AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement"), is
made and entered into as of September 10, 2001, by and among Palm, Inc., a
Delaware corporation ("Parent"), ECA Subsidiary Acquisition Corporation, a
Delaware corporation and an indirect wholly owned Subsidiary of Parent
("Buyer"), and Be Incorporated, a Delaware corporation ("Seller"). RECITALS
A. Parent, Buyer and Seller are parties to that certain Asset Purchase
Agreement dated as of August 16, 2001 (the "Existing Agreement Date"), which
provides for the purchase by Buyer from Seller, and the sale by Seller to
Buyer, of substantially all of the assets relating to, required for, used in
or otherwise constituting the Products (as defined therein), in exchange for
shares of common stock of Parent, the assumption of certain liabilities
relating to the Products and the other consideration set forth therein (the
"Existing Agreement").
B. Concurrently with the execution and delivery of the Existing Agreement, as
a material inducement to Parent and Buyer to enter into the Existing
Agreement, selected Key Employees (as defined below) of Seller entered into
non-competition agreements, substantially in the form attached thereto as
Exhibit A (the "Non-Competition Agreements"), with Parent, each of which
shall become effective as of the Closing Date (as defined therein).
C. Concurrently with the execution and delivery of the Existing Agreement, as
a material inducement to Parent and Buyer to enter into the Existing
Agreement, certain stockholders of Seller executed and delivered stockholder
support agreements, substantially in the form attached thereto as Exhibit B
(the "Support Agreements"), to Buyer.
D. It is contemplated that, subject to approval by Seller's stockholders, as
soon as reasonably practicable following the Closing (as defined in the
Existing Agreement) Seller shall wind-up its business operations in
accordance with applicable law.
E. Parent, Buyer and Seller now desire to amend and restate in its entirety
the Existing Agreement, on the terms and conditions set forth in this
Agreement, in order to reflect certain understandings reached by the parties
subsequent to the execution and delivery of the Existing Agreement. NOW,
THEREFORE, in consideration of the covenants, representations, warranties and
mutual agreements set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Capitalized Terms. The following capitalized terms shall have the
meanings set forth below:
(a) "Acquired Assets" shall have the meaning set forth in Section 2.1.
(b) "Adjustment Amount" means the aggregate amount of all Prepaid Service
Payments (as defined in Section 5.7) reflected on the Prepaid Service Payment
Update as of the Closing Date.
(c) "Agreement" means this Asset Purchase Agreement together with all
exhibits and schedules hereto.
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(d) "Allocation" shall have the meaning set forth in Section 3.3.
(e) "Assumed Liabilities" shall have the the meaning set forth in Section
2.9.
(f) "Benefits Liabilities" means any and all claims, debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute, matured
or unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever or however arising, including all costs and expenses
relating thereto arising under law, rule, regulation, permits, action or
proceeding before any Governmental Entity, order or consent decree or any
award of any arbitrator of any kind relating to any Employee Plan, Employment
Agreement, International Employee Plan or otherwise to an Employee.
(g) "Books and Records" means all papers and records (in paper or
electronic format) in the care, custody, or control of Seller or any of its
Subsidiaries relating to the Acquired Assets including, without limitation,
all purchasing and sales records, customer and vendor lists, accounting and
financial records, product documentation, product specifications, marketing
requirement documents and software release orders.
(h) "Closing" shall have the meaning set forth in Section 3.1.
(i) "Closing Date" shall have the meaning set forth in Section 3.1.
(j) "Collateral Agreements" shall have the meaning set forth in Section
2.4.
(k) "Code" means the Internal Revenue Code of 1986, as amended.
(l) "Continuing Employees" shall have the meaning set forth in Section
7.10.
(m) "Contract" means any mortgage, indenture, lease, contract, covenant or
other agreement, instrument or commitment, permit, concession, franchise or
license.
(n) "Derivative Work" has the meaning ascribed to it under the United
States Copyright Law, Title 17 U.S.C. Sec. 101 et. seq., as the same may be
amended from time to time.
(o) "Designated Employees" means those employees of Seller listed on
Schedule 1.1(o) hereto.
(p) "DOL" shall mean the Department of Labor.
(q) "Effectively Transferred Contract" means a Transferred Contract as to
which no consent to assignment is required or as to which a consent to
assignment is required and has been obtained prior to the Closing.
(r) "Eligible Contracts" means (i) the Internet Appliance OEM License and
Distribution Agreement between Be Incorporated and Sony Electronics Inc.
dated March 13, 2001 (the "Sony Agreement"), (ii) all Contracts of Seller
that contain license grants to Seller that are not Transferred Contracts on
the Existing Agreement Date and (iii) all nondisclosure agreements,
confidentiality agreements or similar Contracts of Seller.
(s) "Employee" shall mean any current or former or retired employee,
consultant or director of Seller or any Subsidiary of Seller in his or her
capacity as such.
(t) "Employee Plan" means any plan, program, policy, practice, contract,
agreement or other material arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock
or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written, unwritten or otherwise, funded or
unfunded, including, without limitation, each "employee benefit plan," within
the meaning of Section 3(3) of ERISA, which is or has been maintained,
contributed to, or required to be contributed to, by Seller for the benefit
of any Designated Employee, or with respect to which Seller has or may have
any liability or obligation to any Designated Employee.
(u) "Employment Agreement" means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
other agreement, contract or understanding between Seller or any Subsidiary
of Seller and any Designated Employee.
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(v) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(w) "Excluded Assets" shall have the meaning set forth in Section 2.2.
(x) "Excluded Contracts" shall mean the Contracts listed on Schedule
1.1(x).
(y) "Excluded Liabilities" shall have the meaning set forth in Section
2.10.
(z) "GAAP" means United States generally accepted accounting principles,
as of the Existing Agreement Date.
(aa) "General Assignment" shall have the meaning set forth in Section
2.4.
(bb) "Governmental Entity" means any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission.
(cc) "Indemnified Parties" shall have the meaning set forth in Section
9.2.
(dd) "Intellectual Property Rights" means any or all of the following and
all statutory or common law rights throughout the world in, arising out of,
or associated with: (i) all patents and applications (including provisional
applications) therefor and all reissues, divisions, renewals, extensions,
continuations and continuations-in-part thereof (collectively, "Patents");
(ii) all trade secrets that (A) derive independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and (B) are the subject of efforts that are
reasonable under the circumstances to maintain its secrecy, and all other
inventions (whether patentable or not, but which are not the subject of
issued or published Patents), proprietary information, and know how
(collectively, "Trade Secrets"); (iii) all works of authorship, copyrights,
mask works, copyright and mask work registrations and applications
(collectively, "Copyrights"); (iv) all trade names, trademarks and service
marks and all trademark and service xxxx registrations and applications
(collectively, "Trademarks"); (v) all rights in and to databases and data
collections (including knowledge databases, customer lists and customer
databases); and (vi) any similar, corresponding or equivalent rights to any
of the foregoing types of intellectual property.
(ee) "International Employee Plan" means each Employee Plan that has been
adopted or maintained by Seller or any ERISA Affiliate, whether informally or
formally, or with respect to which Seller or any ERISA Affiliate will or may
have any liability, for the benefit of Employees who perform services outside
the United States.
(ff) "IRS" shall mean the Internal Revenue Service.
(gg) "Kernel" means the level of an operating system that contains system
level services, including thread and team management, virtual and protected
memory management, thread scheduling, interprocess communication (including
semaphores, ports and thread messages), input/output management and node
abstraction layer, kernel module management, ELF executable binary loader,
device driver management, power management and CPU-dependent layer. It also
includes built-in components that could otherwise be loaded, including
platform-dependent modules, generic virtual drivers (null and zero drivers),
generic virtual file-systems (root, pipe and device file systems) and the
kernel debugger module.
(hh) "Key Employee" shall have the meaning set forth in Schedule 1.1(hh).
(ii) "Licensed Intellectual Property" means all Intellectual Property
Rights that, immediately after the sale and assignment of the Transferred
Intellectual Property Rights and other Acquired Assets from Seller to Buyer
occurs, Seller or any of its Subsidiaries has the right to license to the
extent provided in Section 4.1, without breaching any Contract, without
infringing any other Person's Intellectual Property Rights, and without
payment of any royalty, fee or other amount as a result of such license to
Buyer (unless Buyer assumes the obligation to pay such royalty, fee or other
amount).
(jj) "Lien" means, with respect to any asset or right, any mortgage, lien,
pledge, charge, security interest, claim, equity encumbrance, restriction on
transfer, conditional sale or other title retention device or
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arrangement (including, without limitation, a capital lease), transfer for
the purpose of subjection to the payment of any indebtedness, restriction on
the creation of any of the foregoing, or encumbrance of any kind whatsoever;
provided, however, that the term "Lien" shall not include: (i) statutory
liens for Taxes that are not yet due and payable or are being contested in
good faith by appropriate proceedings and are disclosed in the Seller
Disclosure Schedule or that are otherwise not material; (ii) statutory or
common law liens to secure obligations to landlords, lessors or renters under
leases or rental agreements confined to the premises rented; (iii) deposits
or pledges made in connection with, or to secure payment of, workers'
compensation, unemployment insurance, old age pension or other social
security programs mandated by applicable law; (iv) statutory or common law
liens in favor of carriers, warehousemen, mechanics and materialmen, to
secure claims for labor, materials or supplies and other like liens; (v)
restrictions on transfer of securities imposed by applicable state and
federal securities laws; and (vi) contractual restrictions on transfer of
contractual rights.
(kk) "Loss" and "Losses" shall have the meanings set forth in Section
9.2.
(ll) "Material Adverse Effect" means any (i) change in or effect on the
Acquired Assets, taken as a whole, that is materially adverse to the Acquired
Assets, taken as a whole, or (ii) circumstance, change or event that
materially impairs Buyer's ability to make, use, sell, license, distribute,
market, build, modify, debug and operate the current version or release of
the Products in substantially the same manner as Seller prior to the Existing
Agreement Date (excluding any effect on Buyer's ability to do the foregoing
caused by the absence of the items licensed under the Excluded Contracts or
Non-Transferred Licenses or any facts and circumstances unique to Buyer).
(mm) "Non-Transferred Licenses" shall mean license agreements granting
licenses to Seller that are Transferred Contracts but which do not become
Effectively Transferred Contracts.
(nn) "Offer Letter" shall have the meaning set forth in Section 7.10.
(oo) "Object Code" means computer software, substantially or entirely in
binary form, which is intended to be directly executable by a computer after
suitable processing and linking but without the intervening steps of
compilation or assembly.
(pp) "Pension Plan" means each Seller Employee Plan which is an "employee
pension benefit plan," within the meaning of Section 3(2) of ERISA.
(qq) "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any syndicate or group of any of the foregoing.
(rr) "Prepaid Service Payment Update" shall have the meaning set forth in
Section 7.14.
(ss) "Platform Business" means the business of developing, marketing,
licensing or distributing operating systems software and associated software
components and software development tools for portable, handheld and wireless
solutions, and personal information management (PIM) applications designed to
run on such operating systems.
(tt) "Products" means any products of Seller or any of its Subsidiaries
(including products under development) listed on Schedule 1.1(tt).
(uu) "PTO" means the United States Patent and Trademark Office.
(vv) "Registered Intellectual Property" means all United States,
international and foreign: (i) Patents; (ii) registered Trademarks and
applications for Trademarks, including intent-to-use applications; (iii)
registered Copyrights and applications for Copyrights; and (iv) any other
Intellectual Property Rights that are the subject of an application,
certificate, filing, registration or other document issued, filed with or
recorded by any Governmental Entity.
(ww) "Software" means computer software and code, including assemblers,
applets, compilers, Source Code, Object Code, data (including image and sound
data), development tools, design tools and user interfaces, in any form or
format, however fixed, including Source Code listings and related
documentation.
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(xx) "Source Code" means computer software code which may be printed out
or displayed in human readable form, including related programmer comments
and annotations, help text, data and data structures, instructions, and
procedural, object-oriented and other code which may be printed out or
displayed in human readable form.
(yy) "Stock Consideration" means that number of shares of Parent's common
stock, rounded to the nearest number of whole shares (with 0.5 being rounded
up), equal to the quotient determined by dividing (A) $11,000,000 minus the
Adjustment Amount by (B) the opening price of Parent's common stock as quoted
on the Nasdaq National Market on the Closing Date; provided, however, that
the number of shares of Parent's common stock comprising the Stock
Consideration shall be increased above such number or decreased below such
number to the extent provided in Section 7.15.
(zz) "Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such Person.
(aaa) "Supplemental Transferred Contracts" means any Eligible Contract of
Seller which becomes a Transferred Contract in accordance with Section 7.26,
in addition to the Transferred Contracts listed on Schedule 1.1(eee).
(bbb) "Tangible Assets" means the tangible assets listed on Schedule
1.1(bbb); provided, however, that Tangible Assets shall not include any
tangible manifestation of Software that is delivered pursuant to a written
agreement or protocol agreed to by Buyer and Seller providing for the remote
electronic transmission of such Software, except for documentation and
manuals.
(ccc) "Tax" and "Taxes" shall mean any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes as well as public imposts, fees and social security
charges (including but not limited to health, unemployment and pension
insurance), together with all interest, penalties and additions imposed with
respect to such amounts and any obligation under any agreement or arrangement
with any other person with respect to such amounts and including any
liability for taxes of a predecessor entity.
(ddd) "Third Party Software" means any Software owned by a third party or
in the public domain, including open source Software, public source Software,
or freeware, or any modification or Derivative Work thereof, and also
including any version of any Software licensed pursuant to any GNU general
public license or limited general public license, in each case that is used
in, incorporated into, or integrated or bundled with the current released
version of the Products and any more recent versions thereof (whether or not
released or completed) or Transferred Technology.
(eee) "Transferred Contracts" means those Contracts listed on Schedule
1.1(eee) as of the Existing Agreement Date, and shall also include, from and
after the date Eligible Contracts become Supplemental Transferred Contracts
in accordance with Section 7.26, any such Supplemental Transferred Contracts.
(fff) "Transferred Intellectual Property Rights" means (i) all
Intellectual Property Rights (other than Trademarks) owned by Seller or any
of its Subsidiaries; and (ii) the Transferred Trademarks.
(ggg) "Transferred Technology" means
(i) the items listed on Schedule 1.1(ggg); and
(ii) any other Source Code and other Software, materials and
information (including development software, development documentation,
compilers, interpreters, system build software, build scripts, test
suites, testing tools and documentation, test scripts, bug databases,
support tools, revision control systems and environments) that are used
by Seller or any of its Subsidiaries to, or that Seller or any of its
Subsidiaries has and are reasonably necessary to, build, modify, debug
and operate the current
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release or version of the Products, and any more recent versions thereof
(whether or not released or completed), which Seller has the right to
deliver and disclose to Buyer without breaching any Contract or infringing
any other Person's Intellectual Property Rights; provided, however, that
Transferred Technology shall not include any tangible manifestation of
Software that is delivered pursuant to a written agreement or protocol
agreed to by Buyer and Seller providing for the remote electronic
transmission of such Software, except for documentation and manuals.
(hhh) "Transferred Trademarks" means the Product names and other
Trademarks, if any, listed on Schedule 1.1(hhh).
1.2 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number will include the plural, and vice versa; the masculine gender
will include the feminine and neuter genders; the feminine gender will
include the masculine and neuter genders; and the neuter gender will include
the masculine and feminine genders.
(b) Any rule of construction to the effect that ambiguities are to be
resolved against the drafting party will not be applied in the construction
or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including" and
variations thereof will not be deemed to be terms of limitation, but rather
will be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Articles," "Schedules," "Sections" and "Exhibits" are intended to refer to
Articles, Schedules, Sections and Exhibits to this Agreement.
(e) The headings in this Agreement are for convenience of reference only,
will not be deemed to be a part of this Agreement, and will not be referred
to in connection with the construction or interpretation of this Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. On the Closing Date, and subject to the
terms and conditions set forth in this Agreement, but subject to Section 2.2,
Seller will sell, convey, transfer and assign to Buyer, and Buyer will purchase
from Seller, all of Seller's right, title and interest in and to all of the
following assets, free and clear of any and all Liens (collectively, the
"Acquired Assets"):
(a) the Tangible Assets;
(b) the Transferred Intellectual Property Rights;
(c) all goodwill of Seller or any of its Subsidiaries appurtenant to the
Transferred Trademarks;
(d) the Transferred Technology (for avoidance of doubt, with respect to
portions of the Transferred Technology that are owned by Persons other than
Seller or its Subsidiaries, the rights in such portions of the Transferred
Technology to be transferred and assigned to Buyer are the rights of Seller
and its Subsidiaries under the Effectively Transferred Contracts as described
in clause (e) below);
(e) all rights of Seller or any of its Subsidiaries under the Effectively
Transferred Contracts, other than payment obligations under such Transferred
Contracts (including accounts receivable) earned by Seller or any of its
Subsidiaries as a result of performance by Seller or any of its Subsidiaries
prior to the Closing Date; and
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(f) all rights to recover past, present and future damages for the breach,
infringement or misappropriation, as the case may be, of any of the
Transferred Intellectual Property Rights and Effectively Transferred
Contracts (other than payment obligations under such Transferred Contracts).
2.2 Excluded Assets. The parties expressly acknowledge and agree that
notwithstanding anything to the contrary in this Agreement, the Acquired Assets
and Transferred Contracts do not include, and Seller does not have and shall be
under no obligation to sell, assign or otherwise transfer to Buyer any of
Seller's fixed assets (other than Tangible Assets), cash and cash equivalents or
receivables, the Sony Agreement, the Excluded Contracts, or any other assets,
claims, causes of action, contracts, licenses or agreements set forth on
Schedule 2.2 hereto, or any other assets, claims, causes of action, contracts,
licenses or agreements not included within the Acquired Assets and Transferred
Contracts as defined herein (collectively, the "Excluded Assets"), which
Excluded Assets shall remain for all purposes the properties and assets of
Seller.
2.3 Delivery of Acquired Assets. At the Closing, Seller shall deliver to
Buyer all of the Tangible Assets and Transferred Technology. Without limiting
the foregoing, all Software included in the Transferred Technology shall, at
Buyer's request, be delivered to Buyer by electronic means.
2.4 Assignments. At the Closing, Seller shall deliver to Buyer, duly executed
by Seller, and Seller shall deliver to Buyer, duly executed by Buyer: (i) an
Assignment and Assumption Agreement and Xxxx of Sale substantially in the form
of Exhibit C hereto (the "General Assignment"); (ii) the copyright registrations
and assignments required pursuant to Section 2.5, the patent assignments
required pursuant to Section 2.6 and the trademark assignments required pursuant
to Section 2.7; and (iii) such other instruments of conveyance, assignment and
transfer as Buyer may reasonably request in order to vest in Buyer good and
valid title in and to the Acquired Assets (the General Assignment and the other
instruments referred to in clauses (i), (ii) and (iii) being collectively
referred to herein as the "Collateral Agreements").
2.5 Transfer of Product Software Copyrights. For each Copyright included in
the Transferred Intellectual Property Rights for which Seller has filed a
copyright registration with the United States Copyright Office, Seller shall
deliver to Buyer at Closing an assignment, on a form reasonably acceptable to
Buyer, to record the transfer of such copyright to Buyer in the United States
Copyright Office. If Seller has not registered the copyright in a Product prior
to the Closing Date, Seller shall deliver to Buyer at the Closing an
application, on the applicable form, to register such copyright in each Product
with the United States Copyright Office.
2.6 Transfer of Patent Rights. For each of Seller's Patents included in the
Transferred Intellectual Property Rights, Seller shall deliver to Buyer at
Closing an assignment in form reasonably acceptable to Buyer to evidence the
transfer of such Patents to Buyer. Such assignment shall specify Buyer as the
owner by assignment of such Patents.
2.7 Transfer of Trademarks. For each of the Transferred Trademarks, Seller
shall deliver to Buyer at Closing an assignment in form reasonably acceptable to
Buyer to evidence the transfer of such Trademarks to Buyer. Such assignment
shall specify Buyer as the owner by assignment of such Trademarks.
2.8 Transferred Contracts. At the Closing, Seller shall deliver to Buyer all
of the Transferred Contracts to the extent not previously delivered to Buyer.
2.9 Assumed Liabilities. As of the Closing, Buyer hereby agrees to assume the
following, and only the following (collectively, the "Assumed Liabilities"): the
obligations of Seller or any of its Subsidiaries under the Transferred
Contracts, in each case solely to the extent such obligations arise from and
after the Closing Date; provided, however, that notwithstanding the foregoing,
Buyer shall be responsible for liabilities that arise solely out of its
ownership or operation of the Acquired Assets or its performance of the
Transferred Contracts on or subsequent to the Closing Date. As of the Closing,
Parent shall be deemed to guarantee the obligations of Buyer under the Assumed
Liabilities.
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2.10 Excluded Liabilities. Except for the Assumed Liabilities, Buyer is not
assuming any other debt, liability, duty or obligation, whether known or
unknown, fixed or contingent, of Seller or any of its Subsidiaries (the
"Excluded Liabilities"). Without limiting the foregoing, all liabilities of
Seller and its Subsidiaries, including any liabilities for Taxes, arising from
or related to: (i) Seller's operations or the operation of any of its
Subsidiaries, whenever arising or incurred, including Seller's or any of its
Subsidiaries' sale or ownership of the Products and Acquired Assets through the
Closing Date; (ii) Seller's or any of its Subsidiaries' termination of any
Contracts that are not Transferred Contracts; (iii) the Sony Agreement, (iv) the
employment or engagement by Seller of employees, agents, consultants or
independent contractors through the Closing Date; or (v) any Benefit
Liabilities, shall be Excluded Liabilities and shall remain the responsibility
of Seller, unless any such liabilities de scribed in this sentence are otherwise
included within the Assumed Liabilities.
ARTICLE 3
CLOSING AND CONSIDERATION
3.1 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, in Palo Alto, California at 6:30 a.m., local
time, two (2) business days following the satisfaction or written waiver of the
last of the conditions of Closing as set forth in ARTICLE 8 hereof, or on such
other date as the parties may mutually determine (the "Closing Date").
3.2 Stock Consideration. At the Closing, Parent and Buyer shall cause to be
issued to Seller a duly authorized and issued stock certificate representing the
Stock Consideration, and following the Closing, to the extent that the Resale
Registration Statement is filed with the SEC and the provisions of Section 7.15
apply, (i) in the case where the number of shares issuable upon the
effectiveness of the Resale Registration Statement is increased pursuant to
Section 7.15(b), Parent and Buyer shall cause to be issued to Seller immediately
upon the effectiveness of the Resale Registration Statement an additional stock
certificate representing the number of any such whole shares of Parent's common
stock required to be issued to Seller in accordance with such Section, and (ii)
in the case where the number of shares issuable upon the effectiveness of the
Resale Registration Statement is decreased pursuant to Section 7.15(b), Parent
and Buyer shall, upon delivery by Seller for cancellation to Buyer of the
original stock certificate issued to Seller, cause to be issued to Seller
immediately upon the effectiveness of the Resale Registration Statement a
replacement stock certificate representing the total number of shares of
Parent's common stock representing the Stock Consideration, as adjusted in
accordance with such Section. In addition, whether at the Closing (in the event
the Form S-4 Registration Statement has been declared effective under the
Securities Act prior to the Closing) or upon the effectiveness of the Resale
Registration Statement (in the event the Form S-4 Registration Statement has not
been declared effective under the Securities Act prior to the Closing), Parent
and Buyer shall, at the request of Seller, deliver such other instruments,
coordinate with Parent's transfer agent, and use commercially reasonable efforts
to do and perform such other acts and things as may be reasonably necessary to
enable Seller to immediately sell, transfer or otherwise liquidate the shares of
Parent's common stock constit uting the Stock Consideration in the public
markets.
3.3 Allocation of Consideration. The parties hereto intend that the purchase
be treated as a taxable transaction for federal and state income tax purposes.
Prior to the Closing Date, Buyer and Seller shall negotiate in good faith and
determine the allocation of the Stock Consideration among the Acquired Assets
(the "Allocation"). The Allocation shall be conclusive and binding upon Buyer
and Seller for all purposes, and the parties agree that all returns and reports
(including IRS Form 8594) and all financial statements shall be prepared in a
manner consistent with (and the parties shall not otherwise file a Tax return
position inconsistent with) the Allocation unless required by the IRS or any
other applicable taxing authority.
3.4 Transfer Taxes. Buyer and Seller shall each be responsible for fifty
percent (50%) of the aggregate amount of any sales, use, excise or similar Taxes
that may be payable in connection with the sale or purchase of the Acquired
Assets and the granting of the licenses hereunder, including any sales, use,
excise or similar transfer Taxes. The parties hereto shall cooperate with each
other and use their reasonable best efforts to minimize the transfer Taxes
attributable to the sale of the Acquired Assets, including but not limited to
the transfer of all Software by remote electronic transmission.
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ARTICLE 4
LICENSE TO BUYER
4.1 License of Licensed Intellectual Property. Effective as of the Closing
(and subject to the conditions thereto set forth herein), Seller shall be deemed
to have granted to Buyer under all of the Licensed Intellectual Property, a
royalty-free, fully-paid, world-wide, perpetual, irrevocable, non-terminable,
transferable right and license, with the right to grant and authorize
sublicenses, to fully exercise, use and otherwise exploit the Licensed
Intellectual Property in any manner and without limitation, including the right
and license under Copyrights to copy, create Derivative Works from, distribute,
publicly perform and display and transmit Software products and other
copyrightable works, and under Patent rights to make, have made, use, sell,
offer for sale and import products. To the extent that the foregoing license is
broader in any respect (including, without limitation, the rights being
licensed, the duration and revocability of the license, the geographic scope of
the license, and the transferab ility of the license) than the license Seller
has the right to grant without breaching any Contract, without infringing any
other Person's Intellectual Property Rights, and without being required to pay
any additional royalty, fee or other amount to any other Person as a result of
such license to Buyer, then the foregoing license will be deemed to be limited
in all such respects to the license Seller has the right to grant without
breaching any Contract, without infringing any other Person's Intellectual
Property Rights, and without being required to pay any royalty, fee or other
amount to any other Person. If, in order to grant the foregoing license to Buyer
with respect to any Licensed Intellectual Property owned by any Person other
than Seller or its Subsidiaries, Seller is required to notify any such other
Person of the license, obtain the approval or consent of any such other Person,
provide a copy of the license agreement to any such other Person, obtain Buyer's
written agreement to any particular ter m or condition (each, a "Pass-Through
Term"), or comply with any obligation, condition, or requirement (collectively,
"Sublicensing Requirements"), the foregoing license will be effective with
respect to such Licensed Intellectual Property only if and when (a) Buyer
authorizes Seller in writing to comply with such Sublicensing Requirements, (b)
Seller complies with all applicable Sublicensing Requirements, (c) Buyer agrees
in writing to be bound by and to comply with all applicable Pass-Through Terms,
if any, and (d) Buyer pays any royalty, fee or other amount which is authorized
by Buyer and is required to be paid by Seller as the result of such license to
Buyer.
4.2 Bankruptcy. The license granted to Buyer under Section 4.1 is, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the United States
Bankruptcy Code, a license to rights of "Intellectual Property Rights" as
defined thereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the disclosure schedule delivered to Parent and Buyer
on the Existing Agreement Date (the "Seller Disclosure Schedule"), Seller
hereby represents and warrants to Parent and Buyer, as of the Existing
Agreement Date (except to the extent such representations and warranties
address matters as of a particular date or period, in which case such
representations and warranties are made as of such date or period), as
follows: 5.1 Organization of Seller.
(a) Except as set forth in Section 5.1(a) of the Seller Disclosure
Schedule, Seller has no Subsidiaries.
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(b) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and
use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts by which it is
bound.
(c) Seller is qualified to do business as a foreign corporation, and is in
good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification and where the failure to so qualify
would have a Material Adverse Effect.
(d) Seller has delivered or made available to Buyer a true and correct
copy of the certificate of incorporation (including any certificate of
designations) and bylaws of Seller and similar governing instruments, each as
amended to date (collectively, the "Seller Charter Documents"), and each such
instrument is in full force and effect. Seller is not in violation of any of
the provisions of Seller Charter Documents.
5.2 Authority. Seller has all requisite corporate power and authority to
enter into this Agreement and the Collateral Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Collateral Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Seller, and, except for approval by the
stockholders of Seller, no further action is required on the part of Seller, any
of its Subsidiaries or any of Seller's stockholders to authorize the Agreement
and the Collateral Agreements and the transactions contemplated hereby. A vote
of the holders of a majority of the outstanding shares of Seller's common stock
is sufficient for Seller's stockholders to approve and adopt this Agreement and
approve the transactions contemplated hereby and the Dissolution (as defined in
Section 7.16). This Agreement and the transactions contemplated hereby have been
approved by the Board of Directors of Seller. This Agreement has been duly
executed and delivered by Seller and, assuming the due authorization, execution
and delivery by Parent and Buyer, constitutes a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally or to other
equitable remedies.
5.3 No Conflict. The execution and delivery of this Agreement by Seller do
not, and the execution and delivery of the Collateral Agreements by Seller and
the performance of this Agreement and the Collateral Agreements by Seller will
not, (i) conflict with or violate the Seller Charter Documents, (ii) subject to
obtaining the approval and adoption of this Agreement by Seller's stockholders
as contemplated in Section 7.16, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Seller or any of its
Subsidiaries or by which any of their properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair the rights of
Seller or any of its Subsidiaries or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of Seller or any of its Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Seller or any
of its Subsidiaries is a party or by which Seller, any of its Subsidiaries or
the Acquired Assets are bound or affected, except with respect to clauses (ii)
and (iii), for the matters set forth on Section 5.3 of the Seller Disclosure
Schedule and for matters the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
5.4 SEC Filings; Seller Financial Statements.
(a) Seller has delivered or made available to Parent (through reference to
documents filed by XXXXX or otherwise) accurate and complete copies of all
forms, reports and documents filed by Seller with the Securities and Exchange
Commission ("SEC") since January 1, 2000 (the "Seller SEC Reports"), which
are all the forms, reports and documents required to be filed by Seller with
the SEC since such date. As of their
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respective dates, the Seller SEC Reports (i) were prepared in accordance and
complied in all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Seller SEC Reports and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in Seller SEC Reports (the "Seller
Financials") (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the
SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented the
financial position of Seller as at the respective dates thereof and the
results of Seller's operations and cash flows for the periods indicated,
except that the unaudited interim financial statements may not contain
footnotes and were or are subject to normal and recurring year-end
adjustments. The balance sheet of Seller contained in the Form 10-Q of Seller
filed on August 14, 2001 is hereinafter referred to as the "Seller Balance
Sheet."
(c) Except as disclosed in the Seller Financials, since the date of Seller
Balance Sheet Seller has incurred no liabilities required under GAAP to be
set forth on a consolidated balance sheet (absolute, accrued, contingent or
otherwise), except for liabilities incurred (i) since the date of the Seller
Balance Sheet in the ordinary course of business consistent with past
practices or (ii) pursuant to this Agreement, which liabilities would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
5.5 Transferred Contracts. True and complete copies of all of the Transferred
Contracts as of the Existing Agreement Date have been delivered to Buyer. Each
such Transferred Contract is in full force and effect. None of Seller, any of
its Subsidiaries or, to Seller's knowledge, any other party thereto is in
default or breach under the terms of any such Transferred Contract and, to the
Seller's knowledge, no event or circumstance has occurred that, with notice or
lapse of time or both, would reasonably be expected to constitute any event of
default thereunder.
5.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or any third
party, including a party to any agreement with Seller or any of its
Subsidiaries, is required by or with respect to Seller or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Collateral Agreements or the consummation of the transactions contemplated
hereby, except for the filing of the Proxy Statement/Prospectus (as defined in
Section 7.15) with the SEC in accordance with the Exchange Act, and the Consents
listed on Section 5.6 of the Seller Disclosure Schedule.
5.7 Support and Service Contracts. Section 5.7 of the Seller Disclosure
Schedule sets forth a true and complete list of all Transferred Contracts
pursuant to which Seller or any of its Subsidiaries is obligated to provide
support, maintenance or other services to third parties following the Existing
Agreement Date, together with the amounts of prepaid fees that are associated
with the executory support, maintenance and other service obligations under such
Transferred Contracts and the portion of such fees attributable to obligations
to be performed subsequent to the Existing Agreement Date (each, a "Prepaid
Service Payment"). Each Prepaid Service Payment is as reflected in the Books and
Records.
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5.8 No Liquidation, Insolvency, Winding-Up
(a) Except as contemplated by this Agreement, no order has been made or
petition presented, or resolution passed by the board of directors or
stockholders of Seller for the dissolution or winding-up of Seller and there
is not outstanding:
(i) any petition or order for the winding-up of Seller;
(ii) any appointment of a receiver over the whole or part of the
undertaking of assets of Seller;
(iii) any petition or order for administration of Seller;
(iv) any voluntary arrangement between Seller and any of its
creditors;
(v) any assignment for the benefit of Seller's creditors or similar
creditor arrangement or remedy;
(vi) any voluntary petition, involuntary petition or order for relief
with respect to the Seller under the Bankruptcy Code, 11 U.S.C. section
101, et. seq.;
(vii) any distress or execution or other process levied in respect of
Seller which remains undischarged; and
(viii) any unfulfilled or unsatisfied judgment or court order against
Seller.
(b) Seller is not now insolvent, and will not be rendered insolvent by any
of the transactions contemplated by this Agreement. As used in this section,
"insolvent" means either of the following:
(i) at fair valuations, the sum of Seller's debts and other
liabilities, including, without limitation, contingent liabilities, is
greater than all of Seller's assets, provided that (A) such assets are
not to include any rights of Seller or any successor to Seller under any
fraudulent transfer, preference or similar theories to recover Seller's
property that was transferred, concealed or removed, and (B) the
valuation of such assets is to assume that the Closing occurs, but
otherwise is to be based on liquidation values of any assets not being
sold to Buyer under this Agreement (assuming a liquidation within 120
days following the Closing), and
(ii) Seller is not generally paying its debts as they come due (within
the meaning of Section 3439 of the California Civil Code).
(c) Upon occurrence of the transfers of property from Seller to Buyer
under this Agreement, Seller will have adequate capital for any business or
transaction in which Seller is or will be engaged.
(d) Seller has not incurred, does not intend to incur, and does not
reasonably believe it will incur debts beyond its ability to pay as such
debts mature or become due.
(e) Seller intends to and will wind-up its business operations in
accordance with applicable law as soon as reasonably practicable after the
Closing consistent with this Agreement and in a manner providing for full
payment to or adequate provision for all creditors. The parties agree that
notwithstanding anything to the contrary herein, the Dissolution (as defined
herein) shall not mandate that Seller effect the dissolution of its corporate
entity in accordance with Delaware law except to the extent that the failure
to do so would have a Material Adverse Effect or would materially adversely
impact Parent or Buyer.
5.9 Restrictions on Business Activities. There is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which Seller or any of its Subsidiaries is a party which has or could reasonably
have the effect of prohibiting the transactions contemplated by this Agreement,
or which could reasonably have a Material Adverse Effect.
5.10 Title to Properties; Absence of Liens and Encumbrances.
(a) Seller does not own any real property.
(b) Seller has good and valid title to or, in the case of leased
properties and assets, valid leasehold interests in, all of the Acquired
Assets, free and clear of any Liens.
(c) None of the Subsidiaries of Seller has, or will as of the Closing Date
have, any right, title or interest in, or to any of the Acquired Assets or
any of the Transferred Contracts.
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5.11 Intellectual Property.
(a) Section 5.11(a) of the Seller Disclosure Schedule lists all Registered
Intellectual Property Rights included among the Transferred Intellectual
Property Rights. All such Registered Intellectual Property Rights are
currently in compliance with formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of use), are valid
(except with respect to pending applications for any patents, trademarks, or
other forms of intellectual property, as to which no representation or
warranty concerning validity is made) and subsisting, and are not subject to
any unpaid maintenance fees or taxes or actions. All such Registered
Intellectual Property Rights have been assigned to Seller and such
assignments have been properly recorded prior to the Closing. There are no
pending proceedings or actions before any court or tribunal (including the
PTO or equivalent authority anywhere in the world) related to any such
Registered Intellectual Property Rights.
(b) Each item of Transferred Intellectual Property Rights embodied in or
relating to the Transferred Technology is free and clear of any Liens.
(c) To the extent that any Transferred Intellectual Property Rights
embodied in or relating to the Transferred Technology were originally owned
or created by or for any third party, including any contractor or employee of
Seller and any predecessor of Seller: (i) Seller has a written agreement with
such third party or parties with respect thereto, pursuant to which Seller
has obtained complete, unencumbered and unrestricted ownership and is the
exclusive owner of, all such Transferred Intellectual Property Rights by
valid assignment or otherwise; and (ii) the assignment by Seller to Buyer
hereunder of such Transferred Intellectual Property Rights will not violate
such third party agreements.
(d) Seller has not transferred ownership of, or granted any license of or
right to use that is in effect as of the Existing Agreement Date, or
authorized the retention of any rights to use, any Transferred Intellectual
Property Right embodied in or relating to the Transferred Technology to any
other Person, except for non-exclusive Object Code end-user licenses, and
non-exclusive end-user licenses to immaterial portions of the Source Code,
granted to customers in the ordinary course of business.
(e) The Transferred Technology delivered to Buyer under this Agreement
includes all Source Code, tools, and other Software used by Seller to, or
necessary to, build, modify, debug and operate the current versions or
releases of the Products in substantially the same manner as Seller did so
prior to the Existing Agreement Date, except for those items licensed to
Seller under the Excluded Contracts and the Non-Transferred Licenses which
Seller is prohibited from providing to Buyer under the Excluded Contracts or
the Non-Transferred Licenses. The Acquired Assets and the Licensed
Intellectual Property, along with the Intellectual Property Rights licensed
under the Excluded Contracts or the Non-Transferred Licenses, are sufficient
to make, use, sell, license, distribute and market the current version or
release of the Products in substantially the same manner as Seller did so
prior to the Existing Agreement Date without infringing or misappropriating
any other Person's Intellectual Property Rights. Seller has the right to
deliver all Software and other materials and information delivered to Buyer
under this Agreement without infringing or misappropriating any other
Person's Intellectual Property Rights.
(f) Seller hereby represents and warrants to Parent and Buyer, only as of
the Closing Date, that Section 5.11(f) of the Seller Disclosure Schedule to
be delivered pursuant to Section 7.2(h) will list all Third Party Software in
the Transferred Technology.
(g) No government funding, facilities of a university, college, other
educational institution or research center or funding from third parties was
used in the development of the Transferred Technology.
(h) To the knowledge of Seller, the making, using, selling, licensing and
distribution of the current version or release of the Products by Seller does
not (i) infringe or misappropriate the Intellectual Property Rights of any
Person, or (ii) constitute unfair competition or trade practices under the
laws of any jurisdiction. Seller has not received written notice from any
Person claiming that the making, using, selling, licensing or distribution of
the current versions or releases of the Products infringes or misappropriates
the
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Intellectual Property Rights of any Person or constitutes unfair competition
or trade practices under the laws of any jurisdiction.
(i) There are no Contracts between Seller and any other Person with
respect to the Acquired Assets, including the Transferred Intellectual
Property Rights, under which there is any pending dispute or (to Seller's
knowledge) threatened dispute regarding the scope of such Contract or
performance under such Contract.
(j) To the knowledge of Seller, no Person is infringing or
misappropriating the Transferred Intellectual Property Rights embodied in or
relating to the Transferred Technology.
(k) Seller has taken all reasonable steps that are required to protect its
rights in the Trade Secrets associated with or related to the Transferred
Technology, and Seller has taken reasonable steps to prevent misappropriation
of any Trade Secrets of any third party.
(l) Except as set forth in Section 5.11(l) of the Disclosure Schedule, no
third party possesses any copy of any Source Code for the Kernel for any
Product. In addition, no third party possesses any copy of any other Source
Code for any Product, other than portions of the Source Code the use of which
by any other Person would not have a Material Adverse Effect.
(m) There is no Third Party Software incorporated in the Kernel for the
current version of any Product.
(n) Seller has and enforces a policy requiring each employee and
consultant of Seller to execute a proprietary rights and confidentiality
agreement substantially in a form that Seller has delivered to Buyer, and all
current and former employees and consultants of Seller or any of its
Subsidiaries who have created or modified in any material respect any of the
Transferred Technology have executed such an agreement, except where the
failure to have obtained such an agreement would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(o) No Transferred Intellectual Property Rights embodied in or relating to
the Transferred Technology are subject to any proceeding or outstanding
decree, order, judgment, or stipulation that restricts the use, transfer or
licensing thereof or may affect the validity, use, or enforceability thereof.
(p) To the extent that Seller has distributed or licensed any Product to
an end user pursuant to any form of encryption key, no third party has had
access to any such keys enabling disclosure of such keys to a third party.
5.12 Litigation. There is no action, suit, claim, proceeding or investigation
of any nature pending or (to the knowledge of Seller) threatened relating to
the Products, the Acquired Assets or the Designated Employees as of the
Existing Agreement Date. To the knowledge of Seller, there is no
investigation or other proceeding pending or threatened relating to the
Acquired Assets or the Designated Employees by or before any Governmental
Entity as of the Existing Agreement Date. There are no judgments, orders,
decrees, citations, fines or penalties heretofore assessed against Seller or
any of its Subsidiaries under any foreign, federal, state or local law that
would reasonably have a Material Adverse Effect.
5.13 Brokers' or Finders' Fees. Except as set forth in Section 5.13 of the
Seller Disclosure Schedule, Seller has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
5.14 Tax Matters
(a) Tax Returns and Audits.
(i) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
Seller and each of its Subsidiaries has prepared and timely filed all
required federal, state, local and foreign returns, estimates,
information statements and
14
reports ("Returns") relating to any and all Taxes concerning or
attributable to Seller, its Subsidiaries or the operations of Seller and
its Subsidiaries and such Returns are true and correct and have been
completed, in all material respects, in accordance with applicable law.
(ii) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
Seller and each of its Subsidiaries (A) has paid all Taxes shown to be
due on such returns and (B) has withheld with respect to its employees
all federal, state and foreign income taxes and social security charges
and similar fees, Federal Insurance Contribution Act, Federal
Unemployment Tax Act and other Taxes required to be withheld.
(iii) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
neither Seller nor any of its Subsidiaries has been delinquent in the
payment of any Tax, nor is there any Tax deficiency outstanding, assessed
or proposed against Seller, nor has Seller executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of Seller or any of
its Subsidiaries is presently in progress, nor has Seller or any of its
Subsidiaries been notified in writing of any request for such an audit or
other examination pursuant to which an assessment could reasonably have a
Material Adverse Effect or would materially adversely impact Parent or
Buyer.
(v) Seller is not aware of, and knows no factual basis for the
assertion of any material claim for Taxes for which Buyer would become
liable as a result of the transactions contemplated by this Agreement and
the Collateral Agreements.
5.15 Power of Attorney. There are no outstanding powers of attorney executed
on behalf of Seller in respect of the Acquired Assets except as granted to Buyer
hereunder.
5.16 Compliance with Laws. Seller and each of its Subsidiaries have complied
with, are not in violation of, and have not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or regulation
with respect to the sale and distribution of the Products, or otherwise with
respect to the Acquired Assets, except for any non-compliance or violations the
existence of which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
5.17 Product Warranties. Except for any of the following the existence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, (i) each Product manufactured, sold, leased,
licensed or delivered by Seller has been done so in conformity with all
applicable contractual commitments and all express and implied warranties, and
(ii) Seller has no liability for replacement or repair thereof or other damages
in connection therewith.
5.18 Employee Matters.
(a) Pension Plan. Seller has never maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to
Title IV of ERISA or Section 412 of the Code.
(b) Scheduled Employees. Concurrent with the execution of the Existing
Agreement, Seller delivered to Buyer a written statement that contains the
names of individuals (including dependents) (i) currently receiving COBRA
continuation coverage under any heath plan of Seller, (ii) terminated within
115 days prior to the Existing Agreement Date, (iii) employed by Seller as of
the date immediately preceding the Existing Agreement Date and who will be
terminated in connection with the acquisition, and (iv) who are Designated
Employees.
(c) Multiemployer and Multiple Employer Plans. At no time has Seller
contributed to or been obligated to contribute to any Multiemployer Plan.
Seller has never maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
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(d) No Post-Employment Obligations. Except as set forth in Section 5.18(d)
of the Seller Disclosure Schedule, no Employee Plan provides, or reflects or
represents any liability to provide retiree health to any person for any
reason, except as may be required by COBRA or other applicable statute.
(e) Effect of Transaction.
(i) Except as set forth on Section 5.18(e) of the Seller Disclosure
Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any Employee Plan or Employment Agreement that will or would
reasonably result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(f) Health Care Compliance. Neither Seller nor any ERISA Affiliate is in
violation, in any material respect, of the health care continuation
requirements of COBRA, the requirements of the Family Medical Leave Act of
1993, as amended, the requirements of the Health Insurance Portability and
Accountability Act of 1996, the requirements of the Women's Health and Cancer
Rights Act of 1998, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996, or any amendment to each such act, or any similar
provisions of state law applicable to its Employees.
(g) Employment Matters. Seller: (i) is in compliance in all respects with
all applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees;
(ii) has withheld and reported all amounts required by law or by agreement
to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(h) Labor. No work stoppage or labor strike against Seller is pending or,
to the knowledge of Seller, threatened involving any of the Designated
Employees. Seller does not know of any activities or proceedings of any labor
union to organize any of the Designated Employees. Except as set forth in
Section 5.18(h) of the Seller Disclosure Schedule, there are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
Seller, threatened relating to any labor, safety or discrimination matters
involving any Designated Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to Seller. Except as set forth in Section 5.18(h) of the Seller
Disclosure Schedule, Seller is not a party to, or bound by, any collective
bargaining agreement or union contract with respect to any of the Designated
Employees and no collective bargaining agreement is currently being
negotiated by Seller.
5.19 International Employee Plan. Seller does not now, nor has it in the last
two years had the obligation to, maintain, establish, sponsor, participate in,
or contribute to any International Employee Plan.
5.20 Business Changes. From June 30, 2001 through the Existing Agreement
Date, except as otherwise contemplated by this Agreement, or as set forth in
Section 5.20 of the Seller Disclosure Schedule:
(a) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, operations, obligations or liabilities of Seller
which, in the aggregate, have had or may be reasonably expected to have a
Material Adverse Effect.
(b) Seller has not mortgaged, pledged, or otherwise encumbered any of the
Acquired Assets.
(c) Seller has not sold, assigned, licensed, leased, transferred or
conveyed, or committed itself to sell, assign, license, lease, transfer or
convey, any of the Acquired Assets except for non-exclusive licenses entered
into in the ordinary course of business.
16
(d) There has been no destruction of, damage to or loss of any of the
Acquired Assets.
(e) There has been no notice of any claim or potential claim of ownership
by any Person other than Seller or its Subsidiaries of the Transferred
Technology, the Transferred Intellectual Property Rights, the Licensed
Intellectual Property Rights, or the Licensed Technology or of infringement
by Buyer or its Subsidiaries of any other Person's Intellectual Property
Rights.
(f) There has been no dispute, proceeding, litigation, arbitration or
mediation pending or (to the knowledge of Seller) threatened against Seller
or any of its Subsidiaries related to the Acquired Assets.
(g) There has been no event or condition of any character that has had or
is reasonably likely to have a Material Adverse Effect.
(h) There has been no agreement by Seller or any of its Subsidiaries or
any employees, agents or affiliates of Seller or its Subsidiaries to do any
of the things described in the preceding clauses (a) through (g) (other than
negotiations with Parent and Buyer and their representatives regarding the
transactions contemplated by this Agreement).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER Except as disclosed in the
Disclosure Schedule delivered to Seller on the Existing Agreement Date (the
"Parent Disclosure Schedule"), Parent and Buyer hereby jointly and severally
represent and warrant to Seller, as of the Existing Agreement Date (except to
the extent such representations and warranties address matters as of a
particular date or period, in which case such representations and warranties are
made as of such date or period), as follows:
6.1 Organization, Good Standing and Qualification. Each of Parent and Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of Delaware. Buyer is a wholly owned Subsidiary of El Camino
Acquisition Corporation, which is in turn a wholly owned Subsidiary of Parent.
6.2 Authority. Each of Parent and Buyer has all requisite corporate power and
authority to enter into this Agreement and the Collateral Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Collateral Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Buyer. This Agreement
and the Collateral Agreements have been duly executed and delivered by Parent
and Buyer and constitute the valid and binding obligations of Parent and Buyer,
enforceable in accordance with their terms, except as such enforceability may be
limited by principles of public policy and subject to the rules of law governing
specific performance, injunctive relief or other equitable remedies.
6.3 No Conflict. Neither the execution and delivery of this Agreement and the
Collateral Agreements, nor the consummation of the transactions contemplated
hereby and thereby, will conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both) (i) any
provision of the certificate of incorporation, as amended, and bylaws, as
amended, of Parent or Buyer, (ii) any Contract to which Parent or Buyer or any
of their respective properties or assets are subject and which has been filed as
an exhibit to Parent's filings under the Securities Act or the Exchange Act, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Buyer or their respective properties or assets, except
in each case where such conflict, violation or default will not have a material
adverse effect on Parent or Buyer or will not affect the legality, validity or
enforceability of this Agreement or the Collateral Agreements.
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6.4 SEC Filings. Parent has delivered or made available to Seller (through
reference to documents filed by XXXXX or otherwise) accurate and complete copies
of all forms, reports and documents filed by Parent with the SEC since March 2,
2000 the SEC since March 2, 2000 (the "Parent SEC Reports"), which are all the
forms, reports and documents required to be filed by Parent with the SEC since
such date. As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Parent's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
6.5 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Buyer in connection with the
execution and delivery of this Agreement and the Collateral Agreements or the
consummation of the transactions contemplated hereby, except for such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings which, if not obtained or made, would not have a material adverse effect
on Parent or Buyer.
6.6 Brokers' and Finders' Fees. Neither Parent nor Buyer has incurred, nor
will they incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 Access. During the period commencing on the Existing Agreement Date and
continuing through the earlier of the Closing Date or the termination of this
Agreement, Seller, upon reasonable prior notice from Parent or Buyer to Seller,
and subject to the Confidentiality Agreement, will (a) afford to Buyer and its
representatives, at reasonable times during normal business hours, reasonable
access to the appropriate members of Seller's personnel, Seller's professional
advisors, and Seller's properties, and (b) furnish Buyer and its representatives
with reasonable access to or copies of Transferred Contracts, relevant Books and
Records, and other existing documents and data related to the Acquired Assets as
Buyer may reasonably request (including to enable Buyer to assess Seller's
compliance with its obligations under this Agreement). Except as otherwise
provided herein, no information or knowledge obtained in any investigation
pursuant to this Section 7.1 shall affect or be deemed to modify any
representatio n or warranty contained herein or the conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby.
7.2 Pre-Closing Activities of Seller. Between the Existing Agreement Date and
the earlier of the Closing Date or the termination of this Agreement, unless
otherwise agreed in writing by Parent or Buyer, Seller will:
(a) conduct its business (as it relates to the Acquired Assets) in a
commercially reasonable manner;
(b) pay its debts and Taxes when due, where failure to pay when due would
be reasonably likely to have a Material Adverse Effect;
(c) pay or perform other obligations related to the Acquired Assets, where
failure to pay or perform would be reasonably likely to have a Material
Adverse Effect;
(d) use commercially reasonable, good faith efforts to maintain its
relations and goodwill with suppliers, customers, distributors, licensors,
licensees, landlords, trade creditors, employees, agents and others having
business relationships with Seller relating to the Acquired Assets to the
extent Seller knows or has reason to believe that Buyer intends to have
business relations with such parties with respect to the Acquired Assets
following the Closing;
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(e) keep Buyer reasonably informed concerning material business or
operational matters relating to the Acquired Assets;
(f) use commercially reasonable, good faith efforts to maintain the
Acquired Assets in their current condition, ordinary wear and tear excepted;
(g) use commercially reasonable efforts to identify and notify Buyer of
material Sublicensing Requirements and, upon receipt of Buyer's written
authorization to do so, comply with the Sublicensing Requirements for the
Licensed Intellectual Property specified in Buyer's authorization to the
extent provided in Section 4.1; provided, however, that, with respect to
those Sublicensing Restrictions that require the consent, approval or other
action of any third party, Seller shall only be required to use commercially
reasonable efforts to comply with such Sublicensing Restrictions; and
(h) complete and deliver to Buyer and Parent Section 5.11(f) of the Seller
Disclosure Schedule on or before the Closing Date.
7.3 Conduct Prior to Closing. Except as otherwise expressly permitted by this
Agreement, between the Existing Agreement Date and the earlier of (i) the
Closing Date and (ii) the termination of this Agreement, Seller will not take
any action as a result of which any of the changes or events described in
Section 5.20 of this Agreement would likely or foreseeably occur. In addition,
between the Existing Agreement Date and the earlier of (i) the Closing Date and
(ii) the termination of this Agreement, Seller will not, without the prior
written consent of Parent or Buyer, which consent shall not be unreasonably
withheld:
(a) take any action to materially impair, encumber, or create a Lien
against the Acquired Assets;
(b) except to comply with existing contractual obligations or commitments
or with respect to non-exclusive licenses entered into in the ordinary course
of business consistent with past practice, buy, or enter into any inbound
license agreement with respect to, Third Party Technology or the Intellectual
Property Rights of any third party to be incorporated in or used in
connection with the Products or sell, lease or otherwise transfer or dispose
of, or enter into any outbound license agreement with respect to, any of the
Acquired Assets with any third party;
(c) except to comply with existing contractual obligations or commitments
or with respect to non-exclusive licenses entered into in the ordinary course
of business consistent with past practice, enter into any Contract relating
to (i) the sale or distribution of any Product, (ii) any of the Acquired
Assets, or (iii) any Licensed Intellectual Property (subject to Section
7.2(g) above);
(d) change pricing or royalties charged to customers or licensees of the
Acquired Assets;
(e) enter into any strategic arrangement or relationship, development or
joint marketing arrangement or agreement relating to the Acquired Assets;
(f) fire, or give notice of termination to, any Designated Employee,
except as permitted under the terms of that certain Funding Agreement between
Buyer and Seller of even date herewith (the "Funding Agreement");
(g) amend or modify, except to the extent required by the terms thereof,
or violate the terms of, any of the Transferred Contracts;
(h) adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes, in each case where such action would
reasonably have a Material Adverse Effect; and
(i) agree in writing or otherwise to take any of the actions described in
Sections 7.3(a) through (h) above.
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7.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 7.1, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be governed by the terms of the Mutual
Nondisclosure Agreement between Parent and Seller dated June 22, 2000, as
amended by Amendment Number 1 to such agreement dated June 21, 2001.
7.5 Use of Confidential Information. Notwithstanding anything to the contrary
contained herein or in any other agreement of Seller, including any agreement
between Seller and any employee of Seller, after the Closing, Buyer shall have
the unrestricted, sublicensable and transferable right, and Seller hereby
consents to such rights of Buyer, to use, disclose and exploit in any manner and
without restriction any and all confidential information embodied in any of the
Acquired Assets. To the extent that any Designated Employee may be bound by any
agreement or policy of Seller or any of its Subsidiaries that would in any way
limit or restrict the rights of Buyer to such confidential information
hereunder, Seller shall not assert, enforce or otherwise exercise its rights
under such agreement or policy against any Designated Employee or Buyer.
7.6 Seller Intellectual Property Covenants. After the Closing, Seller shall
not: (i) transfer or license any Intellectual Property Rights to any third
party; (ii) use, exercise or otherwise exploit any Transferred Technology; or
(iii) disclose any Trade Secrets related to the Transferred Intellectual
Property Rights to any third party. Prior to the Closing, at Seller's request
Seller and Parent shall enter into an escrow agreement with a third party escrow
agent (the "Escrow Agreement") which shall provide that: (1) Seller shall
deposit, with such escrow agent, prior to the Closing, a copy of the Source Code
for the Products (including prior versions thereof) and related materials or
information (the "Escrowed Materials") which Seller reasonably expects could be
necessary for the prosecution or defense of claims or causes of action by or
against Seller for violations of (or that otherwise arise under) the antitrust
laws of any jurisdiction, and (2) Seller shall have the right to obtain from
such escrow ag ent a copy of the Escrowed Materials that are reasonably
necessary for the prosecution or defense of any such antitrust claim or cause of
action by or against Seller, provided that Seller first obtains certain
protective orders or other reasonable confidentiality protections as set forth
in the Escrow Agreement, and provided further that Seller shall have the right
to use such materials only in connection with such specific claim or cause of
action, and shall return to the escrow agent or destroy such materials upon the
final resolution (including through any appeals) of such claim or cause of
action. Except with respect to Escrowed Materials released to Seller as
described above, after the Closing, upon written notice from Buyer, Seller shall
destroy all copies of Source Code in Seller's possession or control relating to
the current version and all prior versions of the Product and all copies in
Seller's possession or control of specifications, documentation, and other
materials and information relating the reto.
7.7 Covenant Not to Compete or Solicit.
(a) Subject to the Closing, and without limiting Seller's ability to
prosecute antitrust claims against third parties, beginning on the Closing
Date and ending on the second (2nd) anniversary of the Closing Date (the
"Non-Competition Period"), Seller shall not directly or indirectly (other
than on behalf of Buyer), without the prior written consent of Parent or
Buyer, engage in a Competitive Business Activity (as defined below) anywhere
in the Restricted Territory (as defined below). For all purposes hereof, the
term "Competitive Business Activity" shall mean: (i) engaging in, managing or
directing persons engaged in any business in competition with Parent's
Platform Business; (ii) acquiring or having an ownership interest in any
entity which derives revenues from any business in competition with Parent's
Platform Business (except for ownership of one percent (1%) or less of any
entity whose securities have been registered under the Securities Act, or
Section12 of the Exchange Act); or (iii) participating in the operation,
management or control of any firm, partnership, corporation, entity or
business described in clause (ii) of this sentence. For all purposes hereof,
the term "Restricted Territory" shall mean each and every country, province,
state, city or other political subdivision of the world including those in
which Parent is currently engaged in business or otherwise distributes,
licenses or sells products.
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(b) Subject to the Closing, and beginning on the Closing Date and ending
on the second (2nd) anniversary of the Closing Date, Seller shall not
solicit, encourage or take any other action which is intended to induce or
encourage or could reasonably be expected to have the effect of inducing or
encouraging, any employee of Parent or any Subsidiary of Parent or any
Continuing Employee to terminate his or her employment with Parent or any
Subsidiary of Parent; provided, however, that any general solicitation of
employees not specifically targeted to employees of Parent or any Subsidiary
of Parent or any Continuing Employee shall not be deemed a violation of this
Section 7.7(b).
(c) The covenants contained in Section 7.7(a) shall be construed as a
series of separate covenants, one for each country, province, state, city or
other political subdivision of the Restricted Territory. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenant contained in Section 7.7(a). If, in any judicial
proceeding, a court refuses to enforce any of such separate covenants (or any
part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the
event that the provisions of this Section 7.7(a) are deemed to exceed the
time, geographic or scope limitations permitted by applicable law, then such
provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.
(d) Seller acknowledges (without in any way representing to Parent or
Buyer any of the following) that (i) the value of the Acquired Assets is an
integral component of the value to Buyer of the transactions contemplated by
this Agreement and is reflected in the value of the Stock Consideration to be
received by Seller, and (ii) Seller's agreement as set forth in Sections
7.7(a) and 7.7(b) is necessary to preserve the value of the Acquired Assets
for Buyer following the Closing. Seller also acknowledges that the
limitations of time, geography and scope of activity agreed to in Section
7.7(a) are reasonable because, among other things, (A) Seller has had unique
access to the Trade Secrets and know-how relating to the Acquired Assets,
including, without limitation, the plans and strategy (and, in particular,
the competitive strategy) relating to the Acquired Assets, and (B) Seller is
receiving significant consideration in connection with the consummation of
the transactions contemplated by this Agreement.
(e) The parties agree that in the event of a breach or threatened breach
by Seller of any of the covenants set forth in Sections 7.7(a) and 7.7(b),
monetary damages alone would be inadequate to fully protect Buyer from, and
compensate Buyer for, the harm caused by such breach or threatened breach.
Accordingly, Seller agrees that if it breaches or threatens breach of any
provision of Sections 7.7(a) and 7.7(b), Buyer shall be entitled to, in
addition to any other right or remedy otherwise available, the right to seek
injunctive relief restraining such breach or threatened breach and to
specific performance of any such provision of Sections 7.7(a) and 7.7(b), and
Buyer shall not be required to post a bond in connection with, or as a
condition to, obtaining such relief before a court of competent jurisdiction.
7.8 No Solicitation.
(a) From and after the Existing Agreement Date until the earlier of (i)
the Closing Date and (ii) termination of this Agreement pursuant to ARTICLE
10, neither Seller nor any of its Subsidiaries will, nor will they authorize
or permit any of their officers, directors or affiliates to, nor will they
authorize or knowingly permit any of their employees or any investment
banker, attorney or other advisor or representative retained by them to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or induce
the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) engage or participate in any discussions or
negotiations regarding, or furnish to any person any non-public information
with respect to, or knowingly take any other action to facilitate or that
could reasonably be expected to lead to, any Acquisition Proposal, (iii)
approve, endorse or recommend any Acquisition Proposal other than in
compliance with Section 7.16(c), or (iv) enter into any letter of intent or
similar document or any contract agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction; provided, however, that
nothing contained in this Section 7.8 shall prohibit the Board of Directors
of Seller from (i) in response to a bona fide written Acquisition Proposal
for a Qualifying Acquisition Transaction not solicited by Seller in violation
of this Section 7.8(a) that the Board of Directors of Seller has in good
faith concluded (based on, among other things, the advice of a financial
advisor of nationally recognized reputation), is reasonably likely to lead to
a Superior Offer, furnishing nonpublic
21
information to the party making such Acquisition Proposal, and submitting to
the party making such Acquisition Proposal written questions, the sole
purpose of which is to elicit clarifications as to the material terms of such
Acquisition Proposal so as to enable the Board of Directors of Seller to make
a determination whether to construe such Acquisition Proposal as a Superior
Offer, to the extent that (A) the Board of Directors of Seller concludes in
good faith, after consultation with its outside counsel, that its fiduciary
obligations under applicable law require it to do so, (B) (x) concurrently
with furnishing any such nonpublic information to, or written questions to
such party, Seller gives Buyer written notice of Seller's intention to
furnish nonpublic information, or written questions to such party and (y)
Seller receives from such party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such party on behalf of Seller, the
terms of which are at least as restrictive as the terms contained in the
Confidentiality Agreement, and (C) contemporaneously with furnishing any such
nonpublic information to such party, Seller furnishes such nonpublic
information to Buyer (to the extent such nonpublic information has not been
previously furnished by Seller to Buyer) and (ii) in response to a bona fide
written Acquisition Proposal not solicited by Seller in violation of this
Section 7.8(a) that constitutes a Superior Offer, engaging in negotiations
with the party making such Acquisition Proposal to the extent that (A) the
Board of Directors of Seller concludes in good faith, after consultation with
its outside counsel, that its fiduciary obligations under applicable law
require it to do so, (B) (x) concurrently with entering into negotiations
with such party, Seller gives Buyer written notice of Seller's intention to
enter into negotiations with such party and (y) Seller receives from such
party an executed confidentiality agreement containing customary limitations
on the use and disclosure of all nonpublic written and oral information
furnished to such party on behalf of Seller, the terms of which are at least
as restrictive as the terms contained in the Confidentiality Agreement.
Seller will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding two sentences by
any officer or director of Seller shall be deemed to be a breach of this
Section 7.8 by Seller.
(b) For purposes of this Agreement, "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent or Buyer)
relating to any Acquisition Transaction. For purposes of this Agreement,
"Acquisition Transaction" shall mean any transaction or series of related
transactions involving: (i) any purchase from Seller or acquisition by any
person or "group" (as defined under Section13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a 15% interest in the total
outstanding voting securities of Seller or any tender offer or exchange offer
that if consummated would result in any person or "group" (as defined under
Section13(d) of the Exchange Act and the rules and regulations thereunder)
beneficially owning 15% or more of the total outstanding voting securities of
Seller or any merger, consolidation, business combination or similar
transaction involving Seller; or (ii) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than
non-exclusive licenses in the ordinary course of business), acquisition or
disposition of more than 15% of the assets of Seller or of any of the
Acquired Assets, except for an immaterial (individually or in the aggregate)
portion of such Acquired Assets. In addition, for the purposes of this
Agreement "Qualifying Acquisition Transaction" shall mean any Acquisition
Transaction pursuant to which (i) the stockholders of Seller immediately
preceding such Acquisition Transaction would immediately following such
Acquisition Transaction hold less than fifty percent (50%) of the aggregate
equity interests in the Seller (or if the Seller does not survive such
Acquisition Transaction, in the surviving or resulting entity); or (ii)
Seller would sell all or substantially all of its assets.
(c) In addition to the obligations of Seller set forth in paragraph (a) of
this Section 7.8, Seller as promptly as practicable after learning of any of
the following matters shall advise Buyer in writing of any Acquisition
Proposal or any request for non-public information or inquiry which Seller
reasonably believes would lead to an Acquisition Proposal or to any
Acquisition Transaction the material terms and conditions of such,
Acquisition Proposal, or request inquiry, and the identity of the person or
group making any such request, Acquisition Proposal or inquiry. Seller will
keep Buyer informed as promptly as practicable after
22
learning of any of the following matters in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such request, Acquisition Proposal or inquiry.
7.9 Notification of Certain Matters.
(a) Seller shall give prompt notice to Buyer of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is
likely to cause any representation or warranty of Seller contained in this
Agreement to be untrue or inaccurate in any material respect at the Closing,
and (ii) any failure of Seller to comply with or satisfy in any material
respect any covenant or agreement required to be complied with or satisfied
by it hereunder, in either case such that the conditions set forth in Section
8.2(a) might reasonably not be satisfied by the End Date; provided, however,
that the delivery of any notice pursuant to this Section 7.9(a) shall not (a)
limit or otherwise affect any remedies available to the party receiving such
notice or (b) constitute an acknowledgment or admission of a breach of this
Agreement. No disclosure by Seller pursuant to this Section 7.9(a), however,
shall be deemed to amend or supplement the Seller Disclosure Schedule or
prevent or cure any misrepresentations, breach of warranty or breach of
covenant by Seller hereunder.
(b) Parent or Buyer shall give prompt notice to Seller of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of Parent or Buyer
contained in this Agreement to be untrue or inaccurate in any material
respect at the Closing, and (ii) any failure of Parent or Buyer to comply
with or satisfy in any material respect any covenant, condition or agreement
required to be complied with or satisfied by it hereunder, in either case
such that the conditions set forth in Section 8.3(a) might reasonably not be
satisfied by the End Date; provided, however, that the delivery of any notice
pursuant to this Section 7.9(b) shall not (a) limit or otherwise affect any
remedies available to Seller, or (b) constitute an acknowledgment or
admission by Parent or Buyer of a breach of this Agreement. No disclosure by
Parent or Buyer pursuant to this Section 7.9(b), however, shall be deemed to
amend or supplement the Buyer Disclosure Schedule or prevent or cure any
misrepresentations, breach of warranty or breach of covenant by Parent or
Buyer hereunder.
7.10 New Employment Arrangements. Parent has offered each person who is a
Designated Employee "at-will" employment with Parent, to be effective as of the
Closing Date, subject to proof evidencing a legal right to work in his or her
country of current employment. Such "at-will" employment arrangements have been
set forth in offer letters based on Parent's standard form delivered to the
Designated Employees prior to the Existing Agreement Date (each, an "Offer
Letter"), copies of which have been provided to Seller. At least seven of the
Key Employees executed an Offer Letter prior to or concurrent with the execution
of the Existing Agreement, which Offer Letters shall be effective as of the
Closing Date. Each employee of Seller who becomes an employee of Parent after
the Closing Date shall be referred to hereafter as a "Continuing Employee."
Continuing Employees shall be eligible to receive benefits consistent with
Parent's standard human resources policies. In furtherance of the foregoing, at
the Closing S xxxxx shall terminate all employment agreements and other
arrangements with any Continuing Employees who have accepted employment with
Parent, and waive any non-competition agreements and any duty of confidentiality
owed to Seller by any such Continuing Employee, effective as of the Closing
Date.
7.11 Public Disclosure. Except as may be required by law or any listing
agreement with a national securities exchange, no party shall issue any
statement or communication to any third party (other than their respective
agents) regarding the subject matter of this Agreement or the transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefor, without the consent of the other party, which consent
shall not be unreasonably withheld. Immediately following the execution of the
Existing Agreement, each of Parent and Seller issued a press release announcing
the execution of the Existing Agreement and the transactions contemplated
thereby, and each of Parent and Seller shall be entitled, in its discretion, to
file a current report with the SEC disclosing the foregoing matters.
23
7.12 Consents. Seller shall use commercially reasonable efforts to obtain the
consents, waivers and approvals under any of the Transferred Contracts or under
any contractual restrictions relating to the Tangible Assets that are necessary
to permit the transfer of such Transferred Contracts or Tangible Assets to Buyer
as may be required in connection with this Agreement, as well as any consents
that may be necessary to permit the transfer to Buyer of any Supplemental
Transferred Contracts. Buyer shall reasonably cooperate in Seller's efforts to
obtain such consents, waivers and approvals.
7.13 COBRA Continuation Coverage. Seller agrees and acknowledges that the
selling group (as defined in Treasury Regulation Section 54.4980B-9, Q&3(a)) of
which it is a part (the "Selling Group") will continue to offer a group health
plan to employees of Seller after the Closing Date and, accordingly, that Seller
and the Selling Group shall be solely responsible for providing continuation
coverage under COBRA to those individuals who are M&A qualified beneficiaries
(as defined in Treasury Regulation Section 54.4980B-9, Q&4(a)) with respect to
the transactions contemplated by this Agreement (collectively, the "M&A
Qualified Beneficiaries"). Seller further agrees and acknowledges that in the
event that the Selling Group ceases to provide any group health plan to any
employee prior to the expiration of the continuation coverage period for all M&A
Qualified Beneficiaries (pursuant to Treasury Regulation Section 54.4980B-9,
Q&8(c)), then Seller shall provide Buyer with (i) written notice of such
cessation as fa r in advance of such cessation as is reasonably practicable
(and, in any event, at least thirty (30) days prior to such cessation), and (ii)
all information necessary or appropriate for Purchaser to offer continuation
coverage to such M&A Qualified Beneficiaries.
7.14 Prepaid Service Payment Update. Seller shall prepare and deliver, at
least three(3) business days prior to the Closing Date, an updated Section 5.7
of the Seller Disclosure Schedule estimated as of the Closing Date (the "Prepaid
Service Payment Update"), including an update to each Prepaid Service Payment
contained thereon, that has been prepared on a basis consistent with Section 5.7
of the Seller Disclosure Schedule delivered on the Existing Agreement Date.
7.15 Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
Seller will prepare a proxy statement with respect to the transactions
contemplated by this Agreement (the "Proxy Statement/Prospectus") and Parent
shall prepare and file with the SEC a registration statement on Form S-4 with
respect to the registration of the Stock Consideration (the "Form S-4
Registration Statement"), in which the Proxy Statement/Prospectus will be
included as a prospectus. Each of Parent and Seller will use all reasonable
efforts to (i) cause the Form S-4 Registration Statement and the Proxy
Statement/Prospectus to comply with the rules and regulations promulgated by
the SEC, (ii) respond promptly to any comments of the SEC, and (iii) have the
Form S-4 Registration Statement declared effective under the Securities Act
as promptly as practicable after it is filed with the SEC. As promptly as
practicable after the effective date of the Form S-4 Registration Statement,
Seller shall cause the Proxy Statement/Prospectus to be mailed to the
stockholders of Seller. Each of the Parent and Seller will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any
other government officials in connection with any filing made pursuant hereto
and of any request by the SEC or its staff or any other government officials
for amendments or supplements to the Form S-4 Registration Statement or the
Proxy Statement/Prospectus or for additional information. Each of the Parent
and Seller will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or
its staff or any other government officials, on the other hand, with respect
to the Form S-4 Registration Statement or the Proxy Statement/Prospectus.
Each party will cause all documents that it is responsible for filing with
the SEC or other regulatory authorities under this Section 7.15 to comply in
all material respects with all applicable requirements of law and the rules
and regulations promulgated thereunder. Whenever any event occurs that is
required to be set forth in an amendment or supplement to the Form S-4
Registration Statement or the Proxy Statement/Prospectus, each of Parent and
Seller will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, or
mailing to stockholders of Seller, such amendment or supplement. No amendment
or supplement to the Form S-4 Registration Statement or the Proxy
Statement/Prospectus shall be made without the approval of Parent and
24
Seller, which approval shall not be unreasonably withheld or delayed. In the
event that, at any time prior to the effectiveness of the Form S-4
Registration Statement under the Securities Act, the SEC shall take the
position that Form S-4 is not available or is otherwise inappropriate with
respect to the registration of the Stock Consideration, (i) Parent shall
issue the Stock Consideration hereunder pursuant to the Resale Registration
Statement as provided in Section 7.15(b), (ii) the parties shall comply with
Section 7.15(b) and (iii) Parent shall use commercially reasonable efforts to
seek a waiver from Foothill Capital Corporation to enable Parent to make the
Cash Loan in accordance with Section 7.15(c)(the "Waiver").
(b) In the event that, at any time prior to the effectiveness of the Form
S-4 Registration Statement under the Securities Act, the SEC shall take the
position that Form S-4 is not available or is otherwise inappropriate with
respect to the registration of the Stock Consideration, Parent shall, at
Parent's own expense, file with the SEC promptly (and in any event not more
than two business days) following the Closing, a resale registration
statement on Form S-3 (the "Resale Registration Statement") under the
Securities Act to provide for the resale by Seller of such number of shares
of Parent's common stock as may be required to be issued to Seller in
accordance with the last sentence of this clause (b), and will use
commercially reasonable efforts to cause such Resale Registration Statement
to become effective as promptly as reasonably practicable thereafter;
provided, however, that Parent will not be required to cause such Resale
Registration Statement to become effective until at least one (1) Business
Day after Parent publicly discloses operating results from its most recently
ended fiscal quarter. Parent will use its reasonable best efforts to keep
such Resale Registration Statement effective for a period of thirty (30) days
after such Resale Registration Statement becomes effective; provided,
however, that at any time after fifteen (15) days after the SEC shall have
declared the Resale Registration Statement effective, Parent may suspend the
use of the Resale Registration Statement beginning on the fifteenth (15th)
day of the last month prior to the end of each fiscal quarter of Parent and
ending one (1) business day after Parent publicly discloses operating results
from such fiscal quarter, in keeping with the black-out periods in Parent's
standard stock trading policy, and during any other black-out period
designated by Parent under Parent's standard stock trading policy; provided,
however, that in no event shall Parent suspend the effectiveness of the
Resale Registration Statement for more than 60 consecutive days. Seller
shall, on or prior to the Closing Date, complete a selling stockholder
questionnaire containing customary investment representations in such form as
may be reasonably provided by Parent not later than the tenth (10th) day
prior to the Closing Date. In the event that Seller shall have failed to
furnish such completed questionnaire to Parent on or prior to the Closing
Date, Parent will be entitled, in its reasonable discretion, to (i) defer the
filing of the Resale Registration Statement until the earlier to occur of the
tenth (10th) day after Seller will have furnished such information or the
thirtieth (30th) day after such Resale Registration Statement is otherwise
required to filed pursuant to this Section 7.15(b). In the event that Parent
shall file the Resale Registration Statement, and Seller shall not have
otherwise disposed of the Stock Consideration prior to the effectiveness of
the Resale Registration Statement, the Stock Consideration shall be increased
or decreased so that Seller shall receive that number of shares of Parent's
common stock, rounded up or down to the nearest number of whole shares (with
0.5 being rounded up) equal to the quotient determined by dividing (A)
$11,000,000 minus the Adjustment Amount, by (B) the opening price of Parent's
common stock as quoted on the Nasdaq National Market on the first trading day
following the declaration of effectiveness of the Resale Registration
Statement.
(c) Provided that Parent obtains the Waiver, (i) if the Resale
Registration Statement is not declared effective by the SEC on or prior to
the 15th day after the Closing Date, Parent shall immediately make a loan to
Seller of $5,500,000 in cash, and (ii) if the Resale Registration Statement
is not declared effective by the SEC on or prior to the 30th day after the
Closing Date, Parent shall immediately make a second loan to Seller of
$5,500,000 in cash (collectively, the "Cash Loans"). The Cash Loans shall not
bear any interest. Repayment of each Cash Loan shall be secured by a pledge
of the Stock Consideration, and Seller and Parent agree to enter into a
promissory note and security agreement containing customary and reasonable
terms and conditions relating to such Cash Loan. The Cash Advances shall be
repayable at any time by Seller, without interest or penalty. In the event
that Buyer makes the Cash Loan, Seller shall be obligated to sell the Stock
Consideration promptly (but, in any event, within two business days)
following the
25
effectiveness of the Resale Registration Statement and simultaneously repay
the Cash Loan with the proceeds of such sale.
(d) In the event that the SEC shall take the position, at any time prior
to the effectiveness of the Form S-4 Registration Statement under the
Securities Act, that Form S-4 is not available or is otherwise inappropriate
with respect to the registration of the Stock Consideration and the Form S-4
Registration Statement shall not have been declared effective under the
Securities Act by the Closing, the Stock Consideration issued to Seller at
Closing shall constitute "restricted securities" within the meaning of Rule
144 of the Securities Act and will be issued in a private placement
transaction in reliance upon the exemption from the registration and
prospectus delivery requirements of Section 5 of the Securities Act afforded
by Section 4(2) of the Securities Act and Regulation D promulgated thereunder
and pending the effectiveness of the Registration Statement, will be subject
to the following legend to identify such privately placed shares as being
"restricted securities" under the Securities Act, to comply with foreign,
provincial, state and federal securities laws and to notice the restrictions
on transfer of such shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING SUCH SECURITIES,
OR (B) A VALID EXEMPTION THEREFROM AND THE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT."
7.16 Meeting of Seller's Stockholders
(a) Seller will take all action necessary in accordance with Delaware law
and its certificate of incorporation and bylaws to convene a meeting (the
"Seller Stockholders' Meeting") of Seller's stockholders to consider adoption
and approval of this Agreement and the dissolution or winding-up of Seller's
business after the Closing in a manner providing for full payment to or
adequate provision for creditors in advance of any distribution to Seller's
stockholders (the "Dissolution") to be held as promptly as practicable after
the Form S-4 Registration Statement is declared effective under the
Securities Act or, in the event that the SEC shall take the position, at any
time prior to the effectiveness of the Form S-4 Registration Statement under
the Securities Act, that Form S-4 is not available or is otherwise
inappropriate with respect to the registration of the Stock Consideration,
within 45 days after Seller is notified of the SEC's position. Subject to
Section 7.16(c), Seller will use its commercially reasonable efforts to
solicit from its stockholders proxies in favor of the adoption and approval
of this Agreement and the Dissolution and to take all other action necessary
or advisable to secure the vote or consent of its stockholders required by
Delaware law in favor of such matters. Notwithstanding anything to the
contrary contained in this Agreement, Seller may adjourn or postpone the
Seller Stockholders' Meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Proxy Statement/Prospectus is
provided to Seller's stockholders in advance of a vote on this Agreement and
the Dissolution or, if as of the time for which Seller Stockholders' Meeting
is originally scheduled (as set forth in the Proxy Statement/Prospectus)
there are insufficient shares of Seller's common stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the business
of the Seller Stockholders' Meeting. Seller shall ensure that Seller
Stockholders' Meeting is called, noticed, convened, held and conducted, and
that all proxies solicited by Seller in connection with Seller Stockholders'
Meeting are solicited, in compliance with the Delaware law, Seller's
certificate of incorporation and bylaws, the rules of Nasdaq and all other
applicable legal requirements. Seller's obligation to call, give notice of,
convene and hold the Seller Stockholders' Meeting in accordance with this
Section 7.16(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Seller of any
Acquisition Proposal (as defined in Section 7.8), or by any
26
withdrawal, amendment or modification of the recommendation of the Board of
Directors of Seller with respect to this Agreement and the Dissolution.
(b) Subject to Section 7.16(c): (i) the Board of Directors of Seller shall
recommend that Seller's stockholders vote in favor of the adoption and
approval of this Agreement and the approval of the Dissolution at the Seller
Stockholders' Meeting; (ii) the Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of Seller has recommended
that Seller's stockholders vote in favor of the adoption and approval of this
Agreement and the Dissolution at the Seller Stockholders' Meeting; and (iii)
neither the Board of Directors of Seller nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify
in a manner adverse to Buyer, the recommendation of the Board of Directors of
Seller that Seller's stockholders vote in favor of the adoption and approval
of this Agreement and the approval of the Dissolution.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Seller from withholding, withdrawing, amending or modifying its
recommendation in favor of the adoption and approval of this Agreement and
the approval of the Dissolution if (i) a Superior Offer (as defined below) is
made to Seller and is not withdrawn, (ii) Seller shall have provided written
notice to Buyer (a "Notice of Superior Offer") advising Buyer that Seller has
received a Superior Offer, specifying the material terms and conditions of
such Superior Offer and identifying the person or entity making such Superior
Offer, (iii) Buyer shall not have, within five (5) business days of Buyer's
receipt of the Notice of Superior Offer, made an offer that the Board of
Directors of Seller by a majority vote determines in its good faith judgment
(based on, among other things, the advice of a financial adviser of
nationally recognized reputation) to be at least as favorable to Seller's
stockholders as such Superior Offer (it being agreed that Board of Directors
of Seller shall convene a meeting to consider any such offer by Buyer
promptly following the receipt thereof), (iv) the Board of Directors of
Seller concludes in good faith, after consultation with its outside counsel,
that, in light of such Superior Offer, the withholding, withdrawal, amendment
or modification of such recommendation is required in order for the Board of
Directors of Seller to comply with its fiduciary obligations to Seller's
stockholders under applicable law and (v) neither Seller nor any of its
representatives shall have violated any of the restrictions set forth in
Section 7.8 or this Section 7.16 in connection with such Superior Offer.
Seller shall provide Buyer with at least three business days' prior notice
(or such lesser prior notice as provided to the members of Seller's Board of
Directors) of any meeting of Seller's Board of Directors at which Seller's
Board of Directors is reasonably expected to consider any Acquisition
Transaction (as defined below). Nothing contained in this Section shall limit
Seller's obligation to hold and convene the Seller Stockholders' Meeting
(regardless of whether the recommendation of the Board of Directors of Seller
shall have been withdrawn, amended or modified). For purposes of this
Agreement "Superior Offer" shall mean a bona fide written offer not solicited
by Seller in violation of Section 7.8(a) to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash or securities, either (x) a
majority-in-interest of the total outstanding voting securities of Seller, if
as a result of such transaction, the stockholders of Seller immediately
preceding such transaction would hold less than fifty percent (50%) of the
equity interest in the surviving corporation or resulting entity of such
transaction or (y) all or substantially all the assets of Seller, on terms
that the Board of Directors of Seller determines, in its good faith judgment
(based on, among other things, the advice of a financial adviser of
nationally recognized reputation) to be more favorable to Seller's
stockholders than the terms of the transaction contemplated by this Agreement
and is reasonably capable of being consummated; provided, however, that any
such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely in the judgment of Seller's Board of Directors to
be obtained by the entity making such Acquisition Proposal on a timely basis.
(d) Nothing contained in this Agreement shall prohibit Seller or its Board
of Directors from taking and disclosing to its stockholders a position
contemplated by Rules14d-9 and 14e-2(a) promulgated under the Exchange Act
with respect to a Superior Offer; provided, however, that the content of any
such disclosure shall not be inconsistent with the terms of this Agreement.
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7.17 Reasonable Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement;
provided that no party to this Agreement shall be required to agree to any
divestiture of shares of capital stock or of any business, assets or property of
Buyer or its Subsidiaries or affiliates or of Seller, as the case may be, or the
imp osition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock.
7.18 Change of Control Agreements. Upon the written request of Buyer, Seller
shall take commercially reasonable actions to have any Continuing Employee waive
any right under any change of control agreement with Seller that, if not waived,
would reasonably be expected to have the effect of providing such Continuing
Employee in the future with similar rights in connection with any future change
of control of Parent or Buyer.
7.19 Post Closing Tax Covenants.
(a) Subject to Section 7.19(c) below, Seller and its Subsidiaries will be
responsible for the preparation and filing of all Tax Returns of Seller and
its Subsidiaries (including Tax Returns required to be filed after the
Closing Date) to the extent such Tax Returns include or relate to the use or
ownership of the Acquired Assets by Seller or any of its Subsidiaries, or to
sales, use and employment taxes. The Tax Returns of Seller and its
Subsidiaries to the extent they relate to the Acquired Assets or to sales,
use and employment taxes shall be true, complete and correct and prepared in
accordance with applicable law in all material respects. Seller and its
Subsidiaries will be responsible for and make all payments of Taxes shown to
be due on such Tax Returns to the extent they relate to the Acquired Assets
or to sales, use and employment taxes.
(b) Buyer will be responsible for the preparation and filing of all Tax
Returns it is required to file with respect to Buyer's ownership or use of
the Acquired Assets attributable to taxable periods (or portions thereof)
commencing on or after the Closing Date. Buyer's Tax Returns, to the extent
they related to the Acquired Assets, shall be true, complete and correct and
prepared in accordance with applicable law in all material respects. Buyer
will make all payments of Taxes shown to be due on such Tax Returns to the
extent they relate to the Acquired Assets.
(c) In the case of any real or personal property taxes (or other similar
Taxes) attributable to the Acquired 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.
(d) To the extent relevant to the Acquired 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 and
its Subsidiaries 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 or any of its Subsidiaries of the relevant Sales Tax Certificates,
shall not destroy or otherwise dispose of any such records for six (6) years
after closing without the prior written consent of Buyer or Parent.
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(e) On or before September 14, 2001, Seller shall file or cause to be
filed properly completed applications or other appropriate forms of request
with (i) California's Employment Development Department (or any other
appropriate or analogous governmental agency) to obtain a certificate of
release as authorized in, and pursuant to, California's Unemployment
Insurance Code sections 1731 through and including 1734, and, to the extent
available under analogous law, a certificate of release or payment pursuant
to the law of Washington state (the "Employment Tax Certificates") and (ii)
California's State Board of Equalization to obtain a certificate of receipt
of payment of all sales and use taxes as authorized in and pursuant to
California Revenue and Taxation Code sections 6811 through and including 6814
and, to the extent available under analogous law, a certificate of payment
pursuant to the law of Washington state (the "Sales and Use Tax
Certificates"). The Employment Tax Certificates and the Sales and Use Tax
Certificates are collectively referred to as the "State Tax Certificates".
7.20 Employee Withholding. Seller shall prepare and furnish to Continuing
Employees a Form W-2 which shall reflect all wages and compensation paid to
Continuing Employees for that portion of the calendar year in which the Closing
Date occurs during which the Continuing Employees were employed by Seller.
Seller shall furnish to Parent the Forms W-4 and W-5 of each Continuing
Employee. Parent shall send to the appropriate Social Security Administration
office a duly completed Form W-3 and accompanying copies of the duly completed
Forms W-2. It is the intent of the parties hereunder that the obligations of
Parent and Seller under this Section 7.20 shall be carried out in accordance
with Section 5 of Revenue Procedure 96-60.
7.21 Termination of Compaq Agreement. Prior to September 19, 2001, Seller
shall deliver a notice of termination to Compaq Computer Corporation in
accordance with Section 14.1 of the Web Appliance OEM License and Distribution
Agreement between Seller and Compaq. Seller shall use commercially reasonable
efforts to obtain the consent of Compaq to terminate all maintenance and other
obligations that continue beyond the end of the term. Buyer shall reasonably
cooperate in Seller's efforts to obtain such consent.
7.22 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting the consummation of this Agreement and the
transactions contemplated hereby. Without limiting the foregoing, at any time or
from time to time after the Closing, at Buyer's request and expense, Seller
shall at the expense of Buyer: (i) execute and deliver to Buyer such other
instruments of sale, transfer, conveyance, assignment and confirmation; (ii)
provide such materials and information; (iii) take such other actions, as Buyer
may reasonably deem necessary or desirable in order effectively to transfer,
convey and assign to Buyer, to confirm Buyer's title to, all of the Acquired
Assets, and, to the full extent permitted by law, to put Buyer in actual
possession and operating control of the Acquired Assets; and (iv) provide
reasonable assistance and information in connection with the filing, prosecution
and enforcement of the Transferred Intellectual Property Rights. In the event
Seller is unable or unwilling to execute any document described in clause (i)
above, Seller hereby appoints Buyer as its attorney-in-fact to execute such
documents on its behalf. Such appointment shall be deemed a power coupled with
an interest and is therefore irrevocable. Buyer shall only exercise such power
if Seller fails to execute the necessary document within thirty (30) business
days of Buyer's written request to do so.
7.23 Disclosure by Seller. None of the information supplied or to be supplied
by or on behalf of Seller for inclusion or incorporation by reference in the
Form S-4 Registration Statement or the Resale Registration Statement, if
applicable, will, at the time such documents are filed with the SEC or at the
time either the Form S-4 Registration Statement or the Resale Registration
Statement, if applicable, becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by or on behalf
of Seller for inclusion or incorporation by reference in the Proxy
Statement/Prospectus to be filed with the SEC, will, at the time the Proxy
Statement/Prospectus is mailed to the stockholders of Seller, or at the time of
the Seller Stockholders' Meeting, co ntain any untrue statement of a material
fact or omit to state any material fact required
29
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Proxy Statement/Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder, except that no representation or warranty is made by Seller
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Buyer for inclusion or incorporation by
reference in the Proxy Statement/Prospectus.
7.24 Disclosure by Buyer or Parent. None of the information supplied or to be
supplied by or on behalf of Parent or Buyer for inclusion or incorporation by
reference in the Form S-4 Registration Statement or the Resale Registration
Statement, if applicable, will, at the time such documents are filed with the
SEC or at the time either the Form S-4 Registration Statement or the Resale
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. None
of the information supplied or to be supplied by or on behalf of Parent or Buyer
for inclusion or incorporation by reference in the Proxy Statement/Prospectus to
be filed with the SEC, will, at the time the Proxy Statement/Prospectus is
mailed to the stockholders of Seller, or at the time of the Seller Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Form S-4 Registration Statement and the Resale Registration
Statement, if applicable, will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations promulgated
by the SEC thereunder, except that no representation or warranty is made by
Parent or Buyer with respect to statements made or incorporated by reference
therein based on information supplied by Seller for inclusion or incorporation
by reference in the Form S-4 Registration Statement or the Resale Registration
Statement, if applicable.
7.25 Sublicensing Requirements. To the extent that Seller was not able prior
to the Closing Date to identify all material Sublicensing Requirements or, upon
receipt of Buyer's written authorization to do so, to comply with the
Sublicensing Requirements for the Licensed Intellectual Property specified in
Buyer's authorization, Seller shall do so until the earlier of (a) six (6)
months after the Closing Date or (b) the date on which Seller files its
certificate of dissolution with the Secretary of State of the State of Delaware;
provided, however, that, with respect to those Sublicensing Restrictions that
require the consent, approval or other action of any third party, Seller shall
only be required to use commercially reasonable efforts to comply with such
Sublicensing Restrictions.
7.26 Supplemental Transferred Contracts. At any time prior to the Closing, if
Buyer elects, in its sole discretion, to assume one or more additional Eligible
Contracts of Seller by delivering a written notice of such election to Seller,
Seller agrees that such an Eligible Contract shall thereafter be considered a
Transferred Contract hereunder, unless Seller reasonably determines in good
faith that Seller cannot transfer such Eligible Contract to Buyer due to a
change in circumstances between the Existing Agreement Date and the date of
Buyer's written notice. Seller shall deliver true and complete copies of all
Supplemental Transferred Contracts to Buyer.
ARTICLE 8
CONDITIONS TO THE CLOSING
8.1 Conditions to Obligations of Each Party. The respective obligations of
Parent, Buyer and Seller to effect the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the following
conditions, any of which may be waived, in writing, by Parent and Buyer (on the
one hand) and Seller (on the other hand):
30
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
transactions contemplated hereby illegal or otherwise prohibiting the
consummation of the transactions contemplated hereby.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the transactions contemplated hereby shall be in effect,
nor shall any proceeding brought by a Governmental Entity seeking any of the
foregoing be pending.
(c) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Dissolution shall have been duly approved, by the requisite
vote under applicable law and the certificate of incorporation of Seller by
the stockholders of Seller.
(d) Governmental Approval. Any governmental or regulatory notices,
approvals or other requirements necessary to consummate the transactions
contemplated hereby and shall have been given, obtained or complied with, as
applicable.
8.2 Additional Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to consummate the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions, any of which may be waived, in writing, exclusively
by Parent and Buyer:
(a) Representations, Warranties and Covenants. (i) The representations and
warranties of Seller in this Agreement shall have been true and correct on
the date they were made and shall be true and correct on and as of the
Closing Date as though such representations and warranties were made on and
as of such date, except in either case to the extent that the aggregate of
all breaches thereof has not had and would not reasonably be expected to have
a Material Adverse Effect (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) and except to
the extent such representations and warranties address matters as of a
particular date or period, in which case such representations and warranties
shall be true and correct as of such date or period (and in any event,
subject to the foregoing Material Adverse Effect qualification), and (ii)
Seller shall have performed and complied in all material respects with all
covenants and obligations under this Agreement required to be performed and
complied with by Seller as of the Closing.
(b) Litigation. There shall be no action or proceeding of any nature
pending or threatened with respect to the Acquired Assets against Seller or
any of its Subsidiaries where such action is reasonably likely to have a
Material Adverse Effect.
(c) Opinion of Financial Advisor. Buyer shall have received an opinion of
a financial advisor or appraiser, in form and substance reasonably acceptable
to Buyer, that (i) Seller is not insolvent as of the Closing Date, and (ii)
the sale of the Acquired Assets will not cause Seller to be insolvent
immediately following the Closing. Notwithstanding anything to the contrary
in this Agreement, Buyer shall bear and incur all costs related to the
issuance of such opinion, and Buyer agrees that any opinion in substantially
the form of Exhibit D hereto shall presumptively be deemed to be acceptable
to Buyer.
(d) New Employment Arrangements. At least seven of the Key Employees
(provided that such seven Key Employees include both Key Employees set forth
on Schedule 8.2(d)) and at least 33 of the Designated Employees other than
the Key Employees shall have entered into "at-will" employment arrangements
with Parent pursuant to their execution of an Offer Letter and shall be
employees of Seller immediately prior to the Closing. In addition, effective
as of the Closing Date, Seller shall have terminated all employment
agreements and other arrangements with the Continuing Employees and waived
all of its rights with respect to any duty of confidentiality owed to Seller
by any such Continuing Employee with respect to the Acquired Assets or any
other intellectual property or technology of Seller.
31
(e) Non-Competition Agreements. Each of the Key Employees set forth on
Schedule 8.2(e) shall have executed Non-Competition Agreements concurrent
with the execution and delivery of the Existing Agreement and such
Non-Competition Agreements shall be in full force and effect as of the
Closing Date.
(f) Certificate of Seller. Buyer shall have received a certificate,
validly executed by a duly authorized officer of Seller for and on its behalf
(the "Certificate of Seller"), to the effect that, as of the Closing, each of
the conditions specified in Section 8.2(a) and Section 8.2(b) have been
satisfied.
(g) Certificate of Secretary of Seller. Buyer shall have received a
certificate, validly executed by the Secretary of Seller, certifying as to
(i) the terms and effectiveness of the certificate of incorporation and the
bylaws of Seller, (ii) the valid adoption of resolutions of the Board of
Directors of Seller approving this Agreement, and (iii) the valid adoption
and approval of this Agreement and approval of the Dissolution by the
stockholders of Seller.
(h) Prepaid Service Payment Update. Buyer shall have received from Seller
the Prepaid Service Payment Update pursuant to Section 7.14.
(i) Deliveries. Seller shall have delivered to Buyer executed copies of
the Collateral Agreements.
(j) State Tax Certificates. Buyer shall have received from Seller
certified copies of the completed and date stamped applications or filings
made in satisfaction of the covenant in Section 7.19(e) or, if received, true
and complete copies of the State Tax Certificates.
8.3 Additional Conditions to Obligations of Seller. The obligations of Seller
to consummate and effect the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Seller:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Parent and Buyer in this Agreement shall have been true and
correct on the date they were made and shall be true and correct on and as of
the Closing Date as though such representations and warranties were made on
and as of such date, except in either case to the extent that the aggregate
of all breaches thereof has not had and would not reasonably be expected to
have a material adverse effect on Parent or Buyer (without giving effect to
any limitation as to "materiality" or "material adverse effect" set forth
therein) and except to the extent such representations and warranties address
matters as of a particular date or period, in which case such representations
and warranties shall be true and correct as of such date or period (and in
any event, subject to the foregoing material adverse effect qualification),
and (ii) Parent and Buyer shall have performed and complied in all material
respects with all covenants and obligations under this Agreement required to
be performed and complied with by Parent or Buyer as of the Closing.
(b) Certificate of Parent and Buyer. Seller shall have received a
certificate, validly executed by an executive officer of both Parent and
Buyer for and on behalf of each of them (the "Certificate of Buyer"), to the
effect that, as of the Closing, each of the conditions specified in Section
8.3(a) have been satisfied.
(c) Certificate of Secretaries of Parent and Buyer. Seller shall have
received certificates, validly executed by the Secretaries of Parent and
Buyer, certifying as to (i) the terms and effectiveness of the certificates
of incorporation and the bylaws of Parent and Buyer, and (ii) the valid
adoption of resolutions of the Board of Directors of Parent and Buyer
approving this Agreement.
(d) Deliveries. Buyer shall have delivered to Seller executed copies of
the Collateral Agreements.
(e) Securities Approvals. Parent shall have received all state securities
laws or "blue sky" permits and authorizations necessary to issue the Stock
Consideration.
(f) Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued and still be
pending, and no proceeding for that purpose shall have been initiated or be
threatened by the SEC with respect to the Form S-4 Registration Statement,
and Parent shall have duly authorized and issued and made available for
delivery to Seller at the Closing a stock certificate that in form and
substance is
32
sufficient to enable Seller to immediately sell on the open market the shares
of Parent's common stock comprising the Stock Consideration; provided,
however, that in the event that, at any time prior to the effectiveness of
the Form S-4 Registration Statement under the Securities Act, the SEC shall
take the position that Form S-4 is not available or is otherwise
inappropriate with respect to the registration of the Stock Consideration,
this condition shall be deemed to have been satisfied if Parent duly and
validly issues the Stock Consideration to Seller in a transaction exempt from
the registration requirements of the Securities Act, and provides Seller with
evidence reasonably satisfactory to Seller that Parent is prepared to file
the Resale Registration Statement immediately following the Closing.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of Seller contained in this Agreement, or in the
Certificate of Seller, shall terminate on the earliest of (i) the first
anniversary of the Closing Date, (ii) the date on which Seller files its
certificate of dissolution with the Delaware Secretary of State and (iii) the
date 15 days following the delivery of a Dissolution Notice; provided, however,
that a termination pursuant to clause (iii) shall be rescinded if a certificate
of dissolution is not filed with the Delaware Secretary of State within 30 days
following the delivery of such Dissolution Notice. A "Dissolution Notice" shall
mean a notice delivered by Seller to Buyer indicating Seller's good faith
intention to file a certificate of dissolution with the Delaware Secretary of
State within 30 days. The representations and warranties of Buyer contained in
this Agreement, or in any certificate or other instrument delivered pursuant to
this Agreement, shall t erminate at the Closing.
9.2 Indemnification. Seller agrees to indemnify and hold Parent and Buyer and
their respective officers, directors and affiliates (collectively, the
"Indemnified Parties"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense (hereinafter individually a "Loss" and
collectively "Losses") incurred or sustained by the Indemnified Parties, or any
of them, arising out of (i) any breach or inaccuracy of a representation or
warranty of Seller contained in this Agreement as of the Existing Agreement Date
(or such other particular date or period that is addressed by such
representation or warranty) and as of the Closing Date or in the Certificate of
Seller, (ii) any failure by Seller to perform or comply with any covenant given
or made by it contained in this Agreement, or (iii) any failure on the part of
Seller to perform and discharge in full the Excluded Liabilities.
9.3 Indemnification Procedure. An Indemnified Party seeking indemnification
pursuant to Section 9.2 shall deliver an Officer's Certificate to Seller. Seller
may object to such claim by written notice to such Indemnified Party specifying
the basis for Seller's objection, within thirty (30) days following receipt by
Seller of notice from such Indemnified Party regarding such claim. If no
objection is made, Seller shall promptly pay the claim. For the purposes hereof,
"Officer's Certificate" shall mean a certificate signed in good faith by any
executive officer of Buyer: (1) stating that Buyer has paid, sustained,
incurred, or properly accrued, or reasonably anticipates that it will have to
pay, sustain, incur, or accrue Losses, and (2) specifying in reasonable detail
the individual items of Losses included in the amount so stated, the date each
such item was paid, sustained, incurred, or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentation, breach of
warrant y or covenant or Excluded Liability to which such item is related.
9.4 Resolution of Conflicts; Arbitration.
(a) In case Seller shall object in writing to any claim or claims made in
any Officer's Certificate to recover Losses within thirty (30) days after
delivery of such Officer's Certificate, Seller and Buyer shall attempt in
good faith to agree upon the rights of the respective parties with respect to
each of such claims. If Seller and Buyer should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
Seller shall promptly pay to the Indemnified Party the amount of the claim
agreed upon, if any.
33
(b) If no such agreement can be reached after good faith negotiation and
prior to sixty (60) days after delivery of an Officer's Certificate, Buyer or
Seller may demand arbitration of the matter unless the amount of the Loss is
at issue in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree
to arbitration, and in either such event the matter shall be settled by
arbitration conducted by one arbitrator mutually agreeable to Buyer and
Seller. In the event that, within thirty (30) days after submission of any
dispute to arbitration, Buyer and Seller cannot mutually agree on one
arbitrator, then, within fifteen (15) days after the end of such thirty (30)
day period, Buyer and Seller shall each select one arbitrator. The two
arbitrators so selected shall select a third arbitrator. If Seller does not
select an arbitrator during this fifteen (15) day period, then the parties
agree that the arbitration will be conducted by one arbitrator selected by
Buyer.
(c) Any such arbitration shall be held in Santa Xxxxx County, California,
under the rules then in effect of the American Arbitration Association. The
arbitrator(s) shall determine how all expenses relating to the arbitration
shall be paid, including without limitation, the respective expenses of each
party, the fees of each arbitrator and the administrative fee of the American
Arbitration Association. The arbitrator or arbitrators, as the case may be,
shall set a limited time period and establish procedures designed to reduce
the cost and time for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrator or majority of the three
arbitrators, as the case may be, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrator or a
majority of the three arbitrators, as the case may be, shall rule upon
motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a
competent court of law or equity, should the arbitrators or a majority of the
three arbitrators, as the case may be, determine that discovery was sought
without substantial justification or that discovery was refused or objected
to without substantial justification. The decision of the arbitrator or a
majority of the three arbitrators, as the case may be, as to the validity and
amount of any claim in such Officer's Certificate shall be final, binding,
and conclusive upon the parties to this Agreement. Such decision shall be
written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s). Within thirty (30) days of a decision of the arbitrator(s)
requiring payment by one party to another, such party shall make the payment
to such other party.
(d) Judgment upon any award rendered by the arbitrator(s) may be entered
in any court having jurisdiction.
9.5 Third-Party Claims. In the event Buyer becomes aware of a third-party
claim which Buyer reasonably believes is reasonably likely to result in a demand
for indemnification pursuant to this ARTICLE 9, Buyer shall notify Seller in
writing of such claim, and Seller shall be entitled, at its expense, to
participate in, but not to determine or conduct, the defense of such claim.
Buyer shall have the right in its sole discretion to conduct the defense of and
settle any such claim; provided, however, that except with the written consent
of Seller, no settlement of any such claim with third-party claimants shall be
determinative of the amount of Losses relating to such matter. In the event that
Seller has consented to any such settlement, Seller shall have no power or
authority to object under any provision of this ARTICLE 9 to the amount of any
claim by Buyer against Seller with respect to such settlement.
9.6 Maximum Payments; Remedy
(a) Except with respect to (A) any Excluded Liabilities, and (B) Taxes
referred to in Section 3.4 and 5.14 that are owed by Seller and which Buyer
may become obligated to pay, the aggregate maximum amount the Indemnified
Parties may recover from Seller pursuant to the indemnity set forth in
Section 9.2 or otherwise for Losses, or otherwise in respect of any breaches
of any of the representations, warranties or covenants of Seller hereunder or
in the Certificate of Seller, shall be limited to $3,300,000.
(b) The maximum amount an Indemnified Party may recover from Seller in
respect of Losses arising out of any Excluded Liabilities shall not be
limited.
34
(c) Without limiting the effect of any of the other limitations set forth
herein, Seller shall not be required to make any indemnification payment
hereunder until such time as the total amount of all Losses that have been
suffered or incurred by any one or more of the Indemnified Parties and to
which any Indemnified Party is entitled to indemnification hereunder, or to
which any one or more of the Indemnified Parties has or have otherwise become
subject with respect to which any Indemnified Party is entitled to
indemnification hereunder, exceeds $100,000 in the aggregate, at which point
Seller shall indemnify the full amount of such claims and all claims
thereafter, subject to any other applicable limitations under this ARTICLE 9.
(d) The right of Parent and Buyer hereto and their related Indemnified
Parties to assert indemnification claims and receive indemnification payments
pursuant to this ARTICLE 9 shall be the sole and exclusive right and remedy
exercisable by Parent and Buyer with respect to any breach by Seller of any
representation, warranty or covenant hereunder or other matter with respect
to which such indemnification is provided; provided, however, that the
foregoing clause of this sentence shall not be deemed a waiver by any
Indemnified Party of any right to specific performance or injunctive relief,
or any right or remedy they may otherwise have against any Person that has
committed fraud with respect to this Agreement.
(e) Nothing herein shall limit the liability of Seller, Buyer or Parent
for any breach or inaccuracy of any representation, warranty or covenant
contained in this Agreement if the Closing does not occur.
9.7 Liability of Parent and Buyer. The fact that neither Parent nor Buyer is
obligated to indemnify Seller hereunder shall not be construed so as to limit
the rights or remedies that Seller may otherwise have against Parent or Buyer,
whether under this Agreement or applicable law, in the event of (a) any breach
or inaccuracy of a representation or warranty of Parent or Buyer contained in
this Agreement or in the Certificate of Buyer, (ii) any failure by Parent or
Buyer to perform or comply with any covenant given or made by either of them
contained in this Agreement, or (iii) any failure on the part of Buyer to
perform and discharge in full the Assumed Liabilities.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. Except as provided in Section 10.3, this Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing whether before or after the requisite approval of the
stockholders of Seller:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent, Buyer and Seller;
(b) by any party if the Closing Date shall not have occurred for any
reason (i) in the event that the SEC has determined to review the Form S-4
Registration Statement, by December 31, 2001, or (ii) in the event the SEC
has determined not to review the Form S-4 Registration Statement, by November
30, 2001 (in either case, the "End Date"); provided, however, that the right
to terminate this Agreement under this Section 10.1(b) shall not be available
to any party whose (or whose affiliate's) action or failure to act has been a
principal cause of or resulted in the failure of the Closing Date to occur on
or before such date and such action or failure to act constitutes a material
breach of this Agreement;
(c) by any party if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, which order, decree, ruling or other action is final and
nonappealable;
(d) by any party if (i) the Seller Stockholders' Meeting (including any
adjournments and postponements thereof) shall not have been held and
completed prior to the End Date or shall have been held and completed and the
stockholders of Seller shall have taken a final vote on a proposal to adopt
and
35
approve this Agreement and the transactions contemplated by this Agreement;
and (ii) this Agreement and the transactions contemplated by this Agreement
shall not have been adopted and approved at the Seller Stockholders' Meeting
(and shall not have been adopted and approved at any adjournment or
postponement thereof) by the required approval of the stockholders of Seller;
provided, however, that the right to terminate this Agreement under this
Section 10.1(d) shall not be available to Seller where the failure to hold
the Seller Stockholders' Meeting and to obtain Seller stockholder approval
shall have been caused by (A) the action or failure to act of Seller and such
action or failure to act constitutes a breach by Seller of this Agreement or
(B) a material breach of any Support Agreement by any party thereto other
than Buyer; provided further, however, that the right to terminate this
Agreement under this Section 10.1(d) shall not be available to Parent or
Buyer where the failure to hold the Seller Stockholders' Meeting and to
obtain Seller stockholder approval shall have been caused by the action or
failure to act of Parent or Buyer and such action or failure to act
constitutes a breach by Parent or Buyer of this Agreement;
(e) by Buyer (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) if a Seller Triggering Event (as defined below) shall
have occurred;
(f) by Seller (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) if Parent shall have breached (and failed to cure
within 10 days after notice of such breach is delivered by Seller to Parent)
any of its obligations under the Funding Agreement;
(g) by Seller (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) in the event that (i) at any time prior to the
effectiveness of the Form S-4 Registration Statement under the Securities
Act, the SEC shall take the position that Form S-4 is not available or is
otherwise inappropriate with respect to the registration of the Stock
Consideration, and (ii) Parent shall not have obtained the Waiver within ten
(10) business days following the taking of such position by the SEC;
(h) by Buyer, upon a breach of any representation, warranty, covenant or
agreement on the part of Seller set forth in this Agreement, or if any
representation or warranty of Seller shall have become untrue, in either case
such that the conditions set forth in Section 8.2(a) would not be satisfied
by the End Date, provided, that if such inaccuracy in Seller's
representations and warranties or breach by Seller is curable by Seller
through the exercise of its commercially reasonable efforts, then Buyer may
not terminate this Agreement under this Section 10.1(h) prior to the End
Date, provided Seller continues to exercise commercially reasonable efforts
to cure such breach (it being understood that Buyer may not terminate this
Agreement pursuant to this paragraph (h) if it shall have materially breached
this Agreement or if such breach by Seller is cured prior to the End Date);
and
(i) by Seller, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent or Buyer set forth in this Agreement, or if
any representation or warranty of Parent or Buyer shall have become untrue,
in either case such that the conditions set forth in Section 8.3(a) would not
be satisfied by the End Date, provided, that if such inaccuracy in Parent's
or Buyer's representations and warranties or breach by Parent or Buyer is
curable by Parent or Buyer through the exercise of its commercially
reasonable efforts, then Seller may not terminate this Agreement under this
Section 10.1(i) prior to the End Date, provided Parent or Buyer (as the case
may be) continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Seller may not terminate this Agreement
pursuant to this paragraph (i) if it shall have materially breached this
Agreement or if such breach by Parent or Buyer is cured prior to the End
Date). For the purposes of this Agreement, a "Seller Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of Seller or any
committee thereof shall for any reason have withdrawn or shall have amended
or modified in a manner adverse to Buyer its recommendation in favor of the
adoption and approval of this Agreement or the approval of the Dissolution;
36
(ii) Seller shall have failed to include in the Proxy Statement Prospectus
the recommendation of the Board of Directors of Seller in favor of the
adoption and approval of the Agreement and the approval of the Dissolution;
(iii) the Board of Directors of Seller fails to reaffirm its
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Dissolution within ten (10) days after Buyer requests in
writing that such recommendation be reaffirmed following the public
announcement of an Acquisition Proposal;
(iv) the Board of Directors of Seller or any committee thereof shall have
approved or recommended any Acquisition Proposal; or
(v) a tender or exchange offer relating to securities of Seller shall have
been commenced by a Person unaffiliated with Buyer and Seller shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within ten (10) business days after such tender or exchange
offer is first published sent or given, a statement disclosing that Seller
recommends rejection of such tender or ex change offer.
10.2 Notice of Termination. Any termination of this Agreement under Section
10.1 will be effective immediately upon the delivery of written notice thereof
by the terminating party to the other parties hereto (or, in the case of
termination pursuant to Section 10.1(h) or Section 10.1(i), on the date
specified therein).
10.3 Effect of Termination. In the event of termination of this Agreement as
provided in Section 10.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto, or its
affiliates, officers, directors or stockholders, provided that each party shall
remain liable for any breaches of this Agreement prior to its termination; and
provided further that, the provisions of Section 7.4, Section 7.10, ARTICLE 11
and this Section 10.3 of this Agreement shall remain in full force and effect
and survive any termination of this Agreement. Notwithstanding the foregoing, no
termination of this Agreement shall relieve any party from liability for any
breach hereof prior to such termination.
10.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
10.5 Extension; Waiver. At any time prior to the Closing, Buyer, on the one
hand, and Seller, on the other hand, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 11
GENERAL
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice);
provided, however, that notices sent by mail will not be deemed given
until received: (a) if to Buyer, to:
Palm, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
37
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to Seller, to:
Be Incorporated
000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
11.2 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Seller Disclosure Schedule, the Parent Disclosure Schedule, the Non-Disclosure
Agreement, the Collateral Agreements and the documents and instruments and other
agreements among the parties hereto referenced herein: (i) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings both written and oral, among
the parties with respect to the subject matter hereof; (ii) are not intended to
confer upon any other person any rights or remedies hereunder; and (iii) shall
not be assigned by operation of law or otherwise, except that Buyer may assign
its rights and delegate its obligations hereunder to Parent. The Existing
Agreement is hereby amended and restated in its entirety by this Agreement, and
each of Seller, Buyer and Parent agree that, without limiting any liability that
any party may have by reason of any breach of the Existing Agreement, this Ag
reement shall from and after the date first set forth above supersede in its
entirety the Existing Agreement.
11.3 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
11.4 Other Remedies. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, REGARDLESS OF THE LAWS
38
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
11.6 Jurisdiction and Venue. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction and venue of any court within Santa Xxxxx County,
State of California, in connection with any matter based upon or arising out of
this Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction, venue and such process.
11.7 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, 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.
11.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
11.9 Fees and Expenses. Except as otherwise provided herein, whether or not
the transactions contemplated herein are consummated, all expenses, including
without limitation all legal, accounting, financial advisory, consulting and
other fees, incurred in connection with the negotiation or effectuation of this
Agreement or consummation of such transactions, shall be the obligation of the
respective party incurring such expenses.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
[Remainder of Page Intentionally Left Blank]
39
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as
of the date first above written.
PALM, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------
Name: Xxxx Xxxxxx
-------------------------------
Title: Senior Vice President and
-------------------------------
Chief Financial Officer
-------------------------------
BE INCORPORATED
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
-------------------------------
Title: Chief Operating Officer
-------------------------------
ECA SUBSIDIARY ACQUISITION
CORPORATION
By: /s/ Xxxxxxx Xx
---------------------------------
Name: Xxxxxxx Xx
-------------------------------
Title: President
-------------------------------
40
