EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
OPNET TECHNOLOGIES, INC.,
OPNET DEVELOPMENT CORP.,
MAKE SYSTEMS, INC.
and
METROMEDIA COMPANY
(for the purposes of Sections specified herein only)
dated as of
March 20, 2001
TABLE OF CONTENTS
1. Sale and Delivery of the Assets............................................1
1.1 Delivery of the Assets to the Buyer...........................1
1.2 Assumption of Liabilities; Payments...........................3
1.3 Purchase Price................................................4
1.4 Allocation of Purchase Price and Assumed Liabilities..........5
1.5 The Closing...................................................5
1.6 Further Assurances............................................5
1.7 Post Closing Adjustments......................................5
2. Representations of the Seller..............................................7
2.1 Organization..................................................7
2.2 Capitalization of the Seller..................................8
2.3 Authorization; No Consents....................................8
2.4 Ownership of the Assets.......................................9
2.5 Financial Statements..........................................9
2.6 Absence of Undisclosed Liabilities...........................10
2.7 Litigation...................................................10
2.8 Insurance....................................................10
2.9 Fixed Assets.................................................11
2.10 Leases.......................................................11
2.11 Change in Financial Condition and Assets.....................12
2.12 Tax Matters..................................................12
2.13 Accounts Receivable..........................................13
2.14 Books and Records............................................13
2.15 Contracts and Commitments....................................13
2.16 Compliance with Agreements and Laws..........................14
2.17 Employee Relations...........................................14
2.18 Absence of Certain Changes or Events.........................15
2.19 Customers....................................................16
2.20 Prepayments and Deposits.....................................16
2.21 Intellectual Property........................................16
2.22 Employee Benefit Plans.......................................18
2.23 Acquired Assets Complete.....................................20
2.24 Indebtedness to and from Officers, Directors
and Shareholders.............................................20
2.25 Investment...................................................20
2.26 Experience...................................................21
2.27 Brokers' Fees................................................21
3. Representations of the Parent and Buyer...................................21
3.1 Organization and Authority...................................21
3.2 Capitalization of the Parent.................................21
3.3 Newly Issued Shares..........................................21
3.4 Authorization; No Consents...................................22
3.5 Regulatory Approvals.........................................22
3.6 Reports and Financial Statements.............................22
3.7 Absence of Certain Changes...................................23
3.8 Litigation...................................................23
3.9 Intellectual Property........................................23
3.10 Interim Operations of Buyer..................................24
3.11 Brokers' Fees................................................24
4. Covenants.................................................................24
4.1 Public Announcements.........................................24
4.2 Closing Efforts..............................................24
4.3 Governmental and Third-Party Notices and Consents............24
4.4 Operation of Business of the Division........................24
4.5 Access to Information; Confidentiality.......................26
4.6 Exclusivity; Letter Agreement................................26
4.7 Employee Matters.............................................26
4.8 Treatment of 401(k)..........................................28
4.9 Nonassignability.............................................28
5. Conditions................................................................29
5.1 Conditions to Each Party's Obligations.......................29
5.2 Conditions to Obligations of Parent and Buyer................29
5.3 Conditions to Obligations of the Seller......................31
6. Closing Deliveries........................................................32
6.1 Seller Closing Deliveries....................................32
6.2 Parent Closing Deliveries....................................32
7. Indemnification...........................................................33
7.1 Survival of Representations..................................33
7.2 Indemnification by Metromedia and the Seller.................33
7.3 Indemnification by Parent and Buyer..........................34
7.4 Conditions of Indemnification................................35
7.5 Escrow Agreement; Limitations................................36
8. Post-Closing Agreements...................................................37
8.1 Proprietary Information......................................37
8.2 Non-Solicitation and Non-Competition Agreement...............37
8.3 Provision of Data; Accounts Receivable.......................38
8.4 Product Claims and Returns...................................39
8.5 Use of Name..................................................39
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9. Restrictions on Transfer..................................................39
9.1 Lock-Up......................................................39
9.2 Transfer of Shares...........................................40
10. Termination...............................................................41
10.1 Termination..................................................41
11. Provisions Related to Metromedia..........................................41
11.1 Representations of Metromedia................................41
11.2 Covenants....................................................43
12. Miscellaneous.............................................................44
12.1 Transfer and Sales Tax.......................................44
12.2 Notices......................................................44
12.3 Successors and Assigns.......................................45
12.4 Entire Agreement; Amendments; Attachments....................45
12.5 Expenses.....................................................45
12.6 Governing Law................................................45
12.7 Section Headings.............................................46
12.8 Severability.................................................46
12.9 Counterparts.................................................46
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Schedules to be provided by the Seller
1.1(a)(v) - Fixed Assets
1.1(b) - Excluded Assets
1.2 - Assumed Liabilities
2.3(b)(iv) - Authorization; No Consents
2.3(c) - Debt
2.4 - Encumbrances
2.5 - Financial Statements
2.6 - Undisclosed Liabilities
2.7 - Litigation
2.8 - Insurance
2.9 - Fixed Assets
2.11 - Changes in Financial Condition
2.13 - Accounts Receivable
2.15(a) - Division Contracts
2.15(b) - Contract Exceptions
2.16 - Permits
2.17(b) - Employee Relations
2.17(c)(i) - Employee Benefits
2.17(c)(ii) - Contracts with Division Employees
2.18 - Certain Changes or Events
2.19 - Customer List
2.20 - Prepayments and Deposits
2.21(a) - Intellectual Property
2.21(b) - Intellectual Property Infringement Claims
2.21(c) - Licenses to Third-Parties
2.21(d) - Licenses to Company
2.21(e) - Source Code
2.22 - Employee Plans
2.23 - Acquired Assets Complete
2.24 - Affiliated Indebtedness
4.7(b) - Division Employees Past Offers
4.7(c) - Division Employees Future Offers
5.2(a) - Conditions to Obligations of Parent and Buyer
Exhibits
A - Instrument of Assignment and Assumption
B - Escrow Agreement
C-1 Opinion of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
C-2 Opinion of Xxxxx Xxxxxxx
D - Amended and Restated Registration Rights Agreement
E - Opinion of Xxxx and Xxxx LLP
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F - Xxxx of Sale
G - Net Worth Certificate
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the 20th day of
March, 2001 by and among OPNET Technologies, Inc., a Delaware corporation with
its principal office at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000-0000 (the
"Parent"), OPNET Development Corp., a Delaware corporation and a wholly owned
subsidiary of Parent (the "Buyer"), Make Systems, Inc., a California corporation
with its principal office at 0 Xxxxxx Xxxx Xxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx, 00000 (the "Seller"), and, for purposes of Sections 4.6, 4.9(c),
5.2, 7, 8.1, 8.2, 9, 10, 11 and 12 only, Metromedia Company, a Delaware general
partnership with its principal office at Xxx Xxxxxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx,
Xxx Xxxxxx 00000 ("Metromedia"), relating to the sale of the business as a going
concern heretofore conducted by a division of Seller (the "Division") under the
trade names Make Systems and NetMaker, including the Assets (as defined below)
and the goodwill appurtenant to such business and assets. The Parent, Buyer,
Seller and Metromedia are sometimes hereinafter referred to as the "Parties," or
each individually as a "Party."
Preliminary Statement
WHEREAS, each of the Boards of Directors of the Parent, the Buyer and
Seller has approved, and deems it advisable and in the best interests of its
respective shareholders to consummate the acquisition of the Division by the
Buyer, which acquisition is to be effected by the sale by the Seller of all the
Assets (as defined below) to the Buyer, subject only to those liabilities
expressly assumed by the Buyer pursuant hereto, and otherwise upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets.
1.1 Delivery of the Assets to the Buyer.
(a) Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Seller shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase from the Seller, all of the Seller's
right, title and interest in and to the Division as a going concern, including
all the Assets (as defined below), free and clear of all claims, liabilities,
liens, pledges, charges, encumbrances, mortgages, security interests,
restrictions, prior assignments, and claims and equities of any kind or nature
whatsoever (collectively, "Encumbrances"), except for the Encumbrances
specifically to be assumed by Buyer pursuant to the Instrument of Assumption (as
defined below) ("Permitted Encumbrances"). The Assets shall include, without
limitation, all of the Seller's right, title and interest in and to:
(i) all Division Intellectual Property, as such term is
defined in Section 2.21;
(ii) all rights under the Division Contracts (as defined
below) including the Conveyed Lease (as defined below);
(iii) all product records, customer correspondence,
production records, contract files, technical, accounting, manufacturing and
procedural manuals, customer lists, employment records, studies, reports or
summaries relating to any environmental conditions or consequences of any
operation, present or former, as well as all studies, reports or summaries
relating to any environmental aspect or the general condition of the Assets, and
any confidential information which has been reduced to writing or electronic
form to the extent that any of the foregoing relate to or arise out of the
business of the Division;
(iv) all rights under express or implied warranties from
the suppliers relating to the Assets or relating to or arising out of the
business of the Division;
(v) all of the machinery, equipment, tools, fixtures,
furniture, leasehold improvements and construction in progress utilized by the
Division on the Closing Date (as defined below) specified on Schedule 1.1(a)(v)
(collectively, the "Fixed Assets");
(vi) all prepaid expenses, deposits and other similar
assets related to the Division existing on the Closing Date;
(vii) all assets and property physically located at the
Conveyed Leased Premises (as defined below) on the Closing Date, of every kind
and nature and description, whether tangible or intangible, real, personal or
mixed;
(viii) all rights of the Seller under any non-disclosure
agreements, non-solicitation agreements and non-competition agreements entered
into with the Seller's employees and other parties to the extent such rights
relate to the Division, the Assets or the business conducted by the Division;
(ix) all accounts, accounts receivable, notes and notes
receivable existing on the Closing Date related to the Division or the Assets
(collectively, the "Accounts Receivable"), exclusive of the Excluded Receivables
(as defined below); and
(x) except as specifically provided in Section 1.1(b)
hereof, all other assets, properties, claims, rights and interests of the Seller
related to the Division and the Assets which exist on the Closing Date, of every
kind and nature and description, whether tangible or intangible, real, personal
or mixed.
(b) Notwithstanding the provisions of paragraph (a) above, the
Assets to be transferred to the Buyer under this Agreement shall not include
(collectively, the "Excluded Assets"): (x) all accounts, accounts receivable,
notes and notes receivable which have been billed through the Closing Date
related to the Division or the Assets (collectively, the "Excluded
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Receivables"), (y) any state, federal or local Tax (as defined below) related
assets of the Seller, whether current or deferred, or (z) those assets listed on
Schedule 1.1(b) attached hereto.
(c) The Division Intellectual Property, Division Contracts,
Fixed Assets, Accounts Receivable and all other properties, assets and business
described in Section 1.1(a) above shall be referred to collectively as the
"Assets."
1.2 Assumption of Liabilities; Payments.
(a) At the Closing, the Buyer and the Seller shall execute and
deliver an Instrument of Assignment and Assumption (the "Instrument of
Assumption") substantially in the form attached hereto as Exhibit A, pursuant to
which Buyer shall assume and agree to perform, pay and discharge the following
liabilities, obligations and commitments of the Seller (the "Assumed
Liabilities"):
(i) the deferred revenue of the Division as of the
Closing Date;
(ii) the Seller's accrued obligation reflected on the
balance sheet of the Division as of February 28, 2001 (the "Balance Sheet Date")
included in Schedule 2.5 (the "Division Balance Sheet") to pay bonuses of
$150,000 in the aggregate to the Division Offered Employees (as defined below)
in recognition of their past performance;
(iii) All obligations of the Seller continuing after the
Closing under the Conveyed Lease and Division Contracts set forth on Schedule
2.15(a) attached hereto which become due and payable after the Closing Date; and
(iv) Only those other liabilities and obligations of the
Seller specifically identified in Schedule 1.2 attached hereto.
(b) At the Closing, the Seller shall perform, pay and
discharge the following liabilities, obligations and commitments:
(i) All accounts payable and accrued liabilities of the
Division including those reflected on the Division Balance Sheet as of the
Balance Sheet Date that are not included in the Assumed Liabilities (excluding
amounts owed under the Excluded Lease (as defined below));
(ii) All accounts payable and accrued liabilities of the
Seller incurred from the Balance Sheet Date to the Closing Date incurred by or
in respect of the Division that are not included in the Assumed Liabilities
(excluding amounts owed under the Excluded Lease);
(iii) All accounts payable and accrued liabilities of
the Seller which are due as of the Closing; and
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(iv) All other accounts payable and accrued liabilities
of the Seller which are not due as of the Closing to the extent such accounts
payable and accrued liabilities exceed $50,000 in the aggregate (excluding
amounts owed under the Excluded Lease, any amounts owed to Metromedia and any
amounts owed in respect of accrued salary and vacation to employees of the
Seller who will remain employed by the Seller after Closing).
(c) For the avoidance of doubt, without limitation, Assumed
Liabilities shall not include (x) any Employee Plan (as defined below), relating
to any period whether before or after the Closing Date, including, without
limitation, any Taxes, accrued vacation or sick pay (whether or not vested),
sick and personal leaves, employee policies, employee benefit claims or
liability to the Pension Guaranty Corporation, (y) the Lease Agreement (the
"Excluded Lease") by and between Treehouse Properties, LLC and Make Systems,
Inc., dated August 31, 1999, or (z) any Tax liability.
1.3 Purchase Price.
(a) The purchase price for the Assets shall consist of: (i)
Five Million Dollars ($5,000,000) (the "Cash Purchase Price"), and (ii) the
Parent Shares (as defined below), subject to the terms of paragraphs (b), (c)
and (d) of this Section 1.3 and the adjustments provided in Section 1.7 hereof
(the Cash Purchase Price and the Parent Shares are hereinafter collectively
referred to as the "Purchase Price").
(b) At the Closing, the Buyer shall deliver to the Seller (i)
Three Million-Nine Hundred and Ninety Thousand Dollars ($3,990,000) by wire
transfer of immediately available funds to an account designated by the Seller
at least two business days prior to the Closing, and (ii) certificates
representing the Parent Shares.
(c) At the Closing, the Buyer shall deposit with Xxxxx Bank
(the "Escrow Agent") the sum of Eight Hundred Thousand Dollars ($800,000.00) in
cash (the "Escrow Amount"), by wire transfer of immediately available funds to
an account designated by the Escrow Agent at least two business days prior to
the Closing into an escrow account in accordance with the terms of the Escrow
Agreement, in the form attached hereto as Exhibit B. Without limitation of
liability, the Escrow Amount will secure the indemnification obligations of the
Seller and Metromedia set forth in this Agreement. The Escrow Amount shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Amount shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Escrow Agreement. The adoption
of this Agreement and the approval of the transaction by the Seller's
shareholders shall constitute approval of the Escrow Agreement and of all of the
arrangements relating thereto, including without limitation the placement of the
Escrow Amount in escrow.
(d) Within five business days of the Balance Sheet Resolution
Date (as defined below), the Buyer shall deliver to the Seller by wire transfer
of immediately available funds to an account designated by the Seller on the
Balance Sheet Resolution Date the amount, if
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any, by which (i) Two Hundred Ten Thousand Dollars ($210,000.00), (the "Holdback
Cash"), exceeds (ii) the amount of any Seller Deficiency (as defined below),
together with interest on such excess amount at a rate of 5% per annum from the
Closing Date until payment.
(e) "Parent Shares" means (x) 650,000 shares of common stock,
par value $.001 per share, of Parent ("Parent Common Stock"), if the Average
Price (as defined below) is not more than $20 per share and not less than $16
per share, (y) if the Average Price is more than $20 per share, a number of
shares of Parent Common Stock equal to $13,000,000 divided by the Average Price,
or (z) if the Average Price is less than $16 per share, a number of shares of
Parent Common Stock equal to the lesser of (i) $10,400,000 divided by the
Average Price, and (ii) 675,000. "Average Price" means the average of the last
reported sales prices per share of Parent Common Stock at the 4:00 p.m., eastern
time, end of regular trading hours, on each trading day in the Trading Period
(as defined below). "Trading Period" means the 20 consecutive trading day period
ending on March 23, 2001.
1.4 Allocation of Purchase Price and Assumed Liabilities. The
Parties shall negotiate in good faith the allocation of the aggregate amount of
the Purchase Price and the Assumed Liabilities among the Assets. Such allocation
shall be subject to adjustment to the extent that the Purchase Price is adjusted
pursuant to Section 1.7 hereof in the manner specified in such Section. Any
disputes concerning such changes in allocation shall be resolved in accordance
with the procedures set forth in Section 1.7(c) and the expenses incurred in
connection therewith shall be borne in the manner specified in Section 1.7(d).
The Parties acknowledge that such allocation has been made in compliance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
based upon an asset valuation supplied by the Buyer and reasonably acceptable to
the Seller.
1.5 The Closing. The Closing shall take place at the offices of Xxxx
and Xxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 at 10:00 a.m., New York City
time, on March 30, 2001 or at such other place, time or date as may be mutually
agreed upon in writing by the Parties hereto. The transfer of the Assets by the
Seller to the Buyer shall be deemed to occur at 11:59 p.m., New York City time,
on the date of the Closing (the "Closing Date").
1.6 Further Assurances. For a period of up to two years following
the Closing, at the Buyer's request and without further consideration, the
Seller promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, and to put
the Buyer in actual possession and operating control thereof; provided, that the
Buyer shall promptly reimburse the Seller for any reasonable out-of-pocket
expenses incurred by the Seller as a result of taking any of the actions
requested by the Buyer pursuant to this Section 1.6.
1.7 Post Closing Adjustments. The Purchase Price set forth in
Section 1.3 hereof shall be subject to adjustment after the Closing Date as
follows:
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(a) As promptly as practicable following the Closing Date, the
Seller shall direct Deloitte & Touche, independent public accountants (the
"Accountants") to conduct an audit of the financial statements of the Division
as of December 31, 1999 and December 31, 2000. The Seller shall direct the
Accountants to deliver not later than 45 days after the Closing Date, an
independent auditor's report to Parent along with the audited balance sheets of
the Division as of December 31, 1999 and 2000 (the "Division Audited Balance
Sheets") and the related statements of income and changes in equity and cash
flow of the Division for the fiscal years then ended (collectively, including
the Division Audited Balance Sheets, the "Division Audited Financial
Statements"). The Division Audited Financial Statements shall be prepared in
accordance with generally accepted accounting principles applied consistently
with past practice and shall be certified by the Accountants. After delivery of
the Division Audited Financial Statements but not later than 50 days after the
Closing Date, the Seller shall prepare and deliver to Parent an unaudited
balance sheet of the Division as of the Closing Date (the "Closing Balance
Sheet") and the related statements of income and changes in equity of the
Division for the period from January 1, 2001 through the Closing Date and the
NTA Analysis (as defined below). The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles applied consistently
with the Division Audited Financial Statements, without any adjustments
applicable solely as a result of the acquisition of the Assets by the Buyer on
the Closing Date and will exclude footnotes.
(b) Based upon the Closing Balance Sheet delivered pursuant to
paragraph (a) above, the Seller shall prepare an analysis (the "NTA Analysis")
of the net tangible Assets transferred by the Seller to the Buyer, setting forth
the following amounts, together with the calculations showing the basis for the
determination of such amounts. The NTA Analysis shall set forth as of the
Closing Date:
(i) the amount of the Assets (calculated in accordance
with generally accepted accounting principles as used in the Division Audited
Financial Statements without consideration of any changes arising from
circumstances which occur after the Closing or applicable solely as a result of
the acquisition of the Assets by the Buyer on the Closing Date), excluding any
Excluded Assets and intangible or Tax related assets of the Division, provided
that, for such purposes, the amount of Accounts Receivable included in the
Assets shall be deemed to be the lesser of (x) $420,000 and (y) the actual
amount;
(ii) the amount of the Assumed Liabilities (calculated
in accordance with generally accepted accounting principles as used in the
Division Audited Financial Statements without consideration of any changes
arising from circumstances which occur after the Closing or applicable solely as
a result of the acquisition of the Assets by the Buyer on the Closing Date); and
(iii) the remainder (the "Net Transferred Assets") of
the amount in subparagraph (i), less the amount in subparagraph (ii).
(c) In the event that the Buyer disputes the Closing Balance
Sheet or the NTA Analysis, the Buyer shall notify the Seller in writing (the
"Dispute Notice") of the
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amount, nature and basis of such dispute, within five business days after
delivery of the Closing Balance Sheet and the NTA Analysis. In the event of such
a dispute, the Parties hereto shall first use their Reasonable Commercial
Efforts (as defined below) to resolve such dispute among themselves. If the
Parties are unable to resolve the dispute within ten business days after
delivery of the Closing Balance Sheet and the NTA Analysis, the dispute shall be
submitted to the Accountants for resolution. The Accountants shall be directed
to use their best efforts to resolve the dispute within 10 days after
submission. If the dispute is not resolved by the Accountants during such
period, within five days thereafter the Accountants shall be directed to propose
in writing to each of the Seller and the Buyer an independent public accounting
firm of national reputation to serve as arbitrator. The decision as to such
arbitrator shall be final unless either the Seller or the Buyer shall object in
writing within three days to such selection, and such objection shall only be
made in good faith for substantial reason. If such an objection is made, the
Accountants shall be directed to propose an alternative firm in accordance with
the foregoing proceedings. The firm selected through the foregoing procedures is
referred to as the "Arbitrator." The determination of the Arbitrator as to the
resolution of any dispute shall be made as promptly as possible and shall be
binding and conclusive upon all Parties hereto. All determinations pursuant to
this paragraph (c) shall be in writing and shall be delivered to the Parties
hereto.
(d) The fees and expenses of the Accountants in connection
with the preparation of Division Audited Financial Statements shall be paid by
the Parent in an amount not to exceed $80,000. Any fees and expenses of the
Accountants which exceed $80,000 will be paid by the Seller. The fees and
expenses of the Accountants and the other persons referred to herein in
connection with the resolution of disputes pursuant to paragraph (c) above or
Section 1.4 shall be divided equally between the Parent and the Seller.
(e) If the amount of Net Transferred Assets is less than
$750,000, the Cash Purchase Price and the amount payable pursuant to Section
1.3(d) shall be reduced by the amount of the deficiency (the "Seller
Deficiency"). The Seller shall promptly pay to the Buyer the excess amount to
the extent that the Seller Deficiency exceeds $210,000, together with interest
thereon at a rate of 5% per annum from the Closing Date until payment. If the
amount of the Net Transferred Assets is greater than $750,000, the Buyer shall
promptly pay to the Seller the surplus amount up to an additional $50,000. The
date on which any and all disputes under this Section 1.7 are resolved is
referred to as the "Balance Sheet Resolution Date". No dispute concerning
adjustments in the allocation of the Purchase Price pursuant to Section 1.4(e)
hereof shall delay the payments due hereunder.
2. Representations of the Seller. The Seller represents and warrants to
the Parent and the Buyer as follows:
2.1 Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of California,
and has all requisite corporate power and authority to own its properties, to
carry on its business as now being conducted, to execute and deliver this
Agreement and the agreements contemplated herein, and to consummate the
transactions contemplated hereby. Without limitation, the Seller has full
corporate power and
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authority to carry on the business of the Division as it is now being conducted
and to own the Assets. The Seller is duly qualified and licensed to do business
as a foreign corporation in good standing in every jurisdiction in which the
conduct of the Division's business or the ownership of property requires such
qualification, except as would not have a material adverse effect on the Assets,
business, properties, assets or financial condition of the Division or the
ability of the Seller to consummate the transactions contemplated by this
Agreement and to deliver good and marketable title to the Assets at the Closing
free and clear of all Encumbrances except Permitted Encumbrances (a "Material
Adverse Effect"). True, complete and correct copies of the Certificates of
Incorporation and Bylaws of the Seller, each as amended to date, have been made
available to the Buyer, and no amendments have been made thereto or have been
authorized since the date thereof. The Seller does not own any capital stock of
or other equity interest in any corporation, partnership or other entity, except
SolutionCentral, Inc., a Delaware corporation ("Sub"). Sub has no rights, title
or interest in or to any Asset or the Division, and has no material relationship
with the business of the Division.
2.2 Capitalization of the Seller. The Seller's authorized capital
stock consists of (i) 20,000,000 shares of Common Stock, no par value, of which
3,516,087 shares are issued and outstanding, and (ii) 1,500,000 shares of
Preferred Stock, no par value, of which 1,500,000 shares are issued and
outstanding. All of such shares have been duly and validly issued and are fully
paid and nonassessable. The Seller has provided the Buyer a true and accurate
list of the record and beneficial stockholders of the Seller as of the date
hereof.
2.3 Authorization; No Consents.
(a) The execution and delivery of this Agreement by the
Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action, and have been validly approved by the Seller's
shareholders. This Agreement and all such other agreements and obligations
entered into and undertaken in connection with the transactions contemplated
hereby to which the Seller is a party constitute the valid and legally binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms.
(b) The execution, delivery and performance by the Seller of
this Agreement and the agreements provided for herein, and the consummation of
the transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (i) violate the provisions of
the Certificate of Incorporation or Bylaws of the Seller; (ii) violate, or
require any filing with, or permit, authorization, order, consent or approval
under, the provisions of any law, rule or regulation applicable to the Division
or the Seller or by which any of their respective properties is or may be
affected; (iii) violate any judgment, decree, order or award of any court,
federal, state or local arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"); or (iv) except as set forth in Schedule 2.3(b)(iv),
require any consent, approval or notice under, or result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, or cause the creation of any Encumbrance
upon the properties or assets of
8
the Seller pursuant to, any of the terms, conditions or provisions of any
agreement, indenture, mortgage, deed of trust or other instrument to which the
Seller is a party or by which the Seller or any of its properties is or may be
bound.
(c) The execution and delivery by the Seller and Metromedia of
the Credit Agreement dated as of September 29, 1989, as amended (the "Metromedia
Credit Agreement"), by and between the Seller and Metromedia, and the agreements
provided for therein, and the consummation by the Seller and Metromedia of all
transactions contemplated thereby, have been duly authorized by all requisite
corporate and shareholder (if any) action. The Metromedia Credit Agreement and
all such other agreements and obligations entered into and undertaken in
connection with the transactions contemplated thereby constitute the valid and
legally binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms. All amounts owed by Seller to Metromedia
under the Metromedia Credit Agreement represent valid and lawful indebtedness of
the Seller incurred in respect of borrowed money and interest due and payable
thereon. Except as set forth on Schedule 2.3(c) or with respect to the
Metromedia Credit Agreement, the Seller has no liabilities in respect of
borrowed money. A true, correct and complete copy of the Metromedia Credit
Agreement has been made available to the Buyer.
2.4 Ownership of the Assets. Schedule 2.4 attached hereto sets forth
a true, correct and complete list of all Encumbrances affecting the Assets. The
Seller is, and at the Closing will be, the true and lawful owner of the Assets,
and will have the right to sell and transfer to the Buyer good and marketable
title to the Assets, free and clear of all Encumbrances, except the Permitted
Encumbrances. The delivery to the Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and marketable title to
the Assets in the Buyer, free and clear of all Encumbrances, except for the
Permitted Encumbrances.
2.5 Financial Statements.
(a) The Seller has made available to the Buyer its unaudited
balance sheet as of December 31, 2000 (the "Seller Unaudited Balance Sheet") and
the related unaudited statements of income, shareholders" equity, retained
earnings and cash flows of the Seller for the fiscal year then ended
(collectively, including the Seller Unaudited Balance Sheet, the "Seller
Unaudited Financial Statements"). The Seller has made available to the Buyer its
audited balance sheet as of December 31, 1999 (the "Seller Audited Balance
Sheet") and the related audited statements of income, shareholders" equity,
retained earnings and cash flows of the Seller for the fiscal year then ended
(collectively, including the Seller Audited Balance Sheet, the "Seller Audited
Financial Statements," and together with the Seller Unaudited Financial
Statements, the "Seller Financial Statements"). The Seller has also previously
delivered to the Buyer and attached on Schedule 2.5 (i) unaudited balance sheets
as of December 31, 1999 and 2000 (the "Division Annual Unaudited Balance
Sheets") and the related statements of income of the Division for the fiscal
years then ended (collectively, including the Division Annual Unaudited Balance
Sheets, the "Division Annual Unaudited Financial Statements") and (ii) the
Division Balance Sheet as of February 28, 2001 and the related statements of
income of the Division for the period from January 1, 2001 through February 28,
2001 (collectively, the "Division
9
Unaudited Financial Statements," and together with the Division Annual Unaudited
Financial Statements, the "Division Unaudited Financial Statements"). The Seller
Financial Statements and the Division Unaudited Financial Statements are
collectively referred to as the "Financial Statements". Except for adjustments
which may be required as a result of the transactions contemplated hereby, the
Seller Financial Statements have been prepared in accordance with generally
accepted accounting principles applied consistently with past practice and are
certified by the Accountants, in the case of the audited financial statements
described above, and have been certified by the Seller's chief financial
officer, in the case of the unaudited financial statements described above. The
Seller Financial Statements fairly present, in all material respects, as of
their respective dates, the respective financial condition, retained earnings,
assets and liabilities of the Seller and the results of operations of their
respective business for the periods indicated. The Division Unaudited Financial
Statements have been prepared in good faith on the basis of reasonable
assumptions. The Seller Unaudited Financial Statements and the Division
Unaudited Financial Statements shall exclude footnotes.
(b) With respect to the respective contracts and commitments
for the sale of goods or the provision of services by the Seller, the Seller
Financial Statements contain and reflect adequate reserves, which are consistent
with previous reserves taken, for all reasonably anticipated material losses and
costs and expenses; and the amounts shown as accrued for current and deferred
income and other Taxes in the Seller Financial Statements are sufficient for the
payment of all accrued and unpaid Taxes, interest, penalties, assessments or
deficiencies applicable to the Seller, whether disputed or not, for the
applicable period then ended and periods prior thereto.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
(a) reflected and reserved against in the Seller Unaudited Financial Statements,
(b) set forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary
course of business after the date of the Seller Unaudited Balance Sheet and not
material in amount, either individually or in the aggregate, the Seller does not
have any liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise. Except as and to the extent
reflected and reserved against in the Division Balance Sheet or as set forth on
Schedule 2.6, the Division does not have, and there is not, any liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise.
2.7 Litigation. Except as set forth on Schedule 2.7 attached hereto,
the Seller is not a party to, or threatened with, and none of the Assets are
subject to, any litigation, suit, action, investigation, proceeding or
controversy before any Governmental Entity relating to or affecting the Assets
or the business or condition (financial or otherwise) of the Division or the
Seller. The Seller is not in violation of or in default with respect to any
judgment, order, writ, injunction, decree or rule of any Governmental Entity
related to or affecting the Assets or the business or condition (financial or
otherwise) of the Division.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a true,
correct and complete list of all material insurance policies insuring the Assets
or business of the Division (collectively, the "Insurance Policies"). True,
correct and complete copies of all of the Insurance
10
Policies have been made available by the Seller to the Buyer. The Insurance
Policies are in full force and effect. All premiums due on the Insurance
Policies or renewals thereof have been paid and there is no material default
under any of the Insurance Policies. Except as set forth on Schedule 2.8
attached hereto, the Seller has not received any notice or other communication
from any issuer of the Insurance Policies, canceling or materially amending any
of the Insurance Policies, materially increasing any deductibles or retained
amounts thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the Seller's knowledge, no such cancellation,
amendment or increase of deductibles, retainages or premiums is threatened.
2.9 Fixed Assets. Schedule 2.9 attached hereto sets forth a true,
correct and complete list of all Fixed Assets as of the date hereof. All of the
Fixed Assets are in good operating condition and repair, normal wear and tear
excepted, usable by the Seller in the ordinary course of business of the
Division and in the production of products of the Seller and normal maintenance
has been consistently performed with respect to such Fixed Assets.
2.10 Leases.
(a) Seller owns all interests of the tenant under the lease
(the "Conveyed Lease") dated as of December 1, 1997 between the Seller and
REGENCY FOREST, LLC with respect to the premises known as REGENCY FOREST I (the
"Conveyed Leased Premises") free of Encumbrances and has not assigned such
interests or any portion thereof or sublet all or any portion of the Conveyed
Leased Premises. True, correct and complete copies of the Conveyed Lease, and
all amendments, modifications and supplemental agreements thereto (including
without limitation all subordination, non-disturbance and attornment agreements
and agreements confirming the date of commencement or expiration of the term of
such Conveyed Lease), have been made available to the Buyer. The Conveyed Lease
is in full force and effect, is binding and enforceable against the Seller and,
to the Seller's knowledge, the lessor thereto in accordance with its terms and
has not been modified or amended since the date of delivery to the Buyer. No
party to the Conveyed Lease has sent written notice to the other claiming that
such party is in default thereunder, which remains uncured. To the Seller's
knowledge, there has not occurred any event which would constitute a material
breach of or material default by Seller in the performance of any covenant,
agreement or condition contained in the Conveyed Lease, nor has there occurred
any event which, with the passage of time or the giving of notice or both, would
constitute such a material breach or default. The Seller is not obligated to pay
any leasing or brokerage commission relating to the Conveyed Lease and, there
are no obligations of the Seller to pay any leasing or brokerage commission upon
the renewal of the Conveyed Lease. No construction, alteration or other
leasehold improvement work with respect to the Conveyed Lease remains to be paid
for or to be performed. The Division Balance Sheet contains, and the Net
Transferred Assets will provide for adequate reserves to provide for the
restoration of the properties subject to the Conveyed Lease at the end of its
term, to the extent required by the Conveyed Lease.
(b) The Seller has obtained all material consents, permits,
licenses and approvals required by such governmental regulations in connection
with the Conveyed Leased Premises or any improvements therein or use thereof.
All such material consents, permits,
11
licenses and approvals are in full force and effect, have been properly and
validly issued, and, to the extent permitted under applicable law, on or prior
to the Closing Date will be assigned to the Buyer by the Seller. There are no
suits, petitions, notices or proceedings pending, given or, to the knowledge of
the Seller, threatened by any persons or Governmental Entities before any court,
Governmental Entities or instrumentalities, administrative or otherwise,
claiming that the premise of the Conveyed Lease violates such governmental
regulations, or which if given, commenced or concluded would have an adverse
effect on the Buyer's rights to the Conveyed Lease or the operation of the
Division's business as presently operated. To Seller's knowledge, no hazardous
waste reports have been prepared with respect to the Conveyed Lease Premises
since January 1, 1997. Seller has not generated, used, released or disposed of
hazardous waste in, on or from the Conveyed Leased Premises and to Seller's
knowledge the Conveyed Leased Premises has not been used for the generation,
use, release or disposal of hazardous waste.
2.11 Change in Financial Condition and Assets. Except as set forth
on Schedule 2.11 attached hereto, since December 31, 2000 (in the case of the
Seller) and February 28, 2001 (in the case of the Division), there has been no
change which materially and adversely affects the business, properties, assets
(including the Assets), condition (financial or otherwise) of the Seller or the
Division, as the case may be. The Seller has no knowledge of any existing or
threatened occurrence, event or development which could reasonably be expected
to result in a Material Adverse Effect on the Seller.
2.12 Tax Matters. No state of facts exists or has existed that would
constitute grounds for the assessment against Parent or the Buyer, whether by
reason of transferee liability or otherwise, of any liability for any federal,
state, county, local, foreign or other tax (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll related and property
taxes, import duties and other governmental charges and assessments), whether or
not measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto and
obligations under any tax sharing, tax allocation or similar agreement to which
the Seller or any member of a group of corporations with which the Seller has
filed (or been required to file) consolidated, combined, unitary or similar Tax
Returns (an "Affiliated Group") is or has been a party, and including expenses
associated with contesting any proposed adjustment related to any of the
foregoing (hereinafter "Taxes") attributable to any period ending on or before
the Closing Date relating to the Seller's or any member of an Affiliated Group's
income, assets and operations, including the Assets. There is no pending or, to
the knowledge of the Seller or any member of an Affiliated Group, threatened or
contemplated Tax audit or examination of any Tax Return filed by or on behalf of
the Seller or any member of an Affiliated Group or with respect to the Seller's
or any member of an Affiliated Group's income, assets and operations, including
the Assets. Neither the Seller nor any member of an Affiliated Group has waived
any statute of limitations with respect to Taxes or agreed to an extension of
time with respect to a Tax assessment or deficiency. For purposes of this
Agreement, a "Tax Return" includes all reports, returns, declarations,
statements, or other information required to be supplied to a taxing authority
in connection with Taxes.
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2.13 Accounts Receivable. Schedule 2.13 attached hereto sets forth a
true, correct and complete list of all Accounts Receivable as of February 28,
2001 and including an aging thereof as of February 28, 2001. Schedule 2.13, as
updated as of the Closing Date, shall set forth a true, correct and complete
list of the Accounts Receivable as of the Closing Date, including an aging
thereof. All Accounts Receivable arose out of the sales of inventory, licenses
or services in the ordinary course of business. The reserve for doubtful
accounts reflected on Schedule 2.13 was calculated in accordance with generally
accepted accounting principles applied consistently.
2.14 Books and Records. The general ledgers and books of account of
the Seller, all Tax Returns filed by the Seller related to the Assets and/or the
Division, and all other books and records of the Seller are in all material
respects, complete and correct and have been maintained in accordance with good
business practice and in accordance, in all material respects, with applicable
procedures required by laws and regulations.
2.15 Contracts and Commitments.
(a) Schedule 2.15(a) (Parts I and II) attached hereto contains
a true, complete and correct list and description of the contracts, agreements,
commitments, purchase orders or other understandings or arrangements to be
assigned to and assumed by the Buyer (collectively, the "Division Contracts")
hereunder. The Seller has performed all substantial obligations under each of
the Division Contracts listed in Part II of Schedule 2.15(a). The Division
Contracts include all material contracts, agreements, rights, commitments,
purchase orders or other understandings or arrangements to which the Seller is a
party or by which the Seller or any of its property is bound, whether written or
oral, used in or related to the business of the Division or which binds the
Assets. No party to any Division Contract involves or is between the Seller and
any stockholder or affiliate (as such term is defined in the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder) ("Affiliate") of the Seller. There are no contracts,
agreements, commitments, purchase orders or other understandings or arrangements
to which the Seller is a party or by which the Seller or any of its property is
bound, other than Division Contracts, which (A) relate to, affect or are
otherwise material to the Assets or the business of the Division, (B) restrict
or affect the transfer of assets or property by the Seller; (C) permit, or might
in the future permit, access to the source code of the Division Intellectual
Property; or (D) restrict the Seller from carrying on its business anywhere in
the world.
(b) Except as set forth on Schedule 2.15(b) attached hereto:
(i) each Division Contract is a valid and binding
agreement of the Seller, enforceable against the Seller and, to Seller's
knowledge, the other parties thereto in accordance with its terms;
(ii) the Seller is not in material breach of or default
under any Division Contract, and, to the Seller's knowledge, no event has
occurred which with the passage
13
of time or giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any Encumbrance thereunder or
pursuant thereto; and
(iii) to the Seller's knowledge, there is no existing
material breach or default by any other party to any Division Contract, and no
event has occurred which with the passage of time or giving of notice or both
would constitute a material default by such other party, result in a material
loss of rights or result in the creation of any Encumbrance thereunder or
pursuant thereto.
(iv) the continuation, validity and effectiveness of
each Division Contract will not be affected by the transfer thereof to the Buyer
under this Agreement and all such Division Contracts are assignable to the Buyer
without the consent or approval of any person or entity which is not a Party.
(c) The Division is not restricted in any material respect by
any contracts, agreements, commitments, purchase orders or other understandings
or arrangements or otherwise from carrying on its business anywhere in the
world.
(d) True, correct and complete copies of all Division
Contracts have previously been made available by the Seller to the Buyer.
2.16 Compliance with Agreements and Laws. The Seller has all
requisite and material licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct the business of the Division and own and
operate the Assets (collectively, the "Permits"). Schedule 2.16 attached hereto
sets forth a true, correct and complete list of all such Permits, copies of
which have been made available by the Seller to the Buyer. The Seller is not in
violation in any material respect of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties. The business of the Division does
not violate in any material respect any federal, state, local or foreign laws,
regulations or orders (including, but not limited to, any of the foregoing
relating to employment discrimination, occupational safety, environmental
protection, hazardous waste (as defined in the Resource Conservation and
Recovery Act, as amended, and the regulations adopted pursuant thereto),
conservation, or corrupt practices. The Seller has not received any written
notice or communication from any Governmental Entity or otherwise of any such
violation or noncompliance.
2.17 Employee Relations.
(a) With respect to the all current employees of the Seller
(and former employees solely as to matters related to their employment by the
Seller) who are or have been employed in the business of the Division ("Division
Employees"), the Seller is in compliance, in all material respects, with all
federal, state and municipal laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and is not
14
engaged in any unfair labor practice, and the Seller is not delinquent in the
payment of any wages or social security Taxes.
(b) Except as set forth on Schedule 2.17(b), attached hereto
with respect to the Division Employees: (i) none of the Division Employees is
represented by any labor union; (ii) there is no unfair labor practice complaint
against the Seller pending before the National Labor Relations Board or any
state or local agency; (iii) there is no pending labor strike or other material
labor action affecting the Seller (including, without limitation, any
organizational drive); (iv) there is no material labor grievance pending against
the Seller; (v) there is no pending representation question respecting the
Division Employees; and (vi) there are no pending arbitration proceedings
arising out of or under any collective bargaining agreement to which the Seller
is a party, or to the Seller's knowledge, any basis for which a successful claim
may be made under any collective bargaining agreement to which the Seller is a
party.
(c) (i) Schedule 2.17(c)(i) attached hereto sets forth a true,
correct and complete list of the employee benefits provided by the Seller to the
Division Employees, and (ii) Schedule 2.17(c)(ii) attached hereto sets forth a
true, correct and complete list of all contracts or agreements between the
Seller and Division Employees, including all employment, nondisclosure, and
non-competition agreements which have been entered into between the Seller and
the Division Employees, which agreements are valid and enforceable on the date
hereof, subject to applicable state law. A true and correct list of all the
salary or wages rates of each Division Employee as reflected on the Form W-2 for
such employee for the year ended December 31, 2000 has been made available by
the Seller to the Buyer.
(d) For purposes of this Section 2.17, the term "employee"
shall be construed to include sales agents and other independent contractors who
spend a majority of their working time on the Division's business.
2.18 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.18 attached hereto, since December 31, 2000, the Seller has not
entered into any transaction which is not in the ordinary course of business,
and, without limiting the generality of the foregoing, the Seller has not:
(a) incurred any material obligation or liability for borrowed
money other than pursuant to the Metromedia Credit Agreement in accordance with
its terms;
(b) discharged or satisfied any Encumbrance or paid any
obligation or liability other than current liabilities;
(c) subjected any of the Assets to any Encumbrance;
(d) sold, purchased, assigned or transferred any of its assets
or cancelled any debts or claims, except in the ordinary course of business,
nor, since February 28, 2001 sold, purchased, assigned or transferred any
material Assets or cancelled any debts or claims related thereto;
15
(e) made any amendment to or terminated any Division Contract
or done any act or omitted to do any act which would cause the material breach
of any Division Contract;
(f) suffered any losses, whether insured or uninsured, and
whether or not in the control of the Seller, in excess of $50,000 in the
aggregate, or waived any material rights of any value;
(g) made any changes in compensation of Division Offered
Employees or, other than in a manner consistent with past practice, made any
material changes in compensation of its other officers, directors or employees;
(h) authorized or issued recall notices for any of its
products or initiated any safety investigations;
(i) received written notice of any litigation, warranty claim
or products liability claims; or
(j) made any change in the terms, status or funding condition
of any Employee Plan.
2.19 Customers. Schedule 2.19 attached hereto sets forth a true,
correct and complete list of the names and addresses of all customers of the
Seller related, directly or indirectly, to the Division. None of such customers
has notified the Seller in writing that it intends to discontinue its
relationship with the Seller.
2.20 Prepayments and Deposits. Schedule 2.20 attached hereto sets
forth as of February 28, 2001 all prepaid expenses or deposits with vendors and
the landlord of the Conveyed Lease, along with prepayments or deposits from
customers for products to be shipped, or services to be performed, after the
Closing Date which have been received by the Seller as of the date hereof.
2.21 Intellectual Property.
(a) The Seller owns or has the right to use all Intellectual
Property (as defined below) necessary (i) to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and to provide
the services provided, by the Division to other parties (together, the "Customer
Deliverables") and (ii) to operate the Seller's internal systems that are
material to the business or operations of the Division, including, without
limitation, computer hardware systems, telecommunications systems and devices,
storage systems, software applications and embedded systems (the "Internal
Systems"). The Intellectual Property (including, without limitation, that
included in the Assets, including the Netstar Software (as defined below)) owned
by or licensed to the Seller and incorporated in or underlying the Customer
Deliverables or the Internal Systems related to the Division is referred to
herein as the "Division Intellectual Property." Upon the filing by the Buyer
after the Closing of the appropriate assignments with the U.S. Patent and
Trademark Office or Copyright Office,
16
to the extent required, each item of Division Intellectual Property will be
owned or available for use by the Buyer immediately following the Closing on
terms and conditions identical in all material respects as it was to the Seller
immediately prior to the Closing Date. The Seller has taken all commercially
reasonable measures to protect the proprietary nature of each item of Division
Intellectual Property, and to the Seller's knowledge no other person or entity
is infringing, violating or misappropriating any of the Division Intellectual
Property. Except as set forth on Schedule 2.21(a), no other person or entity has
any rights to any of the Division Intellectual Property, other than nonexclusive
end-user licenses to customers identified on Schedule 2.19 entered into in the
ordinary course of business and similar in all material respects to the Seller's
standard forms of license agreement (true and complete copies of which have
previously been made available to Buyer). For purposes of this Agreement,
"Intellectual Property" means all (u) invention disclosures, patents and patent
applications, (v) copyrights and registrations thereof, (w) computer software,
data and documentation, (x) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists and information, (y) trademarks, service marks, certification
marks, trade names, domain name and applications and registrations therefor and
(z) all proprietary rights relating to any of the foregoing. Schedule 2.21(a)
lists each invention disclosure, patent, patent application, copyright
registration or application therefor, mask work registration or application
therefor, and trademark, service xxxx, certification xxxx and domain name of the
Seller (including Xxxxxxxxxxx.xxx and Xxxxxxx.xxx) included among the Assets or
related to the Division and all registrations and applications therefor listed
separately as of the date hereof, other than the Seller's standard nondisclosure
and assignment of invention agreements with Division Employees.
(b) To the Seller's knowledge, none of the Division
Intellectual Property or Customer Deliverables, or the marketing, distribution,
provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
To the Seller's knowledge, none of the Internal Systems, or the use thereof,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any person or entity. Schedule 2.21(b) lists any complaint,
claim or notice, or written threat thereof, received by the Seller alleging any
such infringement, violation or misappropriation; and the Seller has made
available to the Buyer complete and accurate copies of all written documentation
in the possession of the Seller relating to any such complaint, claim, notice or
threat. The Seller has made available to the Buyer complete and accurate copies
of all written documentation in the Seller's possession relating to claims or
disputes known to the Seller concerning any Division Intellectual Property.
(c) Schedule 2.21(c) identifies each license or other
agreement (or type of license or other agreement) pursuant to which the Seller
has licensed, distributed or otherwise granted any rights to any third party
with respect to, any Division Intellectual Property, other than nonexclusive
end-user licenses entered into in the ordinary course of business and
17
similar in all material respects to the Seller's standard forms of license
agreement (true and complete copies of which have previously been made available
to Buyer).
(d) Schedule 2.21(d) identifies each item of Division
Intellectual Property that is owned by a party other than the Seller (the "Third
Party Intellectual Property"), and the license or agreement pursuant to which
the Seller uses it (excluding off-the-shelf software programs licensed by the
Seller pursuant to 'shrink wrap" licenses).
(e) The Seller has not disclosed the source code, design
documents, marketing plans, workings or internal white papers for any of the
software owned by the Seller or acquired from a third party included among the
Assets or related to the Division (the "Software") or other confidential
information constituting, embodied in or pertaining to the Software to any
person or entity, except pursuant to the agreements listed in Schedule 2.21(e),
and the Seller has taken commercially reasonable measures to prevent disclosure
of such source code.
(f) All of the copyrightable materials (including Software and
web site content) incorporated in or bundled with the Customer Deliverables have
been created by employees of the Seller within the scope of their employment by
the Seller, by former employees of the Seller within the scope of their
then-employment by the Seller, or by independent contractors of the Seller who
have executed agreements expressly agreeing that such copyrightable materials
shall be considered a "work made for hire" or assigning all right, title and
interest in such copyrightable materials to the Seller. No portion of such
copyrightable materials was jointly developed with or acquired from any third
party.
(g) The Customer Deliverables and the Internal Systems are
free from significant defects or programming errors and conform in all material
respects to the written documentation and specifications therefor.
(h) The Seller is not a party to, and none of the Assets are
bound by, any agreement that grants to any Affiliate of the Seller or any third
party any rights to any Division Intellectual Property.
(i) Each of the Division Employees has executed the Seller's
standard nondisclosure and assignment of invention agreement, a true and correct
copy of which has been made available to the Buyer by the Seller. It has been
the Seller's practice to require all employees to execute a copy of the Seller's
standard nondisclosure and assignment of invention agreement as a condition of
employment.
2.22 Employee Benefit Plans.
(a) Employee Plans. Schedule 2.22 attached hereto contains a
true, correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and other similar plans, programs and agreements
(the "Employee Plans"), whether reduced to writing or not, in which any Division
Employee participates, to which any Division Employee is party or
18
otherwise applicable to any Division Employee or any other member at any time
since January 1, 1995.
(b) No Liabilities. Neither the Parent nor the Buyer shall
have any liability arising out of the employment of, or failure to employ, any
person by the Seller prior to or following the Closing with respect to an
Employee Plan or otherwise.
(c) Compliance. With respect to all Employee Plans, the Seller
and any other member (hereinafter, "ERISA Affiliate") of any controlled group of
corporations, group of trades or businesses under common control, or affiliated
service group (as defined for purposes of Section 414(b), (c) and (m),
respectively, of the Code) are in material compliance with the requirements
prescribed by any and all statutes, orders or governmental rules or regulations
currently in effect, including, but not limited to, ERISA and the Code,
applicable to such Employee Plans. The Seller and its ERISA Affiliates have in
all material respects performed all obligations required to be performed by them
under, and are not in violation in any material respect of, and there has been
no material default or violation by any other party with respect to, any of the
Employee Plans.
(d) Retiree Benefits. Except as set forth in Schedule 2.22, no
Employee Plan provides health or life insurance benefits for retirees except as
required by applicable law. No such plan contains any provisions, and no
commitments or agreements exist, which in any way would limit or prohibit the
Buyer from amending any such plan to reduce or eliminate such retiree benefits.
(e) Reserved.
(f) Qualifications. Each Employee Plan intended to qualify
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to so qualify, and the trusts created thereunder have been determined to
be exempt from tax under the provisions of Section 501(a). Each Employee Plan
which is a funded welfare benefit plan intended to be exempt from tax under the
provisions of Section 501(c)(9) of the Code has been determined by the Internal
Revenue Service to be so exempt. Copies of all determination letters with
respect to each such Employee Plan have been previously delivered by the Seller
to the Buyer, and nothing has since occurred, or will occur prior to the Closing
Date, which might cause the loss of such qualification or exemption, no such
Employee Plan has been operated in a manner which would cause it to be
disqualified in operation, and all such Employee Plans have been administered in
compliance with and consistent with all applicable requirements of the Code and
ERISA, including, without limitation, all reporting, notice, and disclosure
requirements.
(g) Funding Status, Etc. With respect to each Employee Plan
which is a qualified defined contribution pension, profit-sharing or stock bonus
plan, as defined in ERISA, all employer contributions accrued for plan years
ending prior to the Closing Date under the Employee Plan terms and applicable
law have been made by the Seller. The Seller shall be
19
responsible for a pro rata portion of the employer contribution for the plan
year in which the Closing Date falls.
(h) Claims and Litigation. Except as set forth on Schedule
2.22, there are no pending, or to the Seller's knowledge, threatened or pending
claims, suits or other proceedings by present or former employees of the Seller
or its affiliates, plan participants, beneficiaries or spouses of any of the
above, the Internal Revenue Service, or any other person or entity involving any
Employee Plan including claims against the assets of any trust, involving any
Employee Plan, or any rights or benefits thereunder, other than ordinary and
usual claims for benefits by participants or beneficiaries including claims
pursuant to domestic relations orders.
(i) No Express or Implied Rights. Nothing expressed or implied
herein shall confer upon any past or present employee of the Seller, his or her
representatives, beneficiaries, successors and assigns, nor upon any collective
bargaining agent, any rights or remedies of any nature, including, without
limitation, any rights to employment or continued employment with the Seller,
the Buyer, or any successor or affiliate.
2.23 Acquired Assets Complete. Except as set forth on Schedule 2.23,
the Assets are, when utilized by a labor force substantially similar to that
employed by the Seller in the Division (including Seller employees that allocate
a portion of their time to the Division) on the date hereof, adequate in all
material respects to conduct the business operations of the Division as
currently conducted by the Seller.
2.24 Indebtedness to and from Officers, Directors and Shareholders.
Except as set forth on Schedule 2.24 attached hereto, and except for the
Metromedia Credit Agreement, the Seller is not indebted, directly or indirectly,
to any person who is an officer, director or shareholder of the Seller in any
material amount other than for salaries for services rendered or reimbursable
business expenses, and no such officer, director or shareholder is indebted to
the Seller in any material amount, except for advances made to employees of the
Seller in the ordinary course of business to meet reimbursable business
expenses.
2.25 Investment. The Seller is acquiring the Parent Shares for its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same; and the Seller has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof, except as a transfer of such shares to Metromedia in
accordance with Section 9.1(a). In making the decision to acquire the Parent
Shares in accordance with this Agreement, the Seller has relied upon independent
investigations made by it and not upon any representations made by Parent other
than those made in this Agreement. The Seller is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. The Seller understands that the
Parent Shares have not been registered under the Securities Act and may not be
re-offered or resold other than pursuant to registration thereunder or an
available exemption therefrom.
20
2.26 Experience. The Seller has carefully reviewed the
representations concerning Parent contained in this Agreement and the Parent
Reports (as defined in Section 3.6); and the Seller has sufficient knowledge and
experience in finance and business that it is capable of evaluating the risks
and merits of its investment in Parent and the Seller is able financially to
bear the risks thereof. The Seller understands that no United States federal or
state agency has passed on, reviewed or made any recommendation or endorsement
of the Parent Shares. The Seller understands that the Parent Shares are being or
will be offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal securities laws and that
Parent is relying on the truth and accuracy of, and the Seller's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Seller set forth herein in order to determine the
availability of such exemptions and the eligibility of the Seller to acquire the
Parent Shares.
2.27 Brokers' Fees. The Seller does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
3. Representations of the Parent and Buyer.
The Parent and Buyer, jointly and severally, represent and warrant to the
Seller as follows:
3.1 Organization and Authority. Each of the Parent and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and has requisite corporate power and
authority to own its properties and to carry on its business as now being
conducted. Each of the Parent and the Buyer has full power to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Certified copies of the Certificate of Incorporation and the Bylaws of each of
the Parent and the Buyer, as amended to date, have been made available to the
Seller, are complete and correct, and no amendments have been made thereto or
have been authorized since the date thereof.
3.2 Capitalization of the Parent.
(a) On the date hereof, the Parent's authorized capital stock
consists of 100,000,000 shares of Parent Common Stock, of which 18,117,490
shares were issued and outstanding as of February 28, 2001, and 5,000,000 shares
of preferred stock, $.001 par value per share, none of which are issued and
outstanding. All of the outstanding shares of capital stock of the Parent have
been duly and validly issued and are, or will be, fully paid and nonassessable.
(b) Buyer is authorized to issue 1,000 shares of common stock,
of which 1,000 shares were issued and outstanding as of the date of this
Agreement. All shares of Buyer that are owned by Parent are free and clear of
all Encumbrances, except pursuant to the Parent's commercial credit facilities.
3.3 Newly Issued Shares. All of the Parent Shares will be, when
issued in accordance with this Agreement, duly authorized, validly issued, fully
paid and nonassessable,
21
and will not be subject to any preemptive rights or rights of first refusal
created by statute, the charter documents of Parent or any agreement to which
Parent is a party.
3.4 Authorization; No Consents.
(a) The execution and delivery of this Agreement by each of
the Parent and the Buyer, and the agreements provided for herein, and the
consummation thereby of all transactions contemplated hereby, have been duly
authorized by all requisite corporate action. This Agreement and all such other
agreements and written obligations entered into and undertaken in connection
with the transactions contemplated hereby constitute the valid and legally
binding obligations of the Parent and the Buyer, enforceable against them in
accordance with their respective terms.
(b) The execution, delivery and performance of this Agreement
and the agreements provided for herein, and the consummation by the Buyer and
the Parent of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (i) violate the
provisions of the Certificate of Incorporation or Bylaws of the Parent or the
Buyer; (ii) violate, or require any filing with, or permit, authorization,
order, consent or approval under, the provisions of any law, rule or regulation
applicable to the Parent or the Buyer; (iii) violate any judgment, decree, order
or award of any Governmental Entity applicable to the Parent or the Buyer; or
(iv) require any consent, approval or notice under, or result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, or cause the creation of any Encumbrance
upon the properties or assets of the Parent or the Buyer pursuant to, any of the
terms, conditions or provisions of any material agreement, indenture, mortgage,
deed of trust or other instrument to which they or their properties is a party
or by which they are or may be bound.
3.5 Regulatory Approvals. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Parent and Buyer and which are necessary for the
consummation of the transactions contemplated by this Agreement have been
obtained and satisfied.
3.6 Reports and Financial Statements. Complete and accurate copies,
as amended or supplemented, have been made available to the Seller of: (a)
Parent's Registration Statement on Form S-1, as amended and filed with the
Securities and Exchange Commission (the "SEC") as of August 3, 2000; and (b) all
other reports filed by Parent under Section 13 or subsections (a) or (c) of
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with the SEC since such date (the reports listed in subsections (a) and
(b) are collectively referred to herein as the "Parent Reports"). The Parent
Reports constitute all of the documents required to be filed by Parent under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC from August 3, 2000 through the date of this Agreement. The Parent Reports
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder when filed. As of their respective dates,
the Parent Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to
22
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements included in the Parent
Reports (i) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto when filed, (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of Parent, as of the respective
dates thereof and for the periods referred to therein, and (iv) are consistent
with the books and records of Parent.
3.7 Absence of Certain Changes. Since December 31, 2000, no event or
development has occurred specifically related to Parent which could reasonably
be expected to have a material adverse effect on the assets, business, condition
(financial or otherwise), or results of operations of Parent and its
subsidiaries, taken as a whole. Parent has no liabilities (absolute, accrued,
contingent, determinable or otherwise) other than liabilities (i) disclosed or
provided for in the Parent's balance sheet as of December 31, 2000, or in the
notes thereto, included in the Parent's Quarterly Report on Form 10-Q for the
period then ended, or (ii) incurred since such date in the ordinary course of
business that would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Parent and its subsidiaries,
taken as a whole.
3.8 Litigation. Except as disclosed in the Parent Reports, there is
no action, suit, proceeding, claim, arbitration or investigation pending or, to
the knowledge of the Parent, threatened against or affecting the Parent which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Parent and its subsidiaries, taken as a whole.
3.9 Intellectual Property. The Parent owns or has the right to use
all Intellectual Property necessary (i) to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and to provide
the services provided, by it and (ii) to operate the Internal Systems that are
material to its business or operations, except where the failure to do so would
not, individually or in the aggregate, be reasonably likely to have a material
adverse effect on the Parent and its subsidiaries, taken as a whole. The Parent
has taken all commercially reasonable measures to protect the proprietary nature
of each material item of its Intellectual Property. To the Parent's knowledge,
(i) no other person or entity is infringing, violating or misappropriating any
of its Intellectual Property; (ii) none of its Intellectual Property or the
marketing, distribution, provision or use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity; and (iii) none of its Internal Systems, or the use thereof,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any person or entity; except in each case where any such
infringements, violations or misappropriations as would not, individually or in
the aggregate, be reasonably likely to have a material adverse effect on the
Parent and its subsidiaries, taken as a whole.
23
3.10 Interim Operations of Buyer. The Buyer was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has engaged in no business activities other than as contemplated by this
Agreement.
3.11 Brokers' Fees. Except with respect to Friedman, Billings,
Xxxxxx & Co., Inc., neither Parent nor Buyer has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
4. Covenants.
4.1 Public Announcements. The Parties agree that prior to the
Closing Date, except as may be otherwise required by law, any and all public
announcements or other public communications concerning this Agreement and the
purchase of the Assets by the Buyer shall be subject to the approval of both
Parties, which approval shall not be unreasonably withheld.
4.2 Closing Efforts. Each of the Parties shall use its best efforts,
to the extent commercially reasonable ("Reasonable Commercial Efforts"), to take
all actions and to do all things necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, including without limitation
using its Reasonable Commercial Efforts to ensure that (i) its representations
and warranties remain true and correct in all material respects through the
Closing Date and (ii) the conditions to the obligations of the other Parties are
satisfied.
4.3 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Commercial Efforts to
obtain, at its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and to effect all registrations,
filings and notices with or to Governmental Entities, as may be required for
such Party to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement. Notwithstanding
anything to the contrary in this Agreement, Parent and its Affiliates shall not
be obligated to sell or dispose of or hold separately (through a trust or
otherwise) any assets or businesses of Parent or its Affiliates.
(b) The Seller shall use its Reasonable Commercial Efforts to
obtain, at its expense, all such waivers, consents or approvals from third
parties, and to give all such notices to third parties, as are listed in
Schedule 2.3(b)(iv) and the Buyer shall reasonably cooperate with such efforts.
(c) On the date hereof, the Seller shall provide all notices
required under Section 603 ("Section 603") of the California General Corporation
Law in accordance with applicable law.
4.4 Operation of Business of the Division. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Closing, the Seller shall conduct the operations of the Division in the ordinary
course of business and in compliance with
24
all applicable laws and regulations and, to the extent consistent therewith, use
its Reasonable Commercial Efforts to preserve intact its current business
organization, keep the Assets in good working condition, keep available the
services of the Division Offered Employees and preserve its relationships with
customers of, suppliers of and others having business dealings with the
Division. Without limiting the generality of the foregoing, prior to the
Closing, the Seller shall not, without the prior express written consent of the
Parent:
(a) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(b) except pursuant to the Metromedia Credit Agreement,
create, incur or assume any material indebtedness (including obligations in
respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for any
material obligations of any other person or entity; or make any material loans,
advances or capital contributions to, or investments in, any other person or
entity;
(c) enter into, adopt or amend any employee benefit plan or
any employment or severance agreement or arrangement or increase in any manner
the compensation or fringe benefits of, or materially modify the employment
terms of any Division Employee, except in connection with the transactions
contemplated hereby as previously disclosed to Buyer;
(d) acquire, sell, lease, license or dispose of any assets or
property, except for acquisitions, sales, leases, licenses or dispositions of
assets or property (other than Assets) in the ordinary course of business;
(e) mortgage or pledge any of the Assets or subject the Assets
to any Encumbrance;
(f) discharge or satisfy any Encumbrance or pay any obligation
or liability, other than as contemplated hereby or in the ordinary course of
business;
(g) amend its charter, by-laws or other organizational
documents;
(h) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a change in
generally accepted accounting principles;
(i) enter into, amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or waive
any rights under, any material contract or agreement;
(j) make or commit to make any capital expenditure in excess
of $10,000;
(k) institute or settle any legal proceeding related to the
Division or the Assets;
25
(l) take any action or fail to take any action permitted by
this Agreement which would result in (i) any of the representations and
warranties of the Seller set forth in this Agreement becoming untrue in any
material respect, or (ii) any of the conditions to the Closing not being
satisfied; or
(m) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information; Confidentiality. The Seller shall permit
representatives of Parent and Buyer to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Seller), at Parent's sole expense, to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to the Division and the Assets. The
Buyer and the Parent will keep such information provided to them by the Seller
confidential in accordance with the terms of the Confidentiality Agreement dated
December 14, 2000 (the "Confidentiality Agreement") between the Parent and the
Seller.
4.6 Exclusivity; Letter Agreement.
(a) The Seller shall not, and the Seller shall require each of
its officers, directors, employees, representatives and agents not to, directly
or indirectly, (i) initiate, solicit, encourage or otherwise facilitate any
inquiry, proposal, offer or discussion with any party (other than Parent and
Buyer) concerning any merger, reorganization, consolidation, recapitalization,
business combination, liquidation, dissolution, share exchange, sale of stock,
sale of material assets or similar business transaction involving the Division,
(ii) furnish any non-public information concerning the business, properties or
assets of the Division to any party (other than Parent and Buyer) or (iii)
engage in discussions or negotiations with any party (other than Parent and
Buyer) concerning any such transaction.
(b) Pursuant to the letter agreement dated as of February 9,
2001 (the "Letter Agreement") between the Parent, Metromedia and the Seller, the
Seller and Metromedia heretofore terminated any discussions or negotiations of
the nature described in paragraph (a) above. If the Seller receives any inquiry,
proposal or offer of the nature described in paragraph (a) above, the Seller
shall, as promptly as practical but in any event within three days after such
receipt, notify Parent of such inquiry, proposal or offer, including the
identity of the other party and the terms of such inquiry, proposal or offer.
(c) The Parties hereby reaffirm their obligations, and their
obligations on behalf of their affiliates (including those contained in
Paragraph 2) of the Letter Agreement.
4.7 Employee Matters.
(a) Except to the extent that any Division Employee
voluntarily terminates his or her employment or is dismissed by the Seller, all
employees (including all Division Employees) of the Seller shall be and remain
Seller's employees until the Closing Date, with Seller having full authority and
control over their actions, and Buyer shall not assume the status of an employer
or a joint employer of, or incur or be subject to any liability or obligations
26
of an employer with respect to, any such employees unless and until actually
hired by Buyer. The Seller shall not dismiss any Division Offered Employee prior
to the Closing. The Seller shall be solely responsible for any and all
liabilities and obligations Seller may have to such employees, including,
without limitation, compensation, severance pay, incentive bonuses, health
expenses, and accrued vacation time, sick leave and obligations under Employee
Plans relating to periods prior to the Closing Date. Seller shall comply with
the provisions of the Worker Adjustment and Retraining Notification Act (the
"WARN Act") and similar laws and regulations, if applicable, and shall be solely
responsible for any and all liabilities, penalties, fines, or other sanctions
that may be assessed or otherwise due under such applicable laws and regulations
on account of the dismissal or termination by the Seller of any of the employees
of the Seller.
(b) The Division Employees listed on Schedule 4.7(b) and
Schedule 4.7(c) are referred to herein as the "Division Offered Employees".
Prior to the execution of this Agreement, the Parent or the Buyer has made an
offer of employment to each of the Division Offered Employees listed on Schedule
4.7(b) on terms and conditions substantially consistent with those discussed by
Buyer and Seller and conditioned upon the occurrence of the Closing.
(c) Following the execution of this Agreement and in any event
as promptly as practical following the Closing, the Parent or the Buyer shall
make an offer of employment to each of the Division Offered Employees listed on
Schedule 4.7(c) on terms and conditions substantially consistent with those
discussed by Buyer and Seller and conditioned upon the occurrence of the
Closing.
(d) In addition, Buyer shall have the right, but not the
obligation, at any time prior to or after the Closing Date, to offer employment
to any other Division Employees on terms and conditions determined by Buyer.
Buyer intends to issue stock options of Parent to Division Employees which Buyer
hires in a manner consistent with Parent's current practices with respect to its
current employees.
(e) Seller will be solely responsible for providing, at its
cost, all medical, life and other insurance coverage and benefits, and
disability benefits to which any Division Employee who retired or was terminated
from service with Seller prior to the Closing Date or who was disabled prior to
the Closing Date is entitled under the Employee Plans or applicable law.
(f) No Division Employee or any other person not a Party
hereto shall be deemed to be a third-party beneficiary of any provision of this
Section or any other Section of this Agreement.
27
4.8 Treatment of 401(k). The Seller shall pay all amounts due to any
Division Employee with respect to the Make Systems, Inc. 401(k) Plan and shall
fully comply with all laws and regulations applicable thereto.
4.9 Nonassignability.
(a) Without limiting the generality or effect of any provision
of Section 1, to the extent that transfer or attempted transfer of the Agreement
between the Seller and the Defense Information Systems Agency, (the "DISA")
dated March 31, 1999 (the "DISA Contract") would constitute a breach of any law
thereof or a violation of any law of the United States of America or any rule or
regulation of any governmental agency thereunder, nothing in this Agreement
shall constitute a transfer or an attempted transfer thereof. The Seller shall
use its Reasonable Commercial Efforts, and the Parent and the Buyer shall
cooperate in good faith, to obtain any consents, approvals and waivers necessary
to transfer the DISA Contract to Buyer, and the Seller shall take all actions
reasonably requested by the Parent (including, without limitation, seeking a
novation with respect to the DISA Contract) to effect such transfer. After the
Closing, the provisions of this Section 4.9 shall continue to apply to efforts
to obtain such consents, approvals, novations and waivers; provided, that (i)
Buyer shall promptly reimburse the Seller for 50% of out-of-pocket expenses
reasonably incurred by the Seller in taking any actions requested by Parent, and
(ii) Seller shall promptly reimburse the Parent for 50% of out-of-pocket
expenses reasonably incurred by the Parent to effect such transfer.
(b) To the extent that the consents, approvals, novations and
waivers referred to in Section 4.9(a) are not obtained prior to the Closing,
subject to applicable law, following the Closing, (i) the Seller shall provide
the Parent or the Buyer with the benefits of the DISA Contract; (ii) the Parent
or the Buyer shall have rights sufficient to perform the Seller's obligations
following the Closing under the DISA Contract; and (iii) the Parent or the Buyer
shall perform, at its sole cost and expense, all of the Seller's obligations
under the DISA Contract arising after the Closing. In addition, following the
Closing, the Seller shall (a) use Reasonable Commercial Efforts, at the cost and
expense to be shared equally between the Buyer and the Seller, to provide to the
Buyer the benefits of the DISA Contract in all material respects, (b) cooperate
in any reasonable and lawful arrangement designed to provide such benefits to
Buyer in all material respects, (c) enforce, at the request of Buyer, for the
account of the Buyer and at the sole cost and expense of the Buyer, any rights
of the Seller arising from the DISA Contract (including, without limitation, the
right to elect to terminate in accordance with the terms thereof), and (d) to
provide any notices under the DISA Contract requested by the Buyer. At the
Parent's option, the Buyer and Seller shall prepare and enter into agreements
substantially similar to the DISA Contract (the "Back-to-Back Agreement")
formalizing the arrangements provided by the foregoing.
(c) Neither the Seller nor Metromedia has any reasonable basis
to believe that DISA would not agree to a novation of the DISA Contract with the
Buyer or that DISA would seek to impose any material condition upon such
novation.
28
(d) The Parent and/or the Buyer shall have the right to refuse
to execute a novation of DISA Contract, in its reasonable discretion, due to any
material condition that DISA attaches to its approval of such novation, provided
that Buyer shall continue to perform its obligations in accordance with Section
4.9(b) (or, if applicable, the Back-to-Back Agreement) if Seller is performing
its obligations in accordance with Section 4.9(b) (or, if applicable, the
Back-to-Back Agreement).
(e) To the extent that any other waivers, permits, consents,
approvals or other authorizations, the registrations, filings and notices
referred to in Section 5.2(a) are not obtained, effected or made prior to the
Closing, following the Closing, at the Buyer's request, the Seller shall use
Reasonable Commercial Efforts, at the cost and expense to be shared equally
between the Buyer and the Seller, to obtain such waivers, permits, consents,
approvals or other authorizations, and to make or effect all of the
registrations, filings and notices.
5. Conditions.
5.1 Conditions to Each Party's Obligations. The respective
obligations of each Party to consummate the transactions contemplated hereby are
subject to the satisfaction of the following condition:
(a) no temporary restraining order, preliminary or permanent
injunction, or other order issued by any court of competent jurisdiction or
other legal or regulatory restraints or prohibition preventing the consummation
of the transactions contemplated hereby or limiting or restricting Parent's
conduct or operation of its businesses or the business of the Division after the
Closing Date shall have been issued, nor shall any proceedings brought by any
Governmental Entity seeking any of the foregoing be pending, nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated hereby which
would affect the effectiveness of the transactions contemplated hereby, and
(b) The notice period required by Section 603 shall have
expired.
5.2 Conditions to Obligations of Parent and Buyer. The obligation of
each of Parent and Buyer to consummate the transactions contemplated hereby is
subject to the satisfaction (or waiver by Parent) of the following additional
conditions:
(a) all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
which are required on the part of the Seller or Metromedia to consummate the
transactions contemplated hereby shall have been obtained (and copies thereof
shall have been provided to the Parent) on terms which are reasonably
satisfactory to the Parent (provided that Parent and Buyer agree that the
obtaining of consents with respect to the Division Contracts listed on Schedule
5.2(a) shall not be a condition to the Closing);
(b) the representations and warranties of the Seller set forth
in Section 2 and of Metromedia set forth in Section 11 which are qualified as to
materiality shall be true and
29
correct in all respects, and those which are not qualified as to materiality
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing as though made as of the Closing, except
to the extent such representations and warranties are specifically made as of a
particular date or as of the date of this Agreement (in which case such
representations and warranties shall be true and correct as of such date in all
respects, or true and correct as of such date in all material respects, as
applicable);
(c) there shall not be threatened or pending any suit, action
or proceeding by any Governmental Entity:
(i) seeking to prohibit or impose any material limitations on the
Parent's ownership or operation (or that of any of its
subsidiaries or Affiliates) of all or a material portion of
their businesses or assets or the Division or the Assets, or
to compel the Parent or any of its Subsidiaries or Affiliates
to dispose of or hold separate any material portion of the
Assets or the business or assets of the Parent or any of its
subsidiaries or Affiliates,
(ii) seeking to restrain or prohibit the consummation of the
Closing or the performance of any of the other transactions
relating to this Agreement, or seeking to obtain from the
Parent or any subsidiary of the Parent any damages that are
material,
(iii) seeking to impose material limitations on the ability of the
Parent, or rendering the Parent unable, to accept for payment
or pay for or purchase some or all of the Assets or otherwise
to consummate the Closing, or to effectively exercise full
rights of ownership of the Division or any of the Assets, or
(iv) which otherwise is reasonably likely to have a material
adverse affect on the consolidated financial condition,
businesses or results of operations of the Division or the
Parent;
(d) the Seller shall have performed or complied in all
material respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Closing;
(e) the Seller shall have delivered to Parent and Buyer a
certificate (the "Seller Certificate") of its Chief Executive Officer or Chief
Financial Officer to the effect that each of the conditions specified in Section
5.1 and clauses (a), (b) and (d) of this Section 5.2 is satisfied in all
respects;
(f) Parent shall have received from Xxxx, Weiss, Rifkind,
Xxxxxxx & Xxxxxxxx, counsel to the Seller and Metromedia an opinion with respect
to the matters set forth in Exhibit C-1 attached hereto, and from Xxxxx Xxxxxxx,
General Counsel of Metromedia and
30
special counsel to the Seller an opinion with respect to the matters set forth
in Exhibit C-2 attached hereto, dated as of the Closing Date;
(g) Parent shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Seller in the State of California and the State of North Carolina, certified
charter documents, certificates as to the incumbency of officers and the
adoption of authorizing resolutions and evidence of ownership of Assets) as set
forth in Section 6.1; and
(h) the Escrow Agreement shall have been executed and
delivered by the Seller.
5.3 Conditions to Obligations of the Seller. The obligations of the
Seller to consummate the transactions contemplated hereby are subject to the
satisfaction of the following additional conditions:
(a) the representations and warranties of Parent and Buyer set
forth in Section 3 which are qualified as to materiality shall be true and
correct in all respects, and those which are not qualified as to materiality
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing as though made as of the Closing, except
to the extent such representations and warranties are specifically made as of a
particular date or as of the date of this Agreement (in which case such
representations and warranties shall be true and correct as of such date in all
respects, or true and correct as of such date in all material respects, as
applicable);
(b) each of Parent and Buyer shall have performed or complied
in all material respects with its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Closing;
(c) Parent and Buyer shall have delivered to the Seller a
certificate (the "Buyer Certificate") of their respective Chief Executive
Officers or Chief Financial Officers to the effect that each of the conditions
specified in clauses (a) and (b) of this Section 5.3 is satisfied.
(d) the Amended and Restated Registration Rights Agreement, by
and among Parent, Seller, and the other parties named therein, substantially in
the form attached hereto as Exhibit D (the "Registration Rights Agreement")
shall have been executed and delivered by each of the parties thereto other than
the Seller.
(e) the Escrow Agreement shall have been executed and
delivered by the Parent and the Buyer.
(f) the Seller shall have received from Xxxx and Xxxx LLP,
counsel to the Parent and the Buyer, an opinion with respect to the matters set
forth in Exhibit E hereto, dated as of the Closing Date.
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(g) the Seller shall have received such other certificates and
instruments as set forth in Section 6.2.
6. Closing Deliveries.
6.1 Seller Closing Deliveries. The Parent and Buyer shall receive,
at the Closing or, in the case of Section (d) by taking possession of the
Conveyed Leased Premises, each of the following documents:
(a) a xxxx of sale substantially in the form attached hereto
as Exhibit F;
(b) such instruments of conveyance, assignment and transfer,
in form and substance reasonably satisfactory (including any in connection with
the Division Intellectual Property) to the Buyer, as shall be necessary or
appropriate to convey, transfer and assign to, and to vest in, the Buyer, good
and marketable title to the Assets;
(c) the Instrument of Assumption executed by the Seller;
(d) physical possession of electronic copies of the source
code and all related documentation (including all copies thereof) for all
software (including the Software) included in the Assets;
(e) such contracts, files and other data and documents
pertaining to the Assets or the Division's business as the Buyer may reasonably
request;
(f) a certificate of the Secretary of State of the State of
California as to the legal existence and good standing (including tax) of the
Seller in California dated not more than one business day prior to the Closing
Date;
(g) a certificate of the Secretary of State of the State of
North Carolina as to the legal existence and good standing (including tax) of
the Seller dated not more than one day prior to the Closing Date;
(h) certificates of the Secretary of the Seller attesting to
the incumbency of the Seller's officers, respectively, the authenticity of the
resolutions authorizing the transactions contemplated by the Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Section 2.1;
(i) a cross receipt executed by the Seller; and
(j) such other documents, instruments or certificates as the
Buyer may reasonably request.
6.2 Parent Closing Deliveries. The Seller shall receive, at Closing,
each of the following documents:
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(a) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing (including tax) of the
Parent and Buyer in Delaware dated not more than one day prior to the Closing
Date;
(b) a certificate of the Secretary of the Parent and Buyer
attesting to the incumbency of the Parent's and the Buyer's officers, the
authenticity of the resolutions authorizing the transactions contemplated by
this agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Section 3.1;
(c) the Instrument of Assumption executed by the Buyer;
(d) payment of the Purchase Price as and to the extent
required by Section 1.3;
(e) a cross receipt executed by the Buyer; and
(f) such other documents, instruments or certificates as the
Seller may reasonably request.
7. Indemnification.
7.1 Survival of Representations. Except as otherwise set forth
herein, all representations and warranties, covenants and agreements of
Metromedia and the Seller, on the one hand, and the Parent and the Buyer, on the
other hand, contained in or made pursuant to this Agreement shall remain in full
force and effect for a period of two years after the Closing Date, provided that
the representations and warranties set forth in Sections 2.12, and 2.16 (and the
portion of the Seller Certificate relating thereto) shall survive until 30 days
following expiration of all statutes of limitation applicable to the matters
referred to therein. All such representations and warranties, covenants, and
agreements shall also survive and be unaffected by (and shall not be deemed
waived by) any investigation, audit appraisal, or inspection at any time made by
or on behalf of any Party hereto. Notwithstanding anything herein to the
contrary, any representation, warranty, covenant or agreement which is the
subject of a claim which is asserted in writing prior to the expiration of the
applicable period set forth above shall survive with respect to such claim or
dispute until the final resolution thereof. None of the agreements, covenants,
representations or warranties contained in this Agreement (including the
indemnification obligations of the Parties hereunder), shall be deemed to be
affected or modified in any manner by information or knowledge obtained or which
could have been obtained in any investigation or review by any Party hereto,
except as expressly referenced in this Agreement or the Disclosure Schedule.
7.2 Indemnification by Metromedia and the Seller. Subject to the
conditions and provisions of Section 7.4 and Section 7.5, Metromedia and the
Seller, jointly and severally, agree to indemnify, defend and hold harmless
Parent and the Buyer and their respective directors, officers, managers and
employees (" Buyer Indemnified Parties") from and against and in respect of any
and all Losses (as defined below), asserted against, resulting from, imposed
upon or incurred by the Buyer Indemnified Parties, directly or indirectly, by
reason of or
33
resulting from (a) any liability or obligation of or claim against Buyer
Indemnified Parties (whether absolute, accrued, contingent or otherwise and
whether a contractual, Tax or any other type of liability or obligation or
claim) not expressly assumed by Buyer pursuant to the Instrument of Assumption,
arising out of, relating to or resulting from the business of the Seller, or
relating to or resulting from the Assets or the business and operations of the
Division during the period prior to the Closing Date; (b) any misrepresentation
or breach of the warranties of Metromedia or the Seller contained in or made
pursuant to this Agreement or any related agreement; (c) any noncompliance by
Metromedia or the Seller with any covenants, agreements or undertakings of
Metromedia or the Seller contained in or made pursuant to this Agreement or any
related agreement; (d) any violation of or failure to comply with applicable
bulk sales laws, fiduciary duty obligations, or creditor rights (including
fraudulent transfer claims), in any capacity, whether by the Seller or
Metromedia, or by the Seller's board of directors, officers or affiliates;
(e)(i) any employment related practices, policies, decisions, actions or
omissions of or by the Seller for the period ending on the Closing Date with
respect to any of Seller's employees or former employees or otherwise with
respect to any Employee Plan (including any employment related action or
omission for which Seller is not liable under any Employee Plan) or (ii) any
claim arising from Buyer's decision not to (A) offer employment to any of
Seller's employees (other than arising out of a breach of Section 4.7(a)) or (B)
continue or establish any Employee Plan; (f) any liability arising from or
related to any contract or agreement of the Seller other than those under
Division Contracts assumed by Buyer pursuant to Section 1.2(a); (h) any claims
asserted against Buyer with respect thereto were commercially unreasonable or
unlawful; or (i) any warranty claim or product liability claim relating to (x)
products manufactured or sold by the Seller prior to the Closing Date or (y) the
Division's business or operation prior to the Closing Date; or (j) any Tax
liabilities or obligations of the Division for periods prior to the Closing Date
or of the Seller, (k) any excess by which the Seller Deficiency exceeds
$210,000.00, or (l) any payment obligations under Sections 1.2(b), 1.7, 4.8 or
11.2. "Losses" means any and all demands, claims, complaints, Taxes, actions or
causes of action, suits, proceedings, investigations, arbitrations, assessments,
losses, damages, liabilities, obligations (including those arising out of any
action, such as any settlement or compromise thereof or judgment or award
therein) and any costs and expenses, including, without limitation to, interest,
penalties and reasonable attorneys" fees and disbursements.
7.3 Indemnification by Parent and Buyer. Subject to the conditions
and provisions of Section 7.4 and Section 7.5, Parent and the Buyer hereby
agrees to indemnify, defend and hold harmless Metromedia and the Seller and
their respective directors, officers and employees, and, in the case of
Metromedia, its partners ("Seller Indemnified Parties") from, against and with
respect to any and all Losses, asserted against, resulting from, imposed upon or
incurred by Seller Indemnified Parties, directly or indirectly, by reason of or
resulting from (a) any liability or obligation of or claims against Seller
Indemnified Parties (whether absolute, accrued, contingent or otherwise and
whether contractual, Tax or any other type of liability or obligation or claim)
expressly assumed by Buyer pursuant to Section 1.2 or the Instrument of
Assumption; (b) any misrepresentation or breach of the warranties of Parent or
Buyer contained in or made pursuant to this Agreement or any related agreement;
(c) any noncompliance by Parent or Buyer with any covenants, agreements or
undertakings of Parent or Buyer contained in or made pursuant to this Agreement
or any related agreement; or (d) any liability or obligation of
34
or claims against Seller Indemnified Parties (whether absolute, accrued,
contingent or otherwise and whether a contractual, Tax or any other type of
liability or obligation or claim) arising out of, relating to or resulting from
the businesses of the Parent or Buyer, or relating to or resulting from the
Assets (other than the Excluded Assets) or the Assumed Liabilities, or the
Division during the period from after the Closing Date.
7.4 Conditions of Indemnification.
(a) The obligations and liabilities of Seller and Buyer
hereunder with respect to their respective indemnities pursuant to this Section
7, shall be subject to the following terms and conditions:
(i) The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), written notice specifying in reasonable detail the nature
of its Losses promptly after the Indemnified Party receives notice thereof;
provided that the failure to give such notice shall not affect the rights of the
Indemnified Party hereunder except and solely to the extent that the
Indemnifying Party's defense shall have been materially impaired or prejudiced
thereby.
(ii) The Indemnifying Party shall have the right, absent
a conflict of interest, to undertake, by counsel or other representatives of its
own choosing, the defense of such Losses at the Indemnifying Party's risk and
expense. In the event there exists the reasonable possibility of an actual,
substantial conflict of interest between the Indemnified Party and the
Indemnifying Party in connection any matter for which indemnification may be
sought hereunder, the Indemnified Party shall have the right to participate in
the defense, compromise or settlement of such Losses, by counsel or other
representatives of its own choosing, on behalf of and for the account risk of
the Indemnifying Party. In such event, the costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement
shall be paid by the Indemnifying Party as and when such costs and expenses are
so incurred.
(iii) In the event that the Indemnifying Party shall
elect not to undertake such defense, or, within a reasonable time after notice
from the Indemnified Party of any such Losses, shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnifying Party) shall
have the right to undertake the defense, compromise or settlement of such
Losses, by counsel or other representatives of its own choosing, on behalf of
and for the account risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense under Section 7.4(a)(ii) hereof at any time
prior to settlement, compromise or final determination thereof). In such event,
the costs and expenses incurred by the Indemnified Party in connection with such
defense, compromise or settlement shall be paid by the Indemnifying Party as and
when such costs and expenses are so incurred.
(b) Anything in this Section 7.4 to the contrary
notwithstanding, (i) the Indemnified Party shall have the right, at its own cost
and expense, to participate in the defense, compromise or settlement of the
Losses, (ii) the Indemnifying Party shall not, without the Indemnified Party's
written consent, which shall not be unreasonably withheld, settle or
35
compromise any Losses or consent to entry of any judgement which does not
include as a unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such Losses in form and substance satisfactory to the Indemnified Party, and
(iii) in the event that the Indemnifying Party undertakes defense of any Losses,
the Indemnified Party, by counsel or other representative of its own choosing at
its sole cost and expense, shall have the right to consult with the Indemnifying
Party and its counsel or other representative of its own choosing and at its
sole cost and expense, shall have the right to consult with the Indemnifying
Party and its counsel or other representatives concerning such Losses and the
Indemnifying Party and the Indemnified Party and their respective counsel or
other representatives shall cooperate with respect to such Losses and (iv) in
the event that the Indemnifying Party undertakes defense of any Losses, the
Indemnifying Party shall have an obligation to keep the Indemnified Party
informed of the status of the defense of such Losses and furnish the Indemnified
Party with all documents, instruments and information that the Indemnified Party
shall reasonably request in connection therewith.
(c) To the extent permitted by applicable law, all payments
pursuant to this Section 7 shall be treated by the Parties as an adjustment to
the Purchase Price.
7.5 Escrow Agreement; Limitations. The Escrow Agreement is intended
to secure the indemnification obligations of the Seller and Metromedia under
this Agreement; provided that, except as expressly provided herein, nothing
shall limit the Seller's or Metromedia's obligation to indemnify the Buyer
Indemnified Parties in full. Notwithstanding anything to the contrary set forth
in this Agreement, the indemnification provided for in this Section 7 shall be
subject to the following:
(a) Any Losses payable pursuant to Section 7.2 shall be paid
first from the Escrow Amount.
(b) The amount of any Indemnifying Party's liability pursuant
to this Agreement shall be determined taking into account any applicable
insurance proceeds received by the Indemnified Party with respect to any Losses.
If any Indemnified Party receives any such insurance proceeds after the
Indemnifying Party shall have made any payment to any Indemnified Party with
respect to such Losses, provided that the Indemnifying Party has complied in
full with the provisions of this Section 7, such Indemnified Party shall
promptly return such payment to the Indemnifying Party to the extent of such
insurance proceeds received.
(c) No indemnification payment for any Losses shall be made
pursuant to Section 7.2 (other than clauses (j), (k) and (l) thereof), on the
one hand, or Section 7.3 on the other hand, unless and only to the extent the
aggregate amounts which would otherwise be payable pursuant to such Section,
respectively, exceeds $150,000.
(d) Except in connection with any breach or violation which is
a result of fraud or intentional or willful misrepresentation by Metromedia or
the Seller, Metromedia shall not be obligated to pay any amount for
indemnification pursuant to Section 7.2, or otherwise be liable for, any amount
in excess of 90% of the Purchase Price. Except in connection
36
with any breach or violation which is a result of fraud or intentional or
willful misrepresentation by the Parent or the Buyer, the Parent and the Buyer,
in the aggregate, shall not be obligated to pay any amount for indemnification
pursuant to Section 7.3, or otherwise be liable for, any amount in excess of 90%
of the Purchase Price.
(e) This Section 7 shall be the sole and exclusive basis of
any remedy each Party may have against any other Party for a breach or violation
of a representation, warranty, covenant or agreement under this Agreement or any
agreement contemplated hereby, and each party hereby waives any claim (other
than under this Section 7) it may have against the other Party with respect to a
breach or violation of any such representation, warranty, covenant or agreement
unless such breach or violation is a result of fraud or intentional or willful
misrepresentation by a Party. Nothing herein shall limit any Party's right to
seek and obtain injunctive or other equitable relief and any Party successfully
obtaining any such relief shall be entitled to reimbursement of reasonable
attorney's fees related thereto.
8. Post-Closing Agreements.
8.1 Proprietary Information. The Seller and Metromedia agrees that
from and after the Closing Date:
(a) The Seller and Metromedia shall hold in confidence, and
shall cause all of their respective officers, directors and personnel to hold in
confidence, all knowledge and information of a secret or confidential nature
with respect to the Assets and the business of the Division and shall not
disclose, publish or make use of the same without the prior written consent of
the Parent, except (i) to the extent that such information shall have become
public knowledge other than by breach of an obligation of confidentiality, (ii)
as required by law or (iii) as required in connection with any judicial process,
including any indemnification proceeding contemplated by this Agreement.
(b) The Seller agrees that the remedy at law for any breach of
this Section 8.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 8.1.
8.2 Non-Solicitation and Non-Competition Agreement.
(a) Except as provided by law, for a period of two (2) years
after the Closing Date, in the entire area in which the Seller conducted all
phases of its business, including production, promotional and marketing
activities, and sales, so long as the Buyer or Parent carries on a like business
therein, none of the Seller, Sub or Metromedia or any of their Affiliates shall,
either alone or in association with others, directly or indirectly, (i) solicit,
recruit, induce, attempt to induce, or permit any organization directly or
indirectly controlled thereby to solicit, recruit, induce, or attempt to induce
any Division Employee not to enter into, or to leave, the employ of the Buyer or
the Parent, or (ii) solicit, recruit, induce, attempt to induce for employment
or engagement as an independent contractor thereof, or permit any organization
37
directly or indirectly controlled thereby to solicit, recruit, induce, attempt
to induce for employment or engagement as an independent contractor thereof, any
Division Employee.
(b) For a period of five (5) years after the Closing Date,
neither the Seller nor Metromedia nor any of their Affiliates shall engage in
any business or enterprise that develops, manufactures, markets or sells any
product or service in the network optimization field, so long as the Buyer or
Parent carries on a like business therein, including but not limited to any
business or enterprise that develops, manufactures, markets or sells any product
or service that has the same or substantially the same form, function or primary
application as any existing product or service developed, under substantial
development, manufactured, marketed or sold by the Division on or prior to the
Closing Date.
(c) The Parties agree that the Seller is selling the goodwill
of the Division together with all or substantially all of the Division's
operating assets and that the terms of the non-solicitation and non-competition
provisions set forth in Sections 8.2(a) and 8.2(b) are reasonable and necessary
in terms of time, activity and territory to protect the Buyer's interest. In the
event that any court determines that either or both the duration or geographic
scope of Sections 8.2(a) and 8.2(b) are unreasonable and that such provision is
to that extent unenforceable, the Parties hereto agree that the provision shall
remain in full force and effect for the greatest time period and in the greatest
area that would not render it unenforceable.
(d) The Parties intend that these non-solicitation and
non-competition provisions be deemed to be a series of separate covenants, one
for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where the provisions are intended to be
effective. The Seller and Metromedia agree that damages are an inadequate remedy
for any breach of these provisions and that the Parent and the Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief.
(e) Metromedia represents and warrants that immediately
following the Closing, Metromedia and its Affiliates shall be in full compliance
with this Section 8.2. Thereafter, Metromedia Fiber Network, Inc., a Delaware
corporation, Metromedia International Group, Inc., a Delaware corporation, and
Big City Radio, Inc., a Delaware corporation], each of which is an Affiliate (a
"Public Company Affiliate") of Metromedia which has a class of securities
registered under the Exchange Act, shall not be bound by the provisions of this
Section 8.2. Metromedia represents, warrants and covenants that the Public
Company Affiliates have not been, and will not be, provided with access to any
proprietary, confidential information concerning the Division or the Assets
(including Division Intellectual Property).
8.3 Provision of Data; Accounts Receivable.
(a) Each Party shall have the right for a period of three
years following the Closing Date to have reasonable access to those books,
records and accounts, including financial and Tax information, correspondence,
production records, employment records and other records of the other Parties to
the extent that any of the foregoing relates to the Division or
38
the Assets or is otherwise needed by such Party in order to comply with its
obligations under applicable securities, Tax, environmental, employment or other
laws and regulations or in connection with its indemnification obligations
pursuant to Section 7.
(b) All amounts received by the Seller relating to the
Accounts Receivable, the extent that such Accounts Receivable are included in
the Assets, whenever paid, shall be promptly paid over to Buyer. All amounts
received by the Parent or the Buyer relating to Accounts Receivables, to the
extent that such Accounts Receivables are excluded from the Assets, whenever
paid, shall be promptly paid over to the Seller.
8.4 Product Claims and Returns. The Seller shall be responsible for
customer claims relating to services rendered by Seller prior to the Closing
Date, and customer claims relating to, or returns of, products of Seller which
(a) were sold or licensed by the Seller prior to the Closing Date, (b) subject
to the following sentence, were in the finished goods inventory of the Seller as
of the Closing Date, or (c) subject to the following sentence, were work in
process and more than fifty percent (50%) completed by the Closing Date. The
Seller shall not be responsible under clauses (b) or (c) of the preceding
sentence for customer claims relating to, or returns of, products of the Seller
delivered under the DISA Contract by the Buyer or the Parent after the Closing
Date, except to the extent that such claim or return resulted from the actions
or omissions of the Seller or its agents prior to the Closing Date. If a
customer makes a claim or seeks a return and, in the reasonable judgment of the
Buyer, the claim or return is proper and in accordance with the terms of the
Seller's agreement with such customer, Buyer shall replace or repair, as the
case may be, the services rendered or product purchased at the Buyer's then
generally prevailing prices and labor rates. Such repairs or returns shall be
for the account of Seller and Seller shall promptly reimburse Buyer for the
amounts thereof in excess of reserves for such items included in the Closing
Balance Sheet.
8.5 Use of Name. Within 20 days following the Closing Date, the
Seller will take action to change its corporate name to a new name that does not
contain, and shall not otherwise use or permit the use of the trademarks used in
the business of the Division, including: Make Systems, NetMaker, NetMaker
MainStation, Netmaker FieldStation, Netmaker CableStation, NetMaker XA, NetMaker
Visualizer, NetMaker Interpreter, NetMaker Planner, NetMaker Analyzer, NetMaker
Designer and Netool (or any confusingly similar names), which trademarks are
included among the Assets purchased by the Buyer hereunder including those
listed on Schedule 2.22(a).
9. Restrictions on Transfer.
9.1 Lock-Up. In consideration for the Parent Shares issued to the
Seller in the transaction, the Seller and Metromedia hereby agree as follows:
(a) Except as otherwise provided herein, neither Metromedia
nor the Seller shall, except with the prior written approval of the Parent,
directly or indirectly, offer to sell, sell, pledge, hypothecate or otherwise
transfer or dispose of, enter into any hedge or derivative transaction relating
to, or which may affect the economic interest of the Seller or
39
Metromedia in, or agree to do any of the foregoing with respect to, any of the
Parent Shares (or interest therein) for a period following the Closing Date of
six months, with respect to Metromedia (the "Metromedia Lockup Period"), and one
year, with respect to the Seller (the "Seller Lockup Period", and together with
Metromedia Lockup Period, the "Lockup Periods"). Notwithstanding the foregoing,
from and after the Closing Date (upon delivery to Parent by Metromedia of a duly
executed certificate in form and substance reasonably satisfactory to Parent
confirming as to Metromedia the matters addressed in Sections 2.25 and 2.26),
Metromedia may acquire Parent Shares issued hereunder for fair value subject to
Metromedia Lockup Period and any other applicable restrictions. Subject to any
other restrictions, after the respective Lockup Period, the restrictions
hereunder on the Seller and Metromedia to not offer to sell, contract to sell or
otherwise sell or dispose the Parent Shares shall lapse. Notwithstanding the
foregoing, if the Seller or Metromedia is then entitled to exercise rights to
sell Parent Shares by the terms of the Registration Rights Agreement, subject to
any other restrictions, the Seller or Metromedia shall be entitled to exercise
rights to sell Parent Shares in accordance with the terms of the Registration
Rights Agreement.
(b) The Seller and Metromedia each agrees and consents to the
entry of stop transfer instructions with the Parent's transfer agent against the
transfer of Parent Shares held by the Seller or Metromedia except in compliance
with the foregoing restrictions.
9.2 Transfer of Shares.
(a) "Restricted Shares" means (i) the Parent Shares issued in
the transactions contemplated hereby, (ii) any other shares of capital stock of
the Parent issued in respect of such shares (as a result of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events).
(b) The Restricted Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Seller or Metromedia, as applicable, first shall have been
furnished with an opinion of legal counsel, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act.
Notwithstanding the foregoing, no registration or opinion of counsel shall be
required for (i) a transfer by the Seller, to a wholly owned subsidiary of such
corporation; provided that the transferee agrees in writing to be subject to the
terms of this Section 9 to the same extent as if it were the original holder of
the Restricted Shares hereunder, (ii) a transfer made in accordance with Rule
144 under the Securities Act, or (ii) a transfer by the Seller to Metromedia in
accordance with the terms of Section 9.1(a).
(c) Each certificate representing Restricted Shares shall bear
a legend substantially in the following form:
"Transfer of the shares represented by this certificate is
restricted by the terms of the Asset Purchase Agreement dated
as of March 20, 2001, by and among OPNET Technologies, Inc.,
OPNET Development Corp., Make Systems, Inc. and Metromedia
Company. In addition, the shares represented by this
certificate
40
have not been registered under the Securities Act of 1933, as
amended, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until such
shares are registered under such Act or an opinion of counsel
satisfactory to the OPNET Technologies, Inc. is obtained to
the effect that such registration is not required."
10. Termination.
10.1 This Agreement may be terminated at any time prior to the
Closing Date:
(a) By the mutual written consent of the Parties;
(b) By any Party, if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action (which order, decree,
ruling or other action the Parties hereto shall use their reasonable efforts to
lift), which permanently restrains, enjoins or otherwise prohibits the
acquisition by Buyer of the Division or any of the Assets and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By Seller, if Parent or Buyer shall have breached in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach cannot be or has not been
cured within five days after the giving of written notice by Seller to Parent
specifying such breach.
(d) By Parent, if Seller or Metromedia shall have breached any
representation, warranty, covenant or other agreement contained in this
Agreement, which breach cannot be or has not been cured within five days after
the giving of written notice by Parent to Seller specifying such breach.
(e) By either Parent or Seller if the Closing has not occurred
on or prior to March 31, 2001.
(f) Effect of Termination. In the event of the termination of
this Agreement by any Party hereto pursuant to the terms of this Agreement,
written notice thereof shall forthwith be given to the other Party or Parties
specifying the provision hereof pursuant to which such termination is made, and
there shall be no liability or obligation thereafter on the part of Parent,
Buyer, Metromedia or Seller, other than the provisions of Section 2.27, Section
3.11, the last sentence of Section 4.5, this Section 10.2 and Section 12, except
to the extent that such termination results from the willful and material breach
by a party of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
11. Provisions Related to Metromedia.
11.1 Representations of Metromedia. Metromedia hereby represents and
warrants to the Parent and the Buyer as follows:
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(a) Metromedia is a general partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to own its properties, to carry on its
business as now being conducted, to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions contemplated
hereby; Metromedia's general partners are Xxxx X. Xxxxx and Xxxxxx Xxxxxxxxx.
(b) The execution and delivery of this Agreement by
Metromedia, and the agreements provided for herein, and the consummation by
Metromedia of all transactions contemplated hereby, have been duly authorized by
all requisite partner's action, and have been validly approved by Metromedia's
partners. This Agreement and all such other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby to
which Metromedia is a party constitute the valid and legally binding obligations
of Metromedia, enforceable against Metromedia in accordance with their
respective terms.
(c) The execution, delivery and performance by Metromedia of
this Agreement and the agreements provided for herein, and the consummation of
the transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (i) violate the provisions of
the partnership agreement or any other organizational documents of Metromedia;
(ii) violate, or require any filing with, or permit, authorization, order,
consent or approval under, the provisions of any law, rule or regulation
applicable to Metromedia or by which any of its respective properties is or may
be affected; (iii) violate any judgment, decree, order or award of any
Governmental Entity; or (iv) require any consent, approval or notice under, or
result in a violation or breach of, or constitute (with or without due notice or
the passage of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, or cause the
creation of any Encumbrance upon the properties or assets of Metromedia pursuant
to, any of the terms, conditions or provisions of any agreement, indenture,
mortgage, deed of trust or other instrument to which Metromedia is a party or by
which Metromedia or any of its properties is or may be bound.
(d) The Metromedia Credit Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated thereby constitute the valid and legally binding
obligations of Metromedia, enforceable against Metromedia in accordance with
their respective terms. All amounts owed by Seller to Metromedia under the
Metromedia Credit Agreement represent valid and lawful indebtedness of the
Seller incurred in respect of borrowed money. A true, correct and complete copy
of Metromedia Credit Agreement has previously been made available the Buyer.
(e) Attached as Exhibit G hereto is a copy of a certificate
duly signed on the date hereof by a duly appointed and acting executive officer
of Metromedia affirming that the net worth of Metromedia was at least
$50,000,000 as of the date hereof. Metromedia has no knowledge of any existing
or threatened occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on Metromedia, the
Seller, the Division or their respective business, properties, assets (including
the Assets), condition (financial or otherwise).
42
11.2 Covenants. Metromedia hereby covenants and agrees as follows:
(a) Metromedia shall not, in its capacity as a creditor of the
Seller, initiate or join in any proceedings alleging a fraudulent transfer or
similar claim relating in any manner to the transactions contemplated hereby,
and shall promptly remit to Buyer any and all amounts paid to Metromedia by
Buyer or Parent in any such proceeding.
(b) Prior to the Closing, Metromedia shall not, and Metromedia
shall require each of its officers, directors, employees, representatives and
agents not to, directly or indirectly, (i) initiate, solicit, encourage or
otherwise facilitate any inquiry, proposal, offer or discussion with any party
(other than the Parent and the Buyer) concerning any merger, reorganization,
consolidation, recapitalization, business combination, liquidation, dissolution,
share exchange, sale of stock, sale of material assets or similar business
transaction involving the Assets or the Division, or which would conflict in any
manner with the transactions contemplated hereby, (ii) furnish any non-public
information concerning the business, properties or assets of the Seller or the
Division to any party (other than the Parent and the Buyer) or (iii) engage in
discussions or negotiations with any party (other than the Parent and the Buyer)
concerning any such transaction.
(c) If Metromedia receives any inquiry, proposal or offer of
the nature described in paragraph (b) above, Metromedia shall, as promptly as
practical but in any event within three days after such receipt, notify Parent
of such inquiry, proposal or offer, including the identity of the other party
and the terms of such inquiry, proposal or offer.
(d) Metromedia hereby agrees to be bound by the provisions of
the Confidentiality Agreement with respect to the Proprietary Information (as
defined therein) of the Parent as if Metromedia had been an original party
thereto, and Parent likewise agrees to be bound by the provisions of the
Confidentiality Agreement with respect to the Proprietary Information of
Metromedia as if Metromedia had been originally contemplated as a disclosing
party thereunder.
(e) Metromedia shall cause the Seller to make any payments
required under Sections 1.2(b), 1.7 and 4.8 when and as due.
(f) At the Closing, Metromedia shall sell, transfer and convey
to Seller all of its right, title and interest in that certain computer software
and source codes (the "Netstar Software") designed and developed by SRI
International ("SRI") for Metromedia, Inc., the predecessor in interest to
Metromedia, sometimes referred to by Metromedia and SRI as "Netstar," a
telecommunications network design and optimization software package. Metromedia
owns all of the Netstar Software. At the Closing, Metromedia shall deliver to
the Seller an instrument of assignment with respect to the Netstar Software in
form and substance reasonably satisfactory to the Buyer.
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12. Miscellaneous.
12.1 Transfer and Sales Tax. Notwithstanding any provisions of law
imposing the burden of such Taxes on the Seller or the Buyer, as the case may
be, the Seller and Metromedia, on the one hand, and Buyer and the Parent, on the
one hand, shall divide equally (a) all sales, use and transfer Taxes, and (b)
all governmental charges, if any, upon the sale or transfer of any of the Assets
hereunder. If any Party shall fail to pay the portion of such Taxes or charges
that it is required to pay pursuant to the previous sentence on a timely basis,
any other Party may pay such Taxes or charges to the appropriate governmental
authority or authorities, and the non-paying Party shall promptly reimburse the
paying Party for any amounts so paid by it.
12.2 Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by facsimile,
overnight courier or, registered or certified mail, postage prepaid, addressed
as follows or to such other address of which the Parties may have given notice:
To the Seller: Make Systems, Inc.
0 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Fax: 000-000-0000
Attn: Chief Financial Officer
With a copy to: Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
To Metromedia: Metromedia Company
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
With a copy to: Xxxx Xxxxx Rifkind Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
To the Parent
44
and/or the Buyer: OPNET Technologies, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Fax: 000-000-0000
Attn: Xxxx Xxxxx
With a copy to: Xxxx and Xxxx LLP
00000 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxx, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, by facsimile
or by overnight courier; or (b) two business days after being sent, if sent by
registered or certified mail.
12.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns, except that the Parties may not assign their respective obligations
hereunder without the prior written consent of the other Parties. Any assignment
in contravention of this provision shall be void.
12.4 Entire Agreement; Amendments; Attachments.
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the Parties pursuant hereto
represent the entire understanding and agreement between the Parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such Parties. The Parties, by the consent of their respective Boards of
Directors, or officers authorized by such Boards, may amend or modify this
Agreement, in such manner as may be agreed upon, by a written instrument
executed by thereby.
(b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this Agreement, the provision
of the Agreement shall prevail. The Exhibits and Schedules attached hereto or to
be attached hereafter are hereby incorporated as integral parts of this
Agreement.
12.5 Expenses. Except as expressly otherwise provided in this
Agreement, the Seller and Metromedia, on the one hand, and Parent, and the
Buyer, on the other hand, shall each bear its own costs and expenses (including
legal, accounting and broker fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
12.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the provisions thereof related to conflict of laws.
45
12.7 Section Headings. The section headings are for the convenience
of the Parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the Parties.
12.8 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties hereto
as of and on the date first above written.
MAKE SYSTEMS, INC.
/s/ Xxxxxxx Xxxx
----------------------------------------
Name: Xxxxxxx Xxxx
Title: Chief Financial Officer
METROMEDIA COMPANY
(for purposes of Sections 4.6, 4.9(c),
5.2, 7, 8.1, 8.2, 9, 10, 11 and 12 only)
/s/ Xxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
OPNET TECHNOLOGIES, INC.
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and Chief
Financial Officer
OPNET DEVELOPMENT CORP.
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and Chief
Financial Officer
47
