lease payments per machine of $10,000
or less);
(vii) any material loan or advance to or investment in, any
Person, or any agreement, contract or commitment relating to the making of any
such loan, advance or investment or any agreement, contract or commitment
involving a sharing of profits;
(viii) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business) or any contingent liability in excess of $50,000;
(ix) any management service, consulting or any other similar
type of contract, involving payments of more than $50,000 annually, unless
terminable by Seller without penalty or payment on not more than ninety days'
notice;
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(x) any agreement, contract or commitment limiting the ability
of Seller to engage in the Business or to compete with any Person in the
Business;
(xi) any agreement, contract or commitment requiring Seller to
indemnify or hold harmless (a) any Person other than purchase orders, revenue
earning contracts and other agreements entered into in the ordinary course of
business or (ii) any purchaser and/or any licensee with respect to the Business
Intellectual Property;
(xii) any partnership, joint venture or joint operating
agreement; or
(xiii) any material amendment, modification or supplement in
respect of any of the foregoing.
True and complete copies of all written contracts and other instruments
required to be listed on Section 3.14 of the Disclosure Schedule have been
delivered to Buyer. All of the Material Contracts included in the Assets are
legal, valid and binding obligations of Seller and in full force and effect. The
Material Contracts included in the Assets comprise all agreements, arrangements
and licenses necessary for the continued conduct of the Business as now being
conducted. Seller has performed in all material respects all obligations with
respect to the Material Contracts included in the Assets required to be
performed by it to date, and neither Seller nor, to the knowledge of Seller, any
other party to any contract, agreement, lease or license to which Seller is a
party with respect to the Business has received written notice declaring it or
threatening to declare it in default (with or without the lapse of time or the
giving of notice or both) under any such contract, agreement, lease, license or
other document or instrument.
SECTION 3.15. Intellectual Property
(a) Seller owns, and shall transfer to Buyer at Closing, all of the
Business Intellectual Property identified as owned on Section 2.1(a)(iii) of the
Disclosure Schedule and has valid licenses for, and shall, to the extent
transferable, transfer to Buyer at Closing, all of the Business Intellectual
Property identified as licensed on Section 2.1(a)(iii) of the Disclosure
Schedule. The Business Intellectual Property encompasses all Intellectual
Property primarily used in or necessary for the operation of the Business as
presently conducted or proposed to be conducted. Seller has no registered
Trademarks and service marks, reserved trade names, registered copyrights,
issued Patents, or applications for any of the foregoing, used in or necessary
for the operation of the Business.
(b) Seller has used its best efforts to protect the trade secrets of
the Business. There has been no material unauthorized disclosure of any trade
secrets of the Business by any person or entity.
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(c) All personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of Seller's Intellectual Property with respect to the Business, have
(i) been party to a "work-for-hire" arrangement or agreement with Seller, in
accordance with applicable federal and state law, that by its terms accords to
Seller ownership of all tangible and intangible property thereby arising, (ii)
executed appropriate instruments of assignment in favor of Seller as assignee
that by their terms convey to Seller ownership of all tangible and intangible
property thereby arising, and (iii) acknowledged and agreed that such property
is and shall remain the sole and exclusive property of Seller and is and shall
not be used or disclosed other than as specifically authorized by Seller.
(d) No Intellectual Property right or other claims have been asserted
by any person or entity to the use of any Asset, and Seller is not aware of any
valid basis for any such claim. To the best knowledge of Seller, the use of any
Asset by Seller does not infringe on the Intellectual Property rights or other
rights of any person or entity.
(e) As of the Closing Date, all Business Intellectual Property
transferred and assigned to Buyer pursuant to this Agreement is and shall be
useable in the same form as on the Closing Date, under the same circumstances as
on the Closing Date, and in the ordinary course of the Business as such business
actually has been operated prior to the Closing Date.
(f) Seller (i) has good and marketable title to each intangible Asset
owned by Seller, including, but not limited to, each item of Intellectual
Property used in and material to, or necessary for the operation of, the
Business, free and clear of any Encumbrance, and (ii) is the sole and rightful
owner of all right, title and interest in and to each such intangible Asset, and
has the unrestricted right to market, license and otherwise exploit each such
intangible Asset.
SECTION 3.16. Real Property
(a) Section 3.16 of the Disclosure Schedule sets forth a list of all
Seller Occupied Business Facility Leases, including the address of each
respective Seller Occupied Business Facility, the name of the landlord, the date
of the lease and of each amendment thereto. Seller has provided Buyer with true
and complete copies of each Seller Occupied Business Facility Lease; no term or
condition of any such lease has been modified, amended or waived except as shown
in such copies; each such lease constitutes the entire agreement of the landlord
and the tenant thereunder; and there are no other agreements or arrangements
whatsoever relating to the use or occupancy of any of the Seller Occupied
Business Facilities. Seller has not transferred or assigned any interest in any
Seller Occupied Business Facilities Lease, nor has Seller subleased or otherwise
granted rights of use or occupancy of any of the Seller Occupied Business
Facilities to any other person or entity.
(b) Each Seller Occupied Business Facility Lease is in full force and
effect, all rents and other payments due to date under each lease have been paid
in full, and no breach or default by Seller or, to Seller's knowledge, by the
landlord thereunder, exists, nor to Seller's knowledge has any event or
condition occurred which would with the giving of notice or the passage of time
or both constitute a breach or default, under any Seller Occupied Business
Facility Lease. No party has disputed or repudiated any provision of the Seller
Occupied Business Facility Leases.
(c) Seller has not received any notice of any material violation of any
applicable zoning ordinance, building code, planning law or regulation, use or
occupancy restriction, or violation of any thereof, or any condemnation action
or proceeding with respect thereto.
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SECTION 3.17. Customers
Listed in Section 3.17 of the Disclosure Schedule are the names and
addresses of the 50 most significant customers (ranked by billings) of the
Business for the twelve-month period ended December 31, 2002 and the amount for
which each such customer was invoiced during such period. Seller has not
received any notice and has no reason to believe that any customer of Seller has
ceased, or will cease, to use the products, equipment, goods or services of the
Business or has substantially reduced, or will substantially reduce, the use of
such products, equipment, goods or services at any time. There are no
outstanding disputes with any customers, resellers, or partners of the Business,
other than disputes that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
SECTION 3.18. Suppliers
Section 3.18 of the Disclosure Schedule sets forth the names of the ten
(10) most significant suppliers from which the Business ordered supplies,
merchandise and other goods for the twelve months ended December 31, 2002, and
the amount for which each such supplier invoiced Seller during such period. To
the knowledge of Seller, no supplier of the Business has refused to do business
with Seller nor stated its intention not to continue to do business with Seller
or Buyer, as successor to the Business, at any time after the Closing on terms
and conditions substantially similar to those used in its current sales to
Seller, whether as a result of the transactions contemplated hereby or
otherwise. There are no outstanding disputes with any suppliers, other than
disputes that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 3.19. Employee Benefit Matters
(a) Section 3.19 of the Disclosure Schedule sets forth a complete and
accurate list of all Employee Benefit Plans for the benefit of any employee of
or consultant to Seller who is involved in the Business, indicating the sponsor
of such plan. Seller has furnished or made available to Buyer a true and
complete copy of each such Employee Benefit Plan, all summary descriptions and
evidence of any registration in respect thereof. Each such Employee Benefit Plan
has been administered in accordance with its terms and all understandings,
written or oral, between Seller and the employees of, and consultants to, Seller
who are involved in the Business and complies in all material respects with and
has been administered in all material respects in compliance with the provisions
of all applicable Laws. Seller has received no notice that any Employee Benefit
Plan set forth on Section 3.19 of the Disclosure Schedule is not in compliance
with the provisions of ERISA, the applicable provisions of the Internal Revenue
Code and all other applicable laws. There is no pending or threatened legal
action, proceeding or investigation against or involving any such Employee
Benefit Plan. None of the Employee Benefit Plans provides benefits to retired
employees or consultants or the beneficiaries or dependants of retired employees
or consultants.
(b) Seller has received no notice that any of the Benefit Plans or any
trust created thereunder or any trustee or administrator thereof has engaged in
a transaction which might subject any such trustee or administrator, or any
party dealing with any such Benefit Plan or trust, to the Tax on prohibited
transactions imposed by Section 4975 of the Code.
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SECTION 3.20. Labor Matters
Seller is not a party to any collective bargaining agreement covering
or relating to any employees of the Business and has not recognized, is not
required to recognize, and has not received a demand for recognition by any
collective bargaining representative, and is not bound by any provisions of any
collective bargaining agreement relating to the Business and there has been no
union organizational efforts involving such employees of Seller during the past
five years, and to Seller's knowledge, no such organization efforts are pending
or threatened. There are no strikes or stoppages in effect or, to Seller's
knowledge, threatened against Seller relating to the Business nor has any such
strike or work stoppage relating to the Business been enjoined by any Action of
any Governmental Authority. There are no material controversies pending or, to
Seller's knowledge, threatened between Seller and employees of the Business.
SECTION 3.21. Employees
(a) Section 3.21 of the Disclosure Schedule contains a complete and
accurate list of the Employees as of the date of this Agreement, showing for
each such Employee (i) name, (ii) age, (iii) location of employment (iv) the
salary and wages payable and other benefits which Seller is obligated to provide
(whether at present or in the future), or, in the case of stock option grants,
has prior to the date hereof granted, to each such employee, and including, if
any, particulars of all profit sharing, incentive and, bonus arrangements to
which Seller is a party, (v) the Employee's job title, (vi) the date of hire,
(vii) leave status (including type of leave), if not active, (viii) visa status,
if applicable, (ix) any existing employment, consulting contracts or severance
arrangements or termination notice periods which constitute contractual
obligations of Seller with respect to the Employees, and (x) the participation
in and level of benefit entitlement applicable to each of the employees under
the Employee Benefit Plans. Seller has not improperly classified any of the
Employees identified as independent contractors or leased employees. Except as
set forth on Section 3.21 of the Disclosure Schedule, no Employee is on
long-term disability leave, extended absence or receiving benefits pursuant to
workers' compensation legislation. All current assessments under workers'
compensation legislation in relation to the Business have been paid or accrued
and Seller has not been subject to any special or penalty assessment with
respect to the Business under such legislation which has not been paid.
(b) All Employees are under written obligation to Seller to maintain in
confidence all confidential or proprietary information acquired by them related
to the Business in the course of their employment and to assign to Seller all
inventions made by them within the scope of their employment related to the
Business during such employment.
SECTION 3.22. Taxes
(a) (i) All material Tax Returns required to be filed with respect to
the Business or the Assets have been filed in a timely manner (within any
applicable extension periods); (ii) all Taxes shown to be due on such Tax
Returns have been timely paid in full or will be timely paid in full by the due
date thereof, other than Taxes for which adequate accruals have been provided in
the Financial Statements; (iii) Seller has fully paid and discharged all Taxes
due on or before the date hereof that are related to the Business or the Assets;
and (iv) Seller has withheld all Taxes it is required to withhold in respect of
its employees.
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(b) No Tax liens have been filed with respect to the Business or Assets
and no material claims are being asserted in writing with respect to any Taxes
relating to the Business or the Assets.
(c) The transactions contemplated by this Agreement will not give rise
to (i) the creation of any Encumbrances other than Permitted Encumbrances
against the Assets or the Business in respect of any Taxes.
(d) Except as set forth on Section 3.22(c) of the Disclosure Schedules,
Seller has not received written notification from any Governmental Authority
that any Action is pending or threatened for any audit, examination, deficiency,
assessment or collection from Seller of any Taxes related to the Business,
including jurisdictions where Seller does not file Tax Returns. No unresolved
claim for any deficiency, assessment or collection of any Taxes related to the
Business has been asserted against Seller, and all resolved assessments of Taxes
related to the Business have been paid. No issues have been raised by the
relevant taxing authorities in any audit that are of a recurring nature and that
would have an effect upon the Taxes of the Business.
(e) On the Business Financial Statements, reserves and allowances have
been provided, adequate to satisfy all Liabilities for Taxes relating to the
Business for periods (or any portion of a period) through the date of the
Business Financial Statements and no Tax liabilities relating to the Business
have been incurred since that date other than in the ordinary course of business
as set forth on the Closing Statement.
(f) To the extent relevant to the Assets or the Business, there is no
contract, agreement, plan or arrangement to which Seller is a party that,
individually or collectively, could reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code.
SECTION 3.23. Agreements and Transactions with Affiliates
During the past three years, Seller has not, directly or indirectly,
purchased, leased from others or otherwise acquired any property relating to the
Business or obtained any services from, or sold, leased to others or otherwise
disposed of any property relating to the Business or furnished any services
relating to the Business to, or otherwise dealt with respect to the Business
with (except with respect to remuneration for services as officers, directors or
employees of Seller) any Affiliate. No Affiliate has any direct or indirect
controlling interest in any business involved in the Business.
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SECTION 3.24. Licenses and Permits
Section 3.24 of the Disclosure Schedule is a true and complete list and
description (including the name of the issuing authority and the date of the
expiration period) of all governmental licenses, registrations, permits and
authorizations (collectively, the "Licenses") held by Seller and relating to the
Business. Seller has obtained all Licenses necessary to carry on the Business as
currently conducted under applicable federal, state, local or foreign law and
timely application for the renewal of such Licenses has been made for any of
such as are scheduled to expire prior to or within ten (10) days after the
Closing. Seller is in compliance with all material terms and conditions of all
such Licenses. All of the Licenses are in full force and effect and no Action or
claim is pending nor, to the knowledge of Seller, is threatened to revoke or
terminate any License or declare any License invalid in any material respect.
SECTION 3.25. Environmental, Health and Safety Matters
Seller has complied and is in compliance with all applicable
environmental, health and safety laws. Seller has not received any notice,
report or other information regarding any actual or alleged violation by Seller
of any environmental, health and safety law, or any liability or potential
liability or damages, including any investigatory, remedial or corrective
obligations, relating to the Business, or any facility used in connection
therewith, under any applicable environmental, health and safety laws.
SECTION 3.26. Restrictive Documents and Territorial Restrictions
Except for restrictions contained in this Agreement and the Ancillary
Agreements, the Business is not subject to, or a party to, any charter, by-law,
mortgage, Encumbrance, lease, license, Permit, agreement, instrument, Law,
judgment or decree, or any other restriction of any kind or character, limiting
the ability of the Business to compete in any geographic area or with any Person
or which would prevent the continued operation of the Business after the date
hereof on substantially the same basis as heretofore operated.
SECTION 3.27. Insurance
Section 3.27 of the Disclosure Schedule sets forth a list of all
insurance policies, letters of credit and surety bonds covering or relating to
the Assets. There are no pending claims against such insurance by Seller as to
which the insurers have denied coverage or otherwise reserved rights. Seller has
not been refused any insurance with respect to the Business, nor has its
coverage been limited, by any insurance carrier to which it has applied for any
such insurance with which it has carried insurance since January 1, 2000. Except
as disclosed on Section 3.27 of the Disclosure Schedule, there are no risks with
respect to the Assets or the Business which Seller has designated as being
self-insured. Section 3.27 of the Disclosure Schedule lists all claims of Seller
related to the Assets which are currently pending. Excluding the claims listed
on Section 3.27 of the Disclosure Schedule, since September 1, 2001, the
aggregate amount of (i) all claims made with Seller's insurance carriers plus
(ii) all losses incurred with respect to self-insured risks, in each case
relating to the Assets, does not exceed $250,000.
SECTION 3.28. Brokers
Except for Water Mill Partners LLC, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements based upon arrangements made by or on behalf of Seller. Seller is
solely responsible for the fees and expenses of Water Mill Partners LLC.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to, and agrees with, Seller as follows:
SECTION 4.1. Organization and Authority of Buyer
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Agreements by Buyer, the
performance by Buyer of its obligations hereunder and thereunder and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all requisite action on the part of Buyer. This
Agreement has been, and upon their execution the Ancillary Agreements will be,
duly executed and delivered by Buyer, and (assuming due authorization, execution
and delivery by Seller) this Agreement constitutes, and upon their execution the
Ancillary Agreements will constitute, legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or moratorium statutes, or similar laws affecting the rights of
creditors generally or general principles of equity.
SECTION 4.2. No Conflict
Assuming the making and obtaining of all filings, notifications,
consents, approvals, authorizations and other actions referred to in Section
4.3, except as may result from any facts or circumstances relating solely to
Seller, the execution, delivery and performance of this Agreement and the
Ancillary Agreements by Buyer, do not and will not (a) violate, conflict with or
result in the breach of any provision of the charter or by-laws (or other
organizational documents) of Buyer, (b) conflict with or violate any Law or
Governmental Order applicable to Buyer or (c) conflict with, or result in any
breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of Buyer pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Buyer is a party
or by which any of such assets or properties is bound or affected, which would
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated by this Agreement or by the Ancillary Agreements.
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SECTION 4.3. Governmental Consents and Approvals
The execution, delivery and performance of this Agreement and each
Ancillary Agreement to which it is a party by Buyer do not and will not require
any consent, approval, authorization or other order of, action by, filing with,
or notification to, any Governmental Authority, except as described in a writing
given to Seller by Buyer on the date of this Agreement.
SECTION 4.4. Litigation
There is no claim, legal action, suit, arbitration, government
investigation or other legal or administrative proceeding, pending or, to the
knowledge of Buyer, threatened against, or relating to, or any order,
injunction, ruling, charge, decree, or judgment in progress, pending or in
effect which could have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated by this Agreement, nor is there any
basis known to Buyer for any such action.
SECTION 4.5. Brokers
Buyer has not paid or become obligated to pay any brokerage, finder's
or other fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Buyer.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Conduct of Business Prior to the Closing
(a) Seller covenants and agrees that, except as described in Section
5.1(a) of the Disclosure Schedule, from the date hereof through the Closing
Date, Seller shall conduct the Business in the ordinary course and consistent
with Seller's past practice. Without limiting the generality of the foregoing,
except as described in Section 5.1(a) of the Disclosure Schedule, Seller shall,
with respect to the Business, (i) continue its promotional activities, and
pricing and purchasing policies, in accordance with past practice; (ii) not
shorten or lengthen the customary payment cycles for any of its Receivables;
(iii) preserve intact the business organization of the Business, (iv) keep
available to Buyer the services of the Transferred Employees, (v) continue in
full force and effect without material modification all existing policies or
binders of insurance and employee benefit arrangements currently maintained in
respect of the Business and (vi) maintain satisfactory relationships with its
customers, suppliers and with other persons with which it has a business
relationship.
(b) From the date hereof through and including the Closing, Seller
shall not (i) modify, amend or terminate any Material Contract or exercise or
waive any material right or option thereunder; (ii) grant or otherwise create or
consent to the creation of any easement, covenant, restriction, assessment or
charge affecting any Seller Occupied Business Facility or any part thereof; or
(iii) convey, assign, sublease, license or otherwise transfer all or any portion
of any Seller Occupied Business Facility or any interest or rights therein, or
(iv) make any material changes in the construction or condition of any such
facility.
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(c) Without limiting the generality of the foregoing, Seller covenants
and agrees that, through the Closing Date, Seller shall not, without the prior
written consent of Buyer, take or undertake or incur or permit to exist any of
the acts, transactions, events or occurrences specified in Section 3.11.
SECTION 5.2. Access to Information
(a) From the date hereof until the Closing, upon reasonable notice,
Seller shall and shall cause each of its officers, directors, employees, agents,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel and representatives of Buyer reasonable access,
during normal business hours, to the offices, facilities, books and records of
Seller and to those officers, directors, employees, agents, accountants and
counsel of Seller who have any knowledge relating to the Business and (ii)
furnish to the officers, employees and authorized agents, accountants, counsel
and representatives of Buyer such additional financial and operating data and
other information regarding the Business and the Assets as Buyer may from time
to time reasonably request.
(b) In order to facilitate the resolution of any claims made against or
incurred by Seller prior to the Closing or for any other reasonable purpose, for
a period of four years after the Closing, Buyer shall (i) retain the books and
records which are transferred to Buyer pursuant to this Agreement relating to
periods prior to the Closing in a manner reasonably consistent with the prior
practices of Seller and (ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of Seller reasonable access
(including the right to make photocopies at Seller's expense), during normal
business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or
against or incurred by Buyer after the Closing or for any other reasonable
purpose, for a period of four years following the Closing, Seller shall (i)
retain all books and records which are not transferred to Buyer pursuant to this
Agreement and which relate to the Business for periods prior to the Closing and
which shall not otherwise have been delivered to Buyer and (ii) upon reasonable
notice, afford the officers, employees and authorized agents and representatives
of Buyer, reasonable access (including the right to make photocopies at Buyer's
expense), during normal business hours, to such books and records.
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SECTION 5.3. Confidentiality
Seller agrees to, and shall cause its agents, representatives,
Affiliates, employees, officers and directors to: (i) treat and hold as
confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, patent or trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, operations methods, product
development techniques, business acquisition plans, new personnel acquisition
plans and any other confidential information with respect to the Business, (ii)
in the event that Seller or any such agent, representative, Affiliate, employee,
officer or director becomes legally compelled to disclose any such information,
provide Buyer with prompt written notice of such requirement so that Buyer may
seek a protective order or other remedy or waive compliance with this Section
5.3, (iii) in the event that such protective order or other remedy is not
obtained, or Buyer waives compliance with this Section 5.3, furnish only that
portion of such confidential information which is legally required to be
provided (iv) promptly furnish (prior to, at, or as soon as practicable
following, the Closing) to Buyer any and all copies (in whatever form or medium)
of all such confidential information then in the possession of Seller or any of
its agents, representatives, Affiliates, employees, officers and directors and
destroy any and all additional copies then in the possession of Seller or any of
its agents, representatives, Affiliates, employees, officers and directors of
such information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement.
SECTION 5.4. Regulatory and Other Authorizations; Notices and Consents
(a) Each of Buyer and Seller shall use its reasonable best efforts to
obtain all authorizations, consents, orders and approvals of all Governmental
Authorities and officials that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to, this Agreement
and the Ancillary Agreements and will cooperate fully with the other party in
promptly seeking to obtain all such authorizations, consents, orders and
approvals.
(b) Seller shall give promptly such notices to third parties and use
its reasonable best efforts to obtain such third party consents as Buyer may
reasonably deem necessary or desirable in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements, including, without
limitation, all third party consents that are reasonably necessary or desirable
in connection with the transfer of the Material Contracts.
(c) Buyer shall cooperate and use all reasonable efforts to assist
Seller in giving such notices and obtaining such consents; provided, however,
that Buyer shall have no obligation to give any guarantee or other consideration
of any nature in connection with any such notice or consent or to consent to any
change in the terms of any Material Contract which Buyer in its sole discretion
may deem adverse to the interests of Buyer or the Business.
(d) Notwithstanding anything to the contrary set forth in this
Agreement or in any of the Ancillary Agreements, nothing contained in this
Agreement or in any of the Ancillary Agreements shall be construed as, or
constitute, an attempt, agreement or other undertaking to transfer or assign to
Buyer any asset, property or right that would otherwise constitute an Asset, but
that by its terms is not transferable or assignable to Buyer pursuant to this
Agreement without the consent, waiver, approval, authorization, qualification or
other order of one or more third parties and such consent, waiver, approval,
authorization, qualification or other order is not obtained prior to the Closing
(each, a "Non-Transferable Asset").
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(e) From and after the Closing and, with respect to each
Non-Transferable Asset, until the earlier to occur of (i) such time as such
Non-Transferable Asset shall be properly and lawfully transferred or assigned to
Buyer pursuant hereto and (ii) such time as the material benefits intended to be
transferred or assigned to Buyer pursuant hereto have been procured by
alternative means pursuant to Section 5.4(f), (A) such Non-Transferable Asset
shall be held by Seller in trust exclusively for the benefit of Buyer, and (B)
Seller shall cooperate in any good faith, reasonable arrangement designed to
provide or cause to be provided for Buyer the material benefits intended to be
transferred or assigned to Buyer under such Non-Transferable Asset and, in
furtherance thereof, to the extent permitted under the terms of such
Non-Transferable Asset and under applicable Law (1) Buyer shall use commercially
reasonable efforts to perform and discharge all of the Liabilities of Seller
under the terms of such Non-Transferable Asset in effect as of the Closing and
(2) Seller shall use commercially reasonable efforts to provide or cause to be
provided to Buyer all of the benefits of Seller under the terms of such
Non-Transferable Asset in effect as of the Closing, including by promptly paying
to Buyer any monies received by Seller from and after the Closing under such
Non-Transferable Asset attributable to the performance of Buyer thereunder.
(f) In the event that Seller is unable to obtain any consent from a
third Person, as requested by Buyer, under any Non-Transferable Asset after the
Closing Date through the use of commercially reasonable efforts, (i) Buyer shall
be entitled to procure the material rights and benefits of Seller under the
terms of such Non-Transferable Asset in effect as of the Closing by alternative
means, including, without limitation, by entering into new Contracts with third
parties or otherwise, and (ii) Seller shall pay to Buyer the reasonable fees,
expenses and other costs incurred in connection with procuring such rights and
benefits; provided, however, that in the event that Buyer shall exercise its
rights under this Section 5.4(f) in respect of any Non-Transferable Asset, the
obligations of Seller under Section 5.4(e) in respect of such Non-Transferable
Asset shall thereupon cease and expire.
SECTION 5.5. Stockholder Approval; Preparation of Proxy Statement
(a) Seller shall, as soon as practicable following the date hereof (but
allowing for its compliance with its obligations under the third sentence of
this Section 5.5), prepare and file with the SEC a proxy statement (the "Proxy
Statement") to obtain the required vote of Seller's stockholders to approve this
Agreement and the transactions contemplated hereby. Seller will cause the Proxy
Statement to be mailed to Seller's stockholders as promptly as practicable. No
filing of, or amendment or supplement to, or correspondence to the SEC or its
staff with respect to, the Proxy Statement will be made by Seller without
providing Buyer a reasonable opportunity to review and comment thereon. Seller
will advise Buyer, promptly after it receives notice thereof, of any request by
the SEC for the amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the effectiveness of the Proxy Statement any information relating
to Seller or Buyer, or any of their respective affiliates, officers or
directors, should be discovered by Seller or Buyer which should be set forth in
an amendment or supplement to the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of Seller. Each of the parties hereto shall cause the Proxy
Statement to comply as to form and substance to such party in all material
respects with the applicable requirements of (i) the Exchange Act, (ii) the
Securities Act, and (iii) the rules and regulations of the Nasdaq.
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(b) (i) The Board of Directors of Seller shall recommend that Seller's
stockholders vote at the Seller Stockholders' Meeting (as defined below) in
favor of the adoption of a resolution authorizing the transactions contemplated
by this Agreement; (ii) the Proxy Statement shall include a statement to the
effect that the Board of Directors of Seller has recommended that Seller's
stockholders vote at the Seller Stockholders' Meeting in favor of the adoption
of a resolution authorizing the transactions contemplated by this Agreement, and
(iii) neither the Board of Directors of Seller nor any committee thereof shall
withhold, withdraw, amend or modify, or propose or resolve to withhold,
withdraw, amend or modify, in a manner adverse to Buyer, the recommendation of
the Board of Directors of Seller that its stockholders vote at the Seller
Stockholders' Meeting in favor of the adoption of a resolution authorizing the
transactions contemplated by this Agreement.
SECTION 5.6. Stockholder Meeting
Seller shall call and hold a meeting of the stockholders of Seller (the
"Seller Stockholders' Meeting") as promptly as reasonably practicable for the
purpose of voting upon the adoption of a resolution authorizing the transactions
contemplated by this Agreement pursuant to the Proxy Statement, and Seller shall
hold the Seller Stockholders' Meeting as promptly as reasonably practicable.
Nothing herein shall prevent Seller from adjourning or postponing the Seller
Stockholders' Meeting if there are insufficient shares of Seller common stock
necessary to conduct business at the Seller Stockholders' Meeting. Seller shall
solicit from its stockholders proxies in favor of the adoption of a resolution
authorizing the transactions contemplated by this Agreement and shall take all
other action necessary or advisable to secure the vote or consent of
stockholders required by Delaware law to approve this Agreement and the
transactions contemplated hereby.
SECTION 5.7. No Solicitation or Negotiation; Breakup Fee.
Subject to the last sentence of this Section 5.7(a), from and
after the execution and delivery of this Agreement until the earlier to occur of
the Closing or termination of this Agreement pursuant to its terms, Seller shall
not, nor will it authorize or permit any of its directors, officers or other
employees, controlled Affiliates or any investment banker, attorney or other
advisor, representative or agent retained by it to, directly or indirectly, (i)
solicit, initiate, encourage or induce the making, submission or announcement of
a transaction (whether in the form of a merger, consolidation, asset sale or
other form of transaction) for the acquisition of the Business (an "Acquisition
Transaction") by any Person other than Buyer, (ii) participate or engage in any
discussions or negotiations with any such Person regarding an Acquisition
Transaction, (iii) furnish to any such Person any information relating to
Seller, or afford access to the business, properties, assets, books or records
of Seller to any such Person that has made or could reasonably be expected to
make an Acquisition Transaction, or (iv) take any other action intended to
assist or facilitate any inquiries or the making of any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Transaction, (v) approve, endorse or recommend an Acquisition Transaction, or
(v) enter into any letter of intent or similar agreement contemplating or
otherwise relating to an Acquisition Transaction. Notwithstanding the foregoing,
nothing contained in this Section 5.7(a) shall prohibit Seller, or any officer
or director of Seller, from taking any of the actions described in this Section
5.7(a) in response to an unsolicited inquiry, offer or proposal to the extent
that the Board of Directors of Seller determines in good faith that the
fiduciary obligations of such officers and directors to Seller require that such
actions be taken.
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If this Agreement is terminated pursuant to Sections 9.1(h) or
9.1(i) (and Buyer is not in breach of this Agreement), then Seller shall pay to
Buyer the sum of $1,000,000 in cash as a break-up fee (the "Break-Up Fee"),
which payment shall be Buyer's sole and exclusive remedy for any such
termination pursuant to Section 9.1(h) or 9.1(i).
SECTION 5.8. Seller Covenant Not to Compete
(a) In partial consideration of the payment of the Purchase Price,
Seller covenants and agrees that for a period of three years commencing upon the
Closing Date, Seller shall not, directly or indirectly, (i) engage in, carry on,
manage, operate, perform or control the management or operation of any Seller
Restricted Business in any portion of the territory (the "Restricted Territory")
consisting of the world, or (ii) own any equity interest in any Person that is
engaged in, carries on, manages, operates, performs or controls the management
or operations of any Seller Restricted Business in the Restricted Territory.
(b) For purposes of this Section 5.8, the term "Seller Restricted
Business" means any business engaged in the Business.
(c) Notwithstanding Section 5.8(a), it will not constitute a breach of
this Section 5.8 for Seller to acquire (including through a merger other
corporate transaction), invest in or own equity interests in any Person engaged
in, carrying on, managing, operating, performing or controlling the management
or operation of a Seller Restricted Business, so long as (i) Seller does not
own, directly or indirectly, in the aggregate in excess of 4.99% of the
outstanding equity interests of such Person, (ii) the common stock of such
Person is listed on a national securities exchange or traded on an
over-the-counter market and (iii) Seller does not, directly or indirectly,
manage, operate or control the management or operation of such Person or any
Seller Restricted Business of such Person.
(d) Buyer and Seller acknowledge and agree that compliance with the
covenants contained in this Section 5.8 is necessary to protect Buyer and that a
breach of any such covenant would result in irreparable and continuing damage
for which there would be no adequate remedy at Law. Seller agrees that in the
event of any adjudicated breach of such covenant, Buyer shall be entitled to
injunctive relief and to such other and further relief as is proper under the
circumstances. If any court of competent jurisdiction determines any of the
foregoing covenants to be unenforceable with respect to the term thereof or the
scope of the subject matter or geography covered thereby, then such covenant
shall nonetheless be enforceable by such court against Seller or other relevant
Person upon such shorter term or within such lesser scope as may be determined
by the court to be reasonable and enforceable.
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(e) Seller further covenants and agrees that, without the prior written
consent of Buyer, Seller will not, for a period of one year commencing upon the
Closing Date, solicit for employment, as an employee, officer, agent,
consultant, advisor, or in any other capacity whatsoever, any then-current
employee of the Business or any person who has been an employee of the Business
at any time within the six month period preceding such time. As used herein,
"solicit" means contact or communicate in any manner whatsoever, including, but
not limited to, contacts or communications by or through intermediaries, agents,
contractors, representatives, or other parties, provided that nothing herein
shall be construed to prohibit Seller from (i) placing advertisements for
employment that are aimed at the public at large in any newspaper, trade
magazine, or other periodical in general circulation, or (ii) responding to any
unsolicited inquiry by any Buyer employee concerning employment.
(f) Buyer acknowledges that, notwithstanding any other provisions of
this Agreement, this Section 5.8 shall in no event be binding upon or otherwise
apply to any successor to or assignee of any of the assets of Seller, whether by
merger, consolidation, asset sale or other form of transaction (such Section 5.8
being automatically deemed to expire with respect to such assets upon the
consummation of any such transaction); provided, however, that in the event that
any of the entities listed on Schedule 5.8 (the "Restricted Buyers") becomes the
successor to or assignee of any of the assets of Seller through any of the
foregoing transactions, Seller shall pay to Buyer a fee of $5 million in
consideration for Buyer's waiver of this Section 5.8 with respect to such
Restricted Buyer, which payment shall be Buyer's sole and exclusive remedy for
any such transaction by Seller with any Restricted Buyer.
(g) Nothing in this Agreement shall in any way restrict Seller from
continuing to engage in, carry on, manage, operate, perform or control the
management or operation of Seller's Network Operations, as those operations
currently exist and evolve in response to technological, market and other
developments.
SECTION 5.9. Buyer Covenant Not to Compete
(a) In partial consideration for the Assets, Buyer covenants and agrees
that for a period of three years commencing upon the Closing Date, Buyer shall
not, directly or indirectly, (i) market or sell services competitive to those of
Seller's Network Business provided by any of the competitors of Seller listed on
Schedule 5.9 (the "Restricted Competitors"), (ii) acquire or own any equity
interest in any of the Restricted Competitors in a transaction that would result
in Buyer marketing services which are competitive to Seller's Network Business;
provided, however, that Buyer may market or sell services of Seller or acquire
any of the Restricted Competitors upon payment by Buyer to Seller of a one-time
fee of $5 million in consideration for the permanent waiver by Seller of this
Section 5.9, which payment shall be Seller's sole and exclusive remedy for
Buyer's marketing or sale of such services of any Restricted Competitor.
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(b) Buyer and Seller acknowledge and agree that compliance with the
covenants contained in this Section 5.9 is necessary to protect Seller and that
a breach of any such covenant would result in irreparable and continuing damage
for which there would be no adequate remedy at Law. Buyer agrees that in the
event of any adjudicated breach of such covenant, Seller shall be entitled to
injunctive relief and to such other and further relief as is proper under the
circumstances. If any court of competent jurisdiction determines any of the
foregoing covenants to be unenforceable with respect to the term thereof or the
scope of the subject matter or geography covered thereby, then such covenant
shall nonetheless be enforceable by such court against Buyer or other relevant
Person upon such shorter term or within such lesser scope as may be determined
by the court to be reasonable and enforceable.
(c) Buyer further covenants and agrees that, with the exception of
employees and former employees of the Business, without the prior written
consent of Seller, Buyer will not, for a period of one year commencing upon the
Closing Date, solicit for employment, as an employee, officer, agent,
consultant, advisor, or in any other capacity whatsoever, any then-current
employee of the Seller or any person who has been an employee of the Seller at
any time within the six month period preceding such time. As used herein,
"solicit" means contact or communicate in any manner whatsoever, including, but
not limited to, contacts or communications by or through intermediaries, agents,
contractors, representatives, or other parties, provided that nothing herein
shall be construed to prohibit Buyer from (i) placing advertisements for
employment that are aimed at the public at large in any newspaper, trade
magazine, or other periodical in general circulation, or (ii) responding to any
unsolicited inquiry by any Buyer employee concerning employment.
SECTION 5.10. Bulk Transfer Laws
Buyer hereby waives compliance by Seller with any applicable bulk sale
or bulk transfer laws of any jurisdiction in connection with the sale of the
Assets to Buyer (other than any obligations with respect to the application of
the proceeds herefrom). Pursuant to Section 8.2(a)(iii)(A), Seller has agreed to
indemnify Buyer against any and all liabilities which may be asserted by third
parties against Buyer as a result of Seller's noncompliance with any such law.
SECTION 5.11. Tax Matters
(a) Property Taxes. In the case of any real or personal property Taxes
(or other similar Taxes) attributable to the Assets which returns cover a
taxable period commencing before the Closing Date and ending thereafter, Buyer
shall prepare such returns and make all payments required with respect to any
such return, provided, however, Seller will promptly reimburse Buyer upon
receipt of a copy of the filed Tax Return to the extent any payment made by
Buyer relates to that portion of the taxable period ending on or before the
Closing Date which amount shall be determined and prorated on a per diem basis.
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(b) Cooperation. To the extent relevant to the Business or the Assets,
each party shall (i) provide the other with such assistance as may reasonably be
required in connection with the preparation of any Tax Return and the conduct of
any audit or other examination by any taxing authority or in connection with
judicial or administrative proceedings relating to any liability for Taxes and
(ii) retain and provide the other with all records or other information that may
be relevant to the preparation of any Tax Returns, or the conduct of any audit
or examination, or other proceeding relating to Taxes. Seller shall retain all
documents, including prior years' Tax Returns, supporting work schedules and
other records or information with respect to all sales, use and employment tax
returns and, absent the receipt by Seller of the relevant tax clearance
certificates, shall not destroy or otherwise dispose of any such records for
four years after Closing without the prior written consent of Buyer. Seller,
upon request, shall use its reasonable efforts to provide or obtain from any
taxing authority any certificate or other document necessary to mitigate, reduce
or eliminate any Taxes (including additions thereto or interest and penalties
thereon) that otherwise would be imposed with respect to the transactions
contemplated in this Agreement. Buyer, upon request, shall use its reasonable
efforts to provide or obtain from any taxing authority any certificate or other
document necessary to mitigate, reduce or eliminate any Taxes (including
additions thereto or interest and penalties thereon) that otherwise would be
imposed with respect to the transactions contemplated in this Agreement.
(c) Transfer Taxes. Notwithstanding anything else herein, Buyer and
Seller shall each be responsible for and pay when due one half of any and all
transfer, documentary, sales, use or other similar Taxes assessed upon or with
respect to the transfer of the Assets to Buyer and all documentary or recording
fees with respect thereto.
SECTION 5.12. Further Action
Both pending and following the Closing, each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Laws, and execute and deliver such documents and other papers, as may
be reasonably required to carry out the provisions of this Agreement and to
consummate and make effective the transactions contemplated by this Agreement.
SECTION 5.13. Use of Intellectual Property.
(a) Except as set forth in the following sentence, from and after the
Closing, Seller shall not use any of the Business Intellectual Property. From
the Closing Date through and including December 31, 2003, Seller may continue
(i) to use and refer to Trademarks and other Business Intellectual Property for
purposes of informing customers, vendors and other parties with which Seller
continues to deal about the transactions contemplated by this Agreement, the
Seller's changed corporate name, and the like and (ii) to refer to Trademarks
and the Business in any filings with SEC or other Governmental Authority or in
any other historical context.
(b) Immediately after the Closing, Seller shall change its corporate
name, and amend its charter accordingly, to one not using any trademark, service
mark, trade dress, logo, trade name or corporate name contained in the Business
Intellectual Property or any trademark, service mark, trade dress, logo, trade
name or corporate name similar or related thereto. As promptly as practicable
following the Closing, Seller shall remove any Business Intellectual Property
from letterheads and other materials remaining in its possession or under its
control, and Seller shall not use or put into use after the Closing any
materials that bear any trademark, service mark, trade dress, logo, trade name
or corporate name contained in the Business Intellectual Property or any
trademark, service mark, trade dress, logo, trade name or corporate name similar
or related thereto. Buyer acknowledges that the corporate name "Glowpoint Inc."
or any name similar or related thereto complies with the requirements of this
subparagraph.
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SECTION 5.14. Transition Period.
(a) Definitions. As used in this Section 5.14, the following terms
shall have the following meanings:
(i) "Corporate Cost Allocations" shall mean the internal
allocations of Seller for costs of the Business in the amounts set forth in the
Transition Budget;
(ii) "Direct Costs" means amounts payable to third parties
with respect to the Assumed Liabilities and the Transferred Employees and
excludes any internal corporate cost allocations of Seller;
(iii) "Fixed Direct Costs" means Direct Costs identified as
such in the Transition Budget;
(iv) "Monthly Transition Amount" means an amount equal to
$159,000;
(v) "Representative" means any one of a reasonable number of
representatives appointed by the Purchaser and identified as such to Seller to
carry out the purposes of this Section 5.14;
(vi) "Transition Accounts" has the meaning set forth in
subsection (b)(iv) below;
(vii) "Transition Budget" means the expense budget of the
Business set forth on Schedule 5.14;
(viii) "Transition Cap" means the Monthly Transition Amount
times the actual number of calendar months elapsed in the Transition Period,
prorated for any partial calendar month;
(ix) "Transition Cost Amount" means an aggregate amount of
Fixed Direct Costs plus Corporate Cost Allocations that exceed the aggregate
amount of Fixed Direct Costs plus Corporate Cost Allocations in the Transition
Budget;
(x) "Transition Period" means the period commencing on the
Measurement Date and ending on the Closing Date; and
(xi) "Variable Direct Costs" means the variable Direct Costs
identified as such on the Transition Budget.
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(b) During the Transition Period, unless otherwise authorized or
directed by the Representative, the Seller shall:
(i) conduct the Business in accordance with Section 5.1;
(ii) have established and maintain a separate general ledger
reflecting all of the revenues and Direct Costs of the Business, which ledger is
capable of being directly accessed by Buyer at all times during the Transition
Period;
(iii) incur Fixed Direct Costs only in accordance with the
Transition Budget;
(iv) deposit all monies received by Seller as payment of any
Receivables or otherwise with respect to the Business into bank accounts
separate from all other accounts of the Seller (the "Transition Accounts");
(v) make payment with respect to any Direct Costs only from
the Transition Accounts, and make no payment with respect to any costs other
than Direct Costs from the Transition Accounts;
(vi) procure that no monies are transferred from the
Transition Accounts to any other account of Seller;
(vii) permit the Representative access to the Seller's
facilities and properties to observe fully the conduct of the Business and shall
provide the Representative with all information and materials necessary to
enable the Representative to make reasonably informed assessments regarding the
Business of the type which the Representative would make if the Representative
were responsible for the operations of the Business, including without
limitation daily cash reports, weekly revenue reports and periodic management
reports reasonably requested by the Representative; and
(viii) consider the reasonable requests of the Representative
with respect to the conduct of the Business so long as such requests do not
cause Seller to expend funds in excess of the amounts provided in the Transition
Budget.
(c) In addition, from the Measurement Date to the Closing Date Seller
shall not:
(i) fail to deposit and hold all monies received by the Seller
with respect to the Business on or after the Measurement Date into the
Transition Account, or expend any funds in the Transition Account other than for
the benefit of the Business in accordance with the Transition Budget; or
(ii) authorize or enter into any agreement, arrangement,
commitment or obligation to take any action prohibited by this Section, Section
3.11 or Section 5.1.
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(d) Within thirty (30) business days following the Closing Date, Seller
shall prepare and deliver to Purchaser the following accounting statements (the
"Transition Statements"), together with the detailed work papers and
documentation which supports the Transition Statements: (i) an income statement
of the Business for the period commencing on the Meaurement Date and ending on
the Closing Date, separately stating the revenues and Direct Costs; (ii) a
statement of the Assets and Assumed Liabilities of the Business as of the
Closing Date; (iii) a reconciliation of such statements to the Closing
Statement; (iv) bank statements, bank reconciliations and detailed transaction
history for all Transition Accounts. Buyer shall have the right to review the
books and records of Seller and the Business for a period of ninety (90) days
after receiving the Transition Statements (or such reasonable extension thereof
as approved by Seller, such approval not to be unreasonably withheld) to verify
and confirm the accuracy thereof. If, after such review, Buyer agrees with the
Transition Statements, Buyer shall promptly (and in any event within ninety (90)
days after receiving the Transition Statements or approved extension thereof)
notify Seller of its agreement. If, after such review, Buyer objects to the
Transition Statements, Buyer shall promptly (and in any event within ninety (90)
days after receiving the Transition Statements or approved extension thereof)
provide Seller with a statement indicating the basis for its objections, and
Buyer and Seller shall meet and confer in an effort to resolve such disagreement
in good faith.
(e) In the event that Buyer and Seller are unable to resolve a
disagreement with respect to the Transition Statements within ten (10) days
following the date of Buyer's objection (or such longer period as Buyer and
Seller may agree), the Transition Expenses shall be determined by the
Accountants according to the procedure in Section 2.3(c). Other than the expense
of retaining the Accountants, the expense of preparing the Transition Statements
shall be borne by Seller.
(f) Within three (3) business days after the determination of the
Transition Statements pursuant to either the agreement of the parties or the
determination of the Accountants: in the event that there has been a Transition
Cost Amount according to the Transition Statements as so determined, Seller
shall pay in cash to Buyer the amount of such Transition Cost Amount, except as
follows:
(1) if the EBITDA of the Business for the quarter ended
September 30, 2003 is at least $1,000,000 million but not more than
$1,159,000, then Seller shall be entitled to an offset against payment
of the Transition Cost Amount of up to $159,000, not to exceed the
Transition Cap;
(2) if the EBITDA of the Business for the quarter ended
September 30, 2003 is more than $1,159,000 but not more than
$1,318,000, then Seller shall be entitled to an offset against payment
of the Transition Cost Amount of up to $318,000, not to exceed the
Transition Cap; and
(3) if the EBITDA of the Business for the quarter ended
September 30, 2003 is more than $1,318,000, then Seller shall be
entitled to an offset against payment of the Transition Cost Amount of
up to $477,000, not to exceed the Transition Cap.
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SECTION 5.15. Sales to New Customers of Seller's Network Business
During Transition Period.
During the period between the Measurement Date and the Closing Date,
sales of products and services of Seller's Network Business by employees of the
Business shall earn commissions on such sales which shall be credited to Buyer
at Closing as if the Glowpoint Sales Agency Agreement were in place when such
sales were consummated.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.1. Employment Offers
Each of the employees of the Business identified as such on Section
3.21 of the Disclosure Schedule as determined by mutual agreement of Seller and
Buyer (collectively, the "Offered Employees") shall be offered employment by
Buyer prior to the Closing Date, to be effective as of the Closing Date (the
"Employment Offer"). Offered Employees who accept Employment Offers shall become
Buyer employees effective on the Closing Date (collectively "Transferred
Employees") and Seller shall terminate its employment of the Transferred
Employees at the same time.
SECTION 6.2. Access to Employees
Seller agrees to provide Buyer with reasonable access, through
representatives of Seller as intermediaries, to the Transferred Employees prior
to the Closing Date during normal business hours following the date of the
execution of this Agreement in order to, among other things, deliver Employment
Offers and to provide information to such Transferred Employees about Buyer. All
communications by Buyer (through such intermediaries) with the Transferred
Employees shall be conducted in a manner that does not disrupt or interfere with
Seller's operation of its business.
SECTION 6.3. Benefits
Effective at the Closing Date, Transferred Employees shall cease all
participation in the Benefit Plans. As of the Closing Date, the Transferred
Employees shall be eligible to participate in Buyer's benefit programs to the
extent consistent with Buyer's standard human resource policies in effect from
time to time. Transferred Employees shall be given credit for their period of
employment with Seller for purposes of eligibility and vesting under all benefit
plans of Buyer. Buyer shall use its best efforts to cause applicable Buyer
benefit plans to waive, to the extent waived or satisfied under the analogous
Benefit Plans, (i) any pre-existing condition or (ii) any waiting period
limitation that would otherwise be applicable to Transferred Employees on or
after the Closing Date under the Buyer benefit plans. Buyer will cause its
401(k) to accept, after the Closing Date, the rollover of amounts distributed by
Seller to any Transferred Employee from any Seller 401(k), including the
acceptance in such rollover of any outstanding plan loan of such Transferred
Employee. Seller shall pay over to Buyer all amounts accrued by any
participating Transferred Employee in flexible spending accounts maintained by
Seller through the Closing Date, and Buyer shall maintain such accounts for the
participating Transferred Employees after the Closing Date (except as otherwise
provided in the Transition Services Agreement). Seller shall provide Buyer with
an accounting documenting in reasonable detail the elections, balances and
activity in each participating Transferred Employee's flexible spending account
from inception of the current plan year through the Closing Date.
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SECTION 6.4. Benefits Liabilities
From and after the Closing Date, Seller and any ERISA Affiliates
(which, for purposes of this Section 6.4, shall not include Buyer) shall (i)
sponsor and (ii) assume or retain, as the case may be, and be solely responsible
for all Employee Benefit Plans whether incurred before, on or after the Closing.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1. Conditions to Obligations of Seller
The obligations of Seller to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of each of the following conditions (any or all of which may be waived
in whole or in part solely by Seller):
(a) Stockholder Approval. This Agreement shall have been duly approved
by the holders of a majority of the outstanding shares of Seller, in accordance
with applicable law and the Certificate of Incorporation and Bylaws of Seller;
(b) Representations and Warranties. The representations and warranties
of Buyer contained in this Agreement shall be true and correct as of the
Closing, except to the extent that the failure to be so true and correct does
not, and would not reasonably be expected to, have a material adverse effect on
the business, operations, assets, liabilities, prospects, results of operations
or the condition (financial or otherwise) of Buyer. Seller shall have received a
certificate of Buyer, signed for and on behalf of Buyer and in its name by a
duly authorized officer thereof, to the foregoing effect;
(c) Covenants. The covenants and other agreements to be performed or
complied with by Buyer on or prior to the Closing shall have been performed or
complied with by Buyer in all material respects, and Seller shall have a
received a certificate from Buyer, signed for and on behalf of Buyer and in its
name by a duly authorized officer thereof, certifying as to the foregoing;
(d) Legality. No court or other Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
has the effect of rendering the consummation of the transactions contemplated
hereby illegal or otherwise prohibiting the consummation of the transactions
contemplated hereby; and
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(e) Ancillary Agreements. Buyer shall have executed and delivered to
Seller each of the Ancillary Agreements to which Buyer is a party.
SECTION 7.2. Conditions to Obligations of Buyer
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions (any or all of which may be waived in whole
or in part solely by Buyer):
(a) Stockholder Approval. This Agreement shall have been duly approved
by the holders of a majority of the outstanding shares of Seller, in accordance
with applicable law and the Certificate of Incorporation and Bylaws of Seller;
(b) Representations and Warranties. The representations and warranties
of Seller contained in this Agreement shall be true and correct as of the
Closing, except to the extent that the failure to be so true and correct does
not, and would not reasonably be expected to, have a Material Adverse Effect.
Buyer shall have received a certificate of Seller, signed for and on behalf of
Seller and in its name by a duly authorized officer thereof, to the foregoing
effect;
(c) Covenants. The covenants and other agreements to be performed or
complied with by Seller on or prior to the Closing shall have been performed or
complied with by Seller in all material respects, and Buyer shall have a
received a certificate from Seller, signed for and on behalf of Seller and in
its name by a duly authorized officer thereof, certifying as to the foregoing;
(d) Legality. No court or other Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
has the effect of rendering the consummation of the transactions contemplated
hereby illegal or otherwise prohibiting the consummation of the transactions
contemplated hereby;
(e) Ancillary Agreements. Seller shall have executed and delivered to
Buyer each of the Ancillary Agreements to which they are a party;
(f) Removal of Liens. Seller shall have provided evidence reasonably
satisfactory to Buyer of the removal as of Closing of all liens placed on the
Assets in connection with the Company's credit agreement with JPMorgan Chase
Bank; and
(g) Consents and Approvals. Buyer and Seller shall have received, each
in form and substance reasonably satisfactory to Buyer, all authorizations,
consents, orders and approvals of all Governmental Authorities and officials,
and all third party consents, which Buyer in its reasonable judgment deems
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, except to the extent that the failure to
obtain any such authorizations, consents, orders and approvals does not, and
would not reasonably be expected to, have a Material Adverse Effect (after
giving effect, without limitation, to Sections 5.4 (d), (e) and (f)).
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Survival of Representations and Warranties
The representations and warranties of each of Seller and Buyer
contained in this Agreement and the Ancillary Agreements, and all statements
contained in the Acquisition Documents, shall survive the Closing until the
eighteen (18) month anniversary thereof; provided, however, that the
representations and warranties dealing with Employee Benefit Matters and Tax
matters shall survive until the close of business on the 120th day following the
expiration of the applicable statute of limitations, and except those
representations and warranties set forth in the first sentence of Section 3.9,
which shall survive indefinitely. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties by
Buyer to Seller, then the relevant representations and warranties shall survive
as to such claim until the claim has been finally resolved.
Neither the period of survival nor the liability of Seller with respect
to Seller's representations and warranties shall be reduced by any investigation
made at any time by or on behalf of Buyer.
SECTION 8.2. Indemnification
(a) Seller shall indemnify and hold harmless Buyer and its Affiliates,
officers, directors, employees, agents, successors and assigns (each a "Buyer
Indemnified Party") for any and all Liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (a "Loss"), arising out of or resulting from:
(i) the breach or inaccuracy of any representation or warranty
made by Seller contained in the Acquisition Documents; or
(ii) the breach of any covenant or agreement by Seller
contained in the Acquisition Documents; or
(iii) Liabilities, whether arising before or after the Closing
Date, that are not expressly assumed by Buyer pursuant to this Agreement,
including, without limitation:
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(A) Liabilities arising from or related to any
failure to comply with laws relating to bulk transfers or bulk sales with
respect to the transactions contemplated by this Agreement (notwithstanding the
waiver contained in Section 5.10); and
(B) the Excluded Liabilities.
To the extent that Seller's undertakings set forth in this Section 8.2
may be declared or held to be unenforceable under applicable Law, Seller shall
contribute the maximum amount that it is permitted to contribute under
applicable Law to the payment and satisfaction of all Losses incurred by any
Buyer Indemnified Party for which Seller is obligated to provide indemnification
hereunder.
(b) Buyer shall indemnify and hold harmless Seller and its Affiliates,
officers, directors, employees, agents, successors and assigns (each a "Seller
Indemnified Party) for any and all Losses arising out of or resulting from:
(i) the breach or inaccuracy of any representation or warranty
made by Buyer contained in the Acquisition Documents; or
(ii) the breach of any covenant or agreement by Buyer
contained in the Acquisition Documents; or
(iii) the Assumed Liabilities.
To the extent that Buyer's undertakings set forth in this Section 8.2
may be declared or held to be unenforceable under applicable Law, Buyer shall
contribute the maximum amount that it is permitted to contribute under
applicable Law to the payment and satisfaction of all Losses incurred by any
Seller Indemnified Party for which Buyer is obligated to provide indemnification
hereunder.
(c) A Buyer Indemnified Party or a Seller Indemnified Party, as the
case may be (hereinafter referred to as an "Indemnified Party"), shall give the
indemnifying party (the "Indemnifying Party") notice of any matter which an
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement, within 60 days of such determination,
stating the amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification is claimed or arises. The obligations and
Liabilities of the parties under this Article VIII with respect to Losses
arising from claims of any third party which are subject to the indemnification
provided for in this Article VIII ("Third Party Claims") shall be governed by
and contingent upon the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim, the Indemnified
Party shall give the Indemnifying Party notice of such Third Party Claim within
30 days of the receipt by the Indemnified Party of such notice; provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article VIII except to
the extent the Indemnifying Party is materially prejudiced by such failure and
shall not relieve the Indemnifying Party from any other obligation or liability
that it may have to any Indemnified Party otherwise than under this Article
VIII. If an Indemnifying Party acknowledges in writing its irrevocable and
unconditional
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obligation to indemnify the Indemnified Party hereunder against any Losses that
may result from such Third Party Claim, then the Indemnifying Party shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention to
do so to the Indemnified Party within twenty days of the receipt of such notice
from the Indemnified Party; provided, however, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party. In the event an Indemnifying
Party exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, in accordance with the
foregoing provisions, conducting the defense against any such Third Party Claim,
the Indemnifying Party shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Indemnifying Party's
expense, all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as is reasonably required by the Indemnified Party. No such
Third Party Claim may be settled by the Indemnifying Party without the written
consent of the Indemnified Party if such settlement would entail any admission
of liability by, or any restrictions upon the future conduct of, such
Indemnified Party.
SECTION 8.3. Limits on Indemnification
Notwithstanding anything to the contrary contained in this Agreement,
(a) neither party's indemnification obligations under this Agreement shall apply
unless and until the Losses incurred by the other party's Indemnified Parties
exceed $200,000 (the "Basket") and then only to the extent of such excess
(provided, however, that Seller shall be responsible for any and all Losses
arising out of a breach of Section 3.22 without regard to the Basket), and (b)
the maximum aggregate amount of indemnifiable Losses which may be recovered from
(i) Seller arising out of or resulting from the causes enumerated in Section
8.2(a)(i) or from (ii) Buyer arising out of or resulting from the causes
enumerated in Section 8.2(b)(i) shall, in either case, be an amount equal to
forty percent (40%) of the Purchase Price (without giving effect to any
post-closing additional payments made pursuant to Section 2.5).
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.1. Termination
This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of Seller and Buyer; or
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(b) by either Seller or Buyer if the Closing has not occurred by
September 30, 2003; provided, however, that the right to terminate this
Agreement under this Section 9.1(b) shall not be available to any party whose
action or failure to act shall have been the cause of, or shall have resulted
in, the failure of the Closing to occur on or prior to such date and such action
or failure to act constitutes a breach of this Agreement; or
(c) by Buyer or Seller if Seller's stockholders have not, by September
30, 2003, adopted a resolution authorizing the transactions contemplated by this
Agreement under applicable Law; or
(d) by either Buyer or Seller in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(e) by Seller, upon a material breach of this Agreement by Buyer, or if
any representation or warranty of Buyer shall have been untrue or inaccurate
when made or shall have become untrue or inaccurate such that, in the aggregate,
in the case of such representations and warranties, such untruths or
inaccuracies could reasonably be expected to result in Buyer's inability to
satisfy the conditions to Seller's obligation to consummate the transactions
contemplated by this Agreement; provided, that if such untruth or inaccuracy in
Buyer's representations and warranties or breach by Buyer is curable by Buyer
through exercise of its commercially reasonable efforts, then Seller may not
terminate this Agreement pursuant to this Section 9.1(e) until the earlier of
(i) the expiration of a thirty (30) day period after delivery of written notice
from Seller to Buyer of such untruth or inaccuracy or breach, and (ii) Buyer
ceasing to exercise commercially reasonable efforts to cure such untruth or
inaccuracy or breach, provided, that Buyer continues to exercise commercially
reasonable efforts to cure such untruth or inaccuracy or breach (it being
understood that Seller may not terminate this Agreement pursuant to this Section
9.1(e) if such untruth or inaccuracy or breach by Buyer is cured during such
thirty-day period); or
(f) by Buyer, upon a material breach of this Agreement on the part of
Seller, or if any representation or warranty of Seller shall have been untrue or
inaccurate when made or shall have become untrue or inaccurate such that, in the
aggregate, in the case of such representations and warranties, such untruths or
inaccuracies could reasonably be expected to result in Seller's inability to
satisfy the conditions to Buyer's obligation to consummate the transactions
contemplated by this Agreement, provided, that if such untruth or inaccuracy in
Seller's representations and warranties or breach by Seller is curable by Seller
through exercise of its commercially reasonable efforts, then Buyer may not
terminate this Agreement pursuant to this Section 9.1(f) until the earlier of
(i) the expiration of a thirty (30) day period after delivery of written notice
from Buyer to Seller of such untruth or inaccuracy or breach, and (ii) Seller
ceasing to exercise commercially reasonable efforts to cure such untruth or
inaccuracy or breach, provided, that Seller continues to exercise commercially
reasonable efforts to cure such untruth or inaccuracy or breach (it being
understood that Buyer may not terminate this Agreement pursuant to this Section
9.1(f) if such untruth or inaccuracy or breach by Seller is cured during such
thirty-day period); or
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(g) by Buyer if, between the date hereof and the time scheduled for the
Closing Seller makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by Seller seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization;
(h) by Seller, upon the occurrence of a Triggering Event; or
(i) by Buyer if, at any time prior to the adoption and approval of this
Agreement by the required vote of the stockholders of Seller, a Triggering Event
with respect to the Business shall have occurred.
The party desiring to terminate this Agreement pursuant to this Section
9.1 (other than pursuant to Section 9.1(d)) shall give notice of such
termination to the other party.
SECTION 9.2. Notice of Termination; Effect of Termination
Any proper termination of this Agreement under Section 9.1 above will
be effective immediately (or if the termination is pursuant to Section 9.1(e) or
(f) and the proviso is applicable, thirty (30) days after) upon the delivery of
written notice of the terminating party to the other party hereto. In the event
of the termination of this Agreement under Section 9.1, neither party shall have
any liability to the other party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) in connection with
this Agreement, except (i) as set forth in this Section 9.2, Section 9.3,
Section 9.4 and Article X, each of which shall survive the termination of this
Agreement, and (ii) that, notwithstanding any other provision of this Agreement,
each party shall fully retain any and all liability for any breach of or fraud
committed by such party in connection with this Agreement.
SECTION 9.3. Fees and Expenses
Except as set forth in this Section 9.3 and in Section 9.4, all
attorneys', accountants' and consultants' fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees and expenses whether or not the
transactions contemplated hereby are consummated.
SECTION 9.4. Waiver
Either party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered by the other party pursuant hereto
or (c) waive compliance with any of the agreements or conditions of the other
party contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given, upon receipt if
telecopied, or delivered by hand or air courier, or within three days after
mailed if mailed by registered or certified mail, to the addresses herein
designated, or at such other address as may be designated by notice to the other
party.
If to Seller:
Wire One Technologies, Inc.
225 Long Avenue
Hillside, NJ 07205
Attention: Richard Reiss, Chief Executive Officer
Telephone No.: (973) 391-2085
Telecopier No.: (973) 391-9776
With copies to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Michael J.W. Rennock, Esq.
Telephone No.: (212) 468-8000
Telecopier No.: (212) 468-7900
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If to Buyer:
Gores Technology Group
c/o 6260 Lookout Road
Boulder, CO 80301
Attention: Chief Financial Officer
Telephone: (303) 531-3100
Telecopier: (303) 531-3200
With copies to:
c/o Gores Technology Group
10877 Wilshire Blvd., Suite 1805
Los Angeles, CA 90024
Attention: General Counsel
Telephone: (310) 209-3010
Telecopier No.: (310) 443-2149
SECTION 10.2. Public Announcements
Neither Buyer nor Seller shall issue any press release or make any
public announcement relating to the purchase and sale of the Assets or disclose
to any third party, other than its legal and financial advisors and others who
need to know in order to consummate this Agreement, the terms of this Agreement
or the other Ancillary Agreements, without the prior written approval of the
other party; provided, however, that either party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing party will use its reasonable best efforts to advise the other party
prior to making the disclosure).
SECTION 10.3. Further Assurances and Cooperation
From time to time at the request of a party to this Agreement and
without further consideration, the other party will execute and deliver such
documents and take such action as may reasonably be requested in order to
consummate more effectively the transactions contemplated by this Agreement.
Buyer hereby agrees that in connection with any exemption from any Tax otherwise
payable in respect of a bulk transfer of assets that Seller wishes to obtain,
upon Seller's request, Buyer will provide to Seller the appropriate form issued
by the appropriate State Division of Taxation.
SECTION 10.4. Headings
The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning,
construction or interpretation of this Agreement.
SECTION 10.5. Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
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SECTION 10.6. Entire Agreement
This Agreement and the Ancillary Agreements constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior agreements, representations, undertakings and
understandings, both written and oral, between Seller and Buyer with respect to
such subject matter.
SECTION 10.7. Assignment
This Agreement may not be assigned by operation of Law or otherwise by
either Seller or Buyer without the express written consent of the other party
(which consent may be granted or withheld in the sole discretion of such other
party); provided, however, that Buyer may assign any of its rights or
obligations under this Agreement in any country to any of its Affiliates and may
delegate its obligations under this Agreement in any country to any of its
Affiliates without the consent of Seller; provided, however, that no such
assignment or delegation shall relieve Buyer of its joint and several
responsibilities for performance of its obligations under this Agreement.
SECTION 10.8. No Third Party Beneficiaries
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person, including,
without limitation, any union or any employee or former employee of Seller, any
legal or equitable right, benefit or remedy of any nature whatsoever, including,
without limitation, any rights of employment for any specified period, under or
by reason of this Agreement.
SECTION 10.9. Amendment
This Agreement may not be amended, modified or supplemented except (a)
by an instrument in writing signed by, or on behalf of, Seller and Buyer or (b)
by a waiver in accordance with Section 9.4.
SECTION 10.10. Governing Law
THIS AGREEMENT AND THE OBLIGATIONS OF EACH PARTY ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
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SECTION 10.11. Jurisdiction and Venue
Each of the parties hereto irrevocably consents to the non-exclusive
jurisdiction and venue of any court within New Castle County, State of Delaware,
in connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, provided that process may be served upon a party
only by personal service at such party's Address and otherwise in any manner
authorized by the laws of the State of Delaware. The parties waive and covenant
not to assert or plead any objection which they might otherwise have to such
jurisdiction, venue and such process.
SECTION 10.12. Counterparts
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which together shall
constitute one and the same agreement.
SECTION 10.13. 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 will be construed against the
party drafting such agreement or document.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
WIRE ONE TECHNOLOGIES, INC., Seller
By: /s/ Richard Reiss
----------------------------------------------
Name: Richard Reiss
Title: CEO & Chairman
GORES TECHNOLOGY GROUP, Buyer
By: /s/ Brent Bradley
----------------------------------------------
Name: Brent Bradley
Title: Vice President & Assistant
Secretary